Registration No. 33-17850
File No. 811-5360
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. 21 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / X /
Amendment No. 17 / X /
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
- -------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
1-303-768-3200
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(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On December 5, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On _______ pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
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The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
August 31, 1997 was filed on November 8, 1997.
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
FORM N-1A
Cross Reference Sheet
Prospectus of Oppenheimer Main Street Income & Growth Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; How to Exchange Shares; Special
Investor Services; Service Plan for Class A Shares;
Distribution and Service Plan for Class B Shares;
Distribution and Service Plan for Class C Shares; How
to Sell Shares
8 How to Sell Shares
9 *
Prospectus of Oppenheimer Main Street California Municipal Fund
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; How to Exchange Shares; Special
Investor Services; Distribution and Service Plan for
Class B Shares; How to Sell Shares
8 How to Sell Shares
9 *
- ------------------
*Not applicable or negative answer.
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
FORM N-1A
Cross Reference Sheet
Statement of Additional Information of Oppenheimer Main Street
<PAGE>
Income & Growth Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Directors and Officers of
the Corporation
15 How the Fund is Managed - Major Shareholders;
16 How the Fund is Managed; Distribution and Service
Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 *
Statement of Additional Information of Oppenheimer Main Street
California Municipal Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional Investment
Restrictions
14 How the Fund is Managed - Directors and Officers of
the Corporation
15 How the Fund is Managed - Major Shareholders;
16 How the Fund is Managed; Distribution and Service Plan
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment Account - How to Buy Shares; How to
Sell Shares; How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the
Fund
22 Performance of the Fund
23 *
- -------------------
*Not applicable or negative answer.
<PAGE>
Oppenheimer
Main Street Income & Growth Fund(R)
Prospectus dated December 8, 1997
Oppenheimer Main Street Income & Growth Fund, a series of Oppenheimer Main
Street Funds, Inc., is a mutual fund that seeks a high total return (which
includes current income and capital appreciation in the value of its shares)
from equity and debt securities. Please refer to "Investment Policies and
Strategies" for more information about the types of securities the Fund invests
in and refer to "Investment Risks" for a discussion on the risks of investing in
the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the December
8, 1997, Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other agency,
and involve investment risks, including the possible loss of the principal
amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
8 Financial Highlights
12 Investment Objectives and Policies
13 Investment Risks
15 Investment Techniques and Strategies
20 How the Fund is Managed
22 Performance of the Fund
ABOUT YOUR ACCOUNT
26 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
40 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
42 How to Sell Shares
By Mail
By Telephone
44 How to Exchange Shares
46 Shareholder Account Rules and Policies
48 Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Arrangements
-2-
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you might expect to bear indirectly. The
numbers below are based on the Fund's expenses during its fiscal year ended
August 31, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" from pages
26through 49 for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Maximum Sales 5.75% None None None
Charge on Purchases
(as a % of offering price)
- --------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge None(1) 5% in the first 1.0% if None
(as a % of the lower year, declining shares
of the original offering to 1% in the are redeemed
price or redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- --------------------------------------------------------------------------------------------
Maximum Sales Charge on None None None None
Reinvested Dividends
- --------------------------------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3) None(3)
- --------------------------------------------------------------------------------------------
Exchange Fee None None None None
</TABLE>
(1)If you invest $1 million or more($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 31), in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 months for shares purchased
prior to May 1, 1997) from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A Shares," below.
(2)See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares," below, for more information on the contingent deferred
sales charges.
-3-
<PAGE>
(3)There is a $10 transaction fee for redemptions paid by Federal
Funds wire but not for redemptions paid by check or ACH transfer
through AccountLink. See "How to Sell Shares," below.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets):
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
Shares Shares Shares Shares
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Management Fees 0.46% 0.46% 0.46% 0.46%
- ---------------------------------------------------------------------------------------------
12b-1 Plans Fees 0.24% 1.00% 1.00% None
- ---------------------------------------------------------------------------------------------
Other Expenses 0.24% 0.23% 0.23% 0.19%
- ---------------------------------------------------------------------------------------------
Total Fund
Operating Expenses 0.94% 1.69% 1.69% 0.65%
</TABLE>
The numbers in the chart above are based on the Fund's expenses in its
fiscal year ended August 31, 1997. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that year. The
"12b-1 Distribution Plan Fees" for Class A shares are the service fees. The
maximum is 0.25% of average net assets for that Class. For Class B and Class C
shares, the Distribution Plan Fees are the service plan fees (the maximum fee
for each class is 0.25% of average annual net assets of the respective class)
and the asset-based sales charge of 0.75% of average annual net assets of the
respective class. These plans are described in greater detail in "How to Buy
Shares." Class Y shares were first publicly offered on November 1, 1996.
Therefore, the Other Expenses for Class Y shares are estimates based on expenses
that would have been payable if Class Y shares had been outstanding during the
full fiscal period. The actual expenses for each class of shares in future years
may be more or less than the numbers in the chart, depending on a number of
factors, including changes in the actual value of the Fund's assets represented
by each class of shares.
o Examples. To try to show the effect of these expenses on
an investment over time, we have created the hypothetical examples
-4-
<PAGE>
shown below. Assume that you make $1,000 investments in each class of shares of
the Fund, and that the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating Expenses
chart above. If you were to redeem your shares at the end of each period shown
below, your investment would incur the following expenses by the end of 1, 3, 5
and 10 years:
1 year 3 years 5 years 10 years*
- -------------------------------------------------------------
Class A Shares $67 $86 $107 $166
Class B Shares $67 $83 $112 $162
Class C Shares $27 $53 $92 $200
Class Y Shares $7 $21 $36 $81
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- -------------------------------------------------------------
Class A Shares $67 $86 $107 $166
Class B Shares $17 $53 $92 $162
Class C Shares $17 $53 $92 $200
Class Y Shares $7 $21 $36 $81
*In the first example, expenses include the Class A initial sales charge and the
applicable Class B or Class C contingent deferred sales charge. In the second
example, Class A expenses include the initial sales charges but Class B and
Class C expenses do not include contingent deferred sales charges. The Class B
expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the asset-based sales charge and the contingent
deferred sales charge on Class B and Class C shares, long-term Class B and Class
C shareholders could pay the economic equivalent of an amount greater than the
maximum front-end sales charge allowed under applicable regulatory requirements.
For Class B shareholders, the automatic conversion of Class B shares to Class A
shares is designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more
-5-
<PAGE>
complete information can be found. You should carefully read the entire
Prospectus before making a decision about investing in the Fund. Keep the
Prospectus for reference after you invest, particularly for information about
your accounts, such as how to sell or exchange shares.
o What is the Fund's Investment Objective? The Fund's investment objective
is to seek a high total return (which includes current income and capital
appreciation in the value of its shares) from equity and debt securities.
o What does the Fund Invest in? The Fund emphasizes investments in (1)
equity securities, such as common stocks, preferred stocks and convertible
securities, and (2) debt securities, such as bonds and debentures. The Fund may
also assume a temporary defensive position when appropriate to do so by
investing in cash equivalents. The Fund may also write covered calls and use
derivative investments and certain hedging instruments to try to manage
investment risks. These investments and investment methods are more fully
explained in "Investment Objective and Policies," starting on page 12.
o Who Manages the Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios having over $75 billion in assets. The Manager is paid an
advisory fee by the Fund, based on its net assets. The Fund's portfolio manager
is Mr. Robert J. Milnamow, who is employed by the Manager. He is primarily
responsible for the selection of the Fund's securities. The Fund's Board of
Directors, elected by shareholders, oversees the investment adviser and the
portfolio manager. Please refer to "How the Fund is Managed" starting on page 20
for more information about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree. The
Fund's investments in stocks and bonds are subject to changes in their value
from a number of factors such as changes in general bond and stock market
movements, or the change in value of particular stocks or bonds because of an
event affecting the issuer. Changes in interest rates can also affect stock and
bond prices. These changes affect the value of the Fund's investments and its
price per share. The Fund's investments in foreign securities involve additional
risks not associated with investments in domestic securities, including risks
associated with changes in currency rates.
In the Oppenheimer funds spectrum, the Fund is generally more conservative
than aggressive growth funds, but more aggressive than investment grade bond
funds. While the Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the Fund's
portfolio, and
-6-
<PAGE>
in some cases by using hedging techniques, there is no guarantee of success in
achieving the Fund's investment objective and your shares may be worth more or
less than their original cost when you redeem them. Please refer to "Investment
Risks" starting on page 13 for a more complete discussion of the Fund's
investment risks.
o How Can I Buy Shares? You can buy shares Class A, Class B and Class C
shares through your dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by using an
Automatic Investment Plan under AccountLink. Please refer to "How to Buy Shares"
on page 26 for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund offers the individual
investor three classes of shares. All classes have the same investment portfolio
but different expenses. Class A shares are offered with a front-end sales
charge, starting at 5.75%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge (starting at 5% and declining as shares are held longer)
if redeemed within 6 years of purchase. Class C shares are offered without a
front-end sales charge, but may be subject to a contingent deferred sales charge
of 1% if redeemed within 12 months of purchase. There is also an annual
asset-based sales charge on Class B and Class C shares. Please review "How to
Buy Shares" starting on page 26 for more details, including a discussion about
factors you and your financial advisor should consider in determining which
class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer. Please
refer to "How to Sell Shares" on page 42. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page 44.
o How Has the Fund Performed? The Fund measures its performance by quoting
its total returns, average annual total returns and cumulative total returns,
which measure historical performance. Those returns can be compared to the
returns (over similar periods) of other funds. Of course, other funds may have
different objectives, investments, and levels of risk. The Fund's performance
can also be compared to a broad-based market index, which we have done on pages
24 and 25. Please remember that past performance does not guarantee future
results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data, expense
-7-
<PAGE>
ratios and other data based on the Fund's average net assets. This information
has been audited by Deloitte & Touche LLP, the Fund's independent auditors,
whose reports on the Fund's financial statements for the fiscal year ended
August 31, 1997, is included in the Statement of Additional Information.
[graphs]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
---------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1997 1996(3) 1996 1995
=======================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $27.95 $28.89 $24.07 $20.40
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .07 .40 .47
Net realized and unrealized gain (loss) 7.91 (1.01) 4.93 3.66
------- ------- ------- ------
Total income (loss) from investment
operations 8.30 (.94) 5.33 4.13
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) -- (.43) (.46)
Distributions from net realized gain (1.98) -- (.08) --
Distributions in excess of gains -- -- -- --
------- ------- ------- ------
Total dividends and distributions
to shareholders (2.38) -- (.51) (.46)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.87 $27.95 $28.89 $24.07
======= ======= ======= ======
=======================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(7) 31.09% (3.25)% 22.26% 20.52%
=======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $4,457 $3,143 $3,147 $1,924
- -------------------------------------------------------------------------------------------------------
Average net assets (in millions) $3,857 $3,090 $2,516 $1,319
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.29% 1.57%(8) 1.55% 2.31%
Expenses, before reimbursement from or
assumption by the Manager 0.94% 0.98%(8) 0.99% 1.07%
Expenses, net of reimbursement from or
assumption by the Manager N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 61.7% 17.5% 92.6% 101.3%
Average brokerage commission rate(10) $0.0604 $0.0590 $0.0571 --
</TABLE>
1. For the period from November 1, 1996 (inception of offering) to August 31,
1997.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
3. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
4. For the period from October 1, 1994 (inception of offering) to June 30, 1995.
5. For the period from February 3, 1988 (commencement of operations) to June 30,
1988.
6. Net investment income would have been $0.20 per share absent the voluntary
expense reimbursement, resulting in an expense ratio of 2.46%.
7. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
8
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(5)
===========================================================================
<S> <C> <C> <C> <C> <C> <C>
$19.88 $15.46 $13.22 $12.38 $11.67 $10.13 $9.60
- ---------------------------------------------------------------------------
.37 .16 .25 .38 .17 .24(6) .05
2.50 6.65 4.72 .87 .88 1.62 .52
- ------ ------ ------ ------ ------ ------ ------
2.87 6.81 4.97 1.25 1.05 1.86 .57
- ---------------------------------------------------------------------------
(.36) (.19) (.22) (.41) (.19) (.19) (.04)
-- (2.20) (2.51) -- (.15) (.13) --
(1.99) -- -- -- -- -- --
- ------ ------ ------ ------ ------ ------ ------
(2.35) (2.39) (2.73) (.41) (.34) (.32) (.04)
- ---------------------------------------------------------------------------
$20.40 $19.88 $15.46 $13.22 $12.38 $11.67 $10.13
====== ====== ====== ====== ====== ====== ======
===========================================================================
14.34% 46.38% 39.48% 10.60% 9.07% 18.77% 5.94%
===========================================================================
$740 $58 $27 $16 $14 $1 $--
- ---------------------------------------------------------------------------
$270 $39 $23 $15 $8 $1 $--
- ---------------------------------------------------------------------------
2.46% 1.02% 1.63% 3.15% 2.33% 2.67% 2.86%(8)
1.28% 1.46% 1.66% 1.84% 2.21% 2.46% 10.54%(8)
N/A N/A N/A N/A N/A 2.12%(6) N/A
- ---------------------------------------------------------------------------
199.4% 283.0% 290.1% 208.9% 214.3% 136.8% 18.8%
-- -- -- -- -- -- --
</TABLE>
8. Annualized.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $5,941,676,446 and $3,997,312,471, respectively.
10. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS B
-----------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1997 1996(3) 1996 1995(4)
=======================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $27.79 $28.77 $24.00 $21.49
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .17 .04 .23 .25
Net realized and unrealized gain (loss) 7.86 (1.02) 4.87 2.54
------- ------- ------- -------
Total income (loss) from investment
operations 8.03 (.98) 5.10 2.79
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.18) -- (.25) (.28)
Distributions from net realized gain (1.98) -- (.08) --
Distributions in excess of gains -- -- -- --
------- ------- ------- -------
Total dividends and distributions
to shareholders (2.16) -- (.33) (.28)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.66 $27.79 $28.77 $24.00
======= ======= ======= =======
=======================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(7) 30.12% (3.41)% 21.34% 13.15%
=======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $3,308 $1,909 $1,800 $628
- -------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,642 $1,818 $1,155 $249
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.53% 0.82%(8) 0.74% 1.25%(8)
Expenses, before reimbursement from or
assumption by the Manager 1.69% 1.74%(8) 1.76% 1.89%(8)
Expenses, net of reimbursement from or
assumption by the Manager N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 61.7% 17.5% 92.6% 101.3%
Average brokerage commission rate(10) $0.0604 $0.0590 $0.0571 --
</TABLE>
1. For the period from November 1, 1996 (inception of offering) to August 31,
1997.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
3. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
4. For the period from October 1, 1994 (inception of offering) to June 30, 1995.
5. For the period from February 3, 1988 (commencement of operations) to June 30,
1988.
6. Net investment income would have been $0.20 per share absent the voluntary
expense reimbursement, resulting in an expense ratio of 2.46%.
7. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
10
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS Y
- ---------------------------------------------------------------- -------
PERIOD ENDED
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30, AUGUST 31,
1997 1996(3) 1996 1995 1994(2) 1997(1)
================================================================================
<S> <C> <C> <C> <C> <C>
$27.78 $28.75 $23.97 $20.33 $20.76 $29.55
- --------------------------------------------------------------------------------
.16 .04 .21 .33 .13 .41
7.85 (1.01) 4.88 3.62 (.42) 6.30
- ------- ------- ------- ------- ------ -------
8.01 (.97) 5.09 3.95 (.29) 6.71
- --------------------------------------------------------------------------------
(.17) -- (.23) (.31) (.14) (.34)
(1.98) -- (.08) -- -- (1.98)
-- -- -- -- -- --
- ------- ------- ------- ------- ------ -------
(2.15) -- (.31) (.31) (.14) (2.32)
- --------------------------------------------------------------------------------
$33.64 $27.78 $28.75 $23.97 $20.33 $33.94
======= ======= ======= ======= ====== =======
================================================================================
30.07% (3.37)% 21.35% 19.63% (0.97)% 23.98%
================================================================================
$1,030 $744 $741 $462 $170 $16
- --------------------------------------------------------------------------------
$904 $730 $588 $325 $72 $5
- --------------------------------------------------------------------------------
0.54% 0.82%(8) 0.80% 1.57% 1.86%(8) 1.58%(8)
1.69% 1.73%(8) 1.74% 1.82% 2.11%(8) 0.65%(8)
N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
61.7% 17.5% 92.6% 101.3% 199.4% 61.7%
$0.0604 $0.0590 $0.0571 -- -- $0.0604
</TABLE>
8. Annualized.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $5,941,676,446 and $3,997,312,471, respectively.
10. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
11
<PAGE>
-8-
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek high total return (which
includes current income and capital appreciation in the value of its shares)
from equity and debt securities.
Investment Policies and Strategies. The Fund emphasizes investments in (1)
equity securities, such as common stocks, preferred stocks and convertible
securities, and (2) debt securities, such as bonds and debentures. The Fund may
also assume a temporary defensive position when appropriate to do so by
investing in cash equivalents, as discussed below. The composition of the Fund's
portfolio among the different types of permitted investments and maturities of
debt instruments will vary from time to time based upon the evaluation of
economic and market trends by the Fund's investment adviser, OppenheimerFunds,
Inc. (the "Manager"), and perceived relative total anticipated return from such
types of securities.
The Fund may try to hedge against losses in the value of its portfolio of
securities by using hedging strategies and derivative investments described
below. The Fund's portfolio manager may employ special investment techniques in
selecting securities for the Fund, which are also described below. Additional
information may be found about these strategies and techniques under the same
headings in the Statement of Additional Information.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, described above, as well as investment policies it follows
to try to achieve its objective. Additionally, the Fund uses certain investment
techniques and strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless this Prospectus
or the Statement of Additional Information says that a particular policy is
"fundamental." The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Board of Directors of Oppenheimer Main Street
Funds, Inc. may change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
o Portfolio Turnover. "Portfolio turnover" describes the rate
at which the fund traded its portfolio securities during its last
fiscal year. For example, if a fund sold all of its securities
-9-
<PAGE>
during the year, its portfolio turnover rate would have been 100%. Portfolio
turnover affects brokerage costs the Fund pays. The Fund may engage frequently
in short-term trading to try to achieve its objective. The Financial Highlights
table above shows the Fund's portfolio turnover rates during prior fiscal years.
Investment Risks.
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assured income or
preservation of capital. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased, and
in some cases by using hedging techniques, changes in overall market prices can
occur at any time, and because the income earned on securities is subject to
change, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
o Stock Investment Risks. Because the Fund invests a substantial portion
of its assets in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. At times, the stock markets can be volatile and
stock prices can change substantially. This market risk will affect the Fund's
net asset value per share, which will fluctuate as the values of the Fund's
portfolio securities change. Not all stock prices change uniformly or at the
same time and not all stock markets move in the same direction at the same time.
Other factors can affect a particular stock's prices, such as poor earnings
reports by an issuer, loss of major customers, major litigation against an
issuer, or changes in government regulations affecting an industry.
Not all of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its investments,
that is, by not holding a substantial amount of stock of any one company and by
not investing too great a percentage of the Fund's assets in any one company.
Also, the Fund does not
-10-
<PAGE>
concentrate its investments in any one industry or group of
industries.
o Interest Rate Risks. In addition to credit risks, described below, debt
securities are subject to changes in their value due to changes in prevailing
interest rates. When prevailing interest rates fall, the value of already-issued
debt securities generally rise. When interest rates rise, the values of
already-issued debt securities generally decline. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. Changes in the value of securities held by the
Fund mean that the Fund's share prices can go up or down when interest rates
change because of the effect of the change on the value of the Fund's portfolio
of debt securities.
o Foreign Securities Have Special Risks. The Fund may invest in foreign
securities. 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.
Securities in emerging market countries may be more difficult to sell and their
prices may be more volatile. More information about the risks and potential
rewards of investing in foreign securities is contained in the Statement of
Additional Information.
o Special Risks of Lower-Grade Securities. The Manager may select
high-yield, below investment grade debt securities (including both rated and
unrated securities). These "lower-grade" securities are commonly known as "junk
bonds." All corporate debt securities (whether foreign or domestic) are subject
to some degree of credit risk. Credit risk relates to the ability of the issuer
to meet interest or principal payments on a security as they become due.
Generally, higher yielding lower-grade bonds, whether rated or unrated, often
have speculative characteristics and special risks that make them riskier
investments than investment grade securities and are subject to greater credit
risks. 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 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 and principal due
on the bonds. The issuer's low creditworthiness may increase the potential for
its
-11-
<PAGE>
insolvency. A decline in their values is also likely in the high yield bond
market during a general economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield bonds and
adversely affect the value of outstanding bonds and the ability of the issuers
to repay principal and interest. For foreign lower-grade debt securities, these
risks are in addition to the risks of investing in foreign securities, described
above. 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. Also,
convertible securities may be less subject to some of these risks than other
debt securities, to the extent they can be converted into stock, which may be
more liquid and less affected by these other risk factors.
o Hedging instruments can be volatile instruments and may involve special
risks. The Fund may invest in a number of different kinds of hedging
instruments. 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
or if it could not close out a position because of an illiquid market for the
future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, 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 and will not be able to realize any profit if the
investment has increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying security at a
disadvantageous price. The use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. These risks and the hedging strategies the Fund may use
are described in greater detail in the Statement of Additional Information.
o There are special risks in investing in derivative
investments. The Fund can invest in a number of different kinds of
"derivative" investments. In general, a "derivative investment" is
-12-
<PAGE>
a specially designed investment whose performance is linked to the performance
of another investment or security, such as an option, future, index, currency or
commodity. The company issuing the instrument may fail to pay the amount due on
the maturity of the instrument. Also, the underlying investment or security on
which the derivative is based, and the derivative itself, may not perform the
way the Manager expects it to perform. Markets, underlying securities and
indices may move in a direction not anticipated by the Manager. Performance of
derivative investments may also be influenced by interest rate and stock market
changes in the U.S. and abroad. All of this can mean that the Fund will realize
less principal or income from the investment than expected. Certain derivative
investments held by the Fund may be illiquid. Please refer to "Illiquid and
Restricted Securities," below, for more information.
Investment Techniques and Strategies.
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on their
use that are designed to reduce some of the risks.
o Foreign Securities. The Fund may purchase equity and debt securities
issued or guaranteed by foreign companies or foreign governments or their
agencies. The Fund may buy securities of companies in any country, developed or
underdeveloped. There is no limit on the amount of the Fund's assets that may be
invested in foreign securities. Foreign currency will be held by the Fund only
in connection with the purchase or sale of foreign securities.
o Warrants and Rights. Warrants are basically options to purchase stock at
set prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed directly by the
issuer to its shareholders. The Fund may invest up to 10% of its total assets in
warrants or rights, although the Fund does not currently intend to invest more
than 5% of its total assets in warrants or rights. For further details about
these investments, please refer to "Warrants and Rights" in the Statement of
Additional Information.
o Investing in Small, Unseasoned Companies. The Fund may 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 have limited liquidity and may
be subject to volatility in their prices. The Fund currently intends to invest
no more than 5% of its net assets in securities of small, unseasoned issuers.
-13-
<PAGE>
o Investments in Bonds and Convertible Securities. The Fund invests in
bonds, debentures and other debt securities to seek its investment objective.
The Fund's investments may include investment-grade bonds, which are bonds rated
at least "Baa" by Moody's Investors Service, Inc. ("Moody's"), at least "BBB" by
Standard & Poor's Corporation ("Standard & Poor's") or Duff & Phelps, Inc.
("Duff & Phelps"), or have comparable ratings by another nationally recognized
statistical rating organization. If the securities are unrated, they must be
judged by the Manager to be of comparable quality to bonds rated as investment
grade.
The Fund may invest up to 25% of its total assets in "lower grade" debt
securities commonly known as "junk bonds," although the Fund does not currently
intend to invest more that 15% of its total assets in lower grade debt
securities. "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, or if unrated, are determined by the Manager to be of comparable
quality to debt securities rated below investment grade. The Fund may invest in
securities rated as low as "C" or "D" or which may be in default at the time the
Fund buys them. 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 as described in
"Investment Risks," above.
The Fund may invest no more than 10% of its total assets in lower-grade
debt securities that are not convertible. The Fund considers convertible
securities to be "equity equivalents" because of the conversion feature and the
security's rating has less impact on the investment decision than in the case of
non-convertible securities.
Other Investment Techniques and Strategies. The Fund may also use the following
investment techniques and strategies. These techniques involve certain risks.
The Statement of Additional Information contains more information about these
practices, including limitations on their use that may help to reduce some of
the risks.
o Borrowing for Leverage. From time to time, the Fund may increase its
ownership of securities by borrowing from banks on an unsecured basis and
investing the borrowed funds (on which it will pay interest). The Fund may
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. Interest on borrowed money
is an expense the Fund would not otherwise incur, so that it may have
substantially reduced net investment income during periods of substantial
borrowings. The Fund's ability to borrow money from banks subject to the 300%
asset coverage requirement is a
-14-
<PAGE>
fundamental policy.
o Temporary Defensive Investments. In times of unstable market or economic
conditions, when fluctuations in the value of the Fund's net assets may occur,
the Manager may determine it appropriate to assume a temporary defensive
position and invest an unlimited amount of assets in: (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Securities"); (ii) commercial paper rated in the highest category by
an established rating organization; (iii) certificates of deposit or bankers'
acceptances of domestic banks with assets of $1 billion or more; (iv) any of the
foregoing maturing in one year or less (generally known as "cash equivalents");
(v) short-term debt obligations; or (vi) repurchase agreements (explained
below).
o "When-Issued" and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
o Repurchase Agreements. The Fund may enter into repurchase agreements.
They are primarily used for liquidity purposes. In a repurchase transaction, the
Fund buys a security and simultaneously sells it to the vendor for delivery at a
future date. Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days. 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.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Board of Directors of Oppenheimer Main Street Funds, Inc.,
the Manager determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of 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 will not invest more than 10% of its net assets
in illiquid or restricted securities (the Board may increase that
-15-
<PAGE>
limit to 15%). Certain restricted securities that are eligible for resale to
qualified institutional purchasers, are not subject to that limit. Illiquid
securities include repurchase agreements maturing in more than seven days, or
certain participation interests other than those with puts exercisable within
seven days. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate liquidity.
o Loans of Portfolio Securities. In an attempt to raise income or to raise
cash for liquidity purposes, the Fund may lend its portfolio securities to
certain types of eligible borrowers approved by the Board of Directors. Each
loan must be collateralized in accordance with applicable regulatory
requirements. After any loan, the value of the securities loaned must not exceed
25% 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
in the coming year.
o Derivative Investments. In general, a "derivative investment" is a
specially-designed investment. Its performance is linked to the performance of
another investment or security, such as an option, future, index or currency. In
the broadest sense, exchange-traded options, futures contracts, and other
hedging instruments the Fund might use may be considered "derivative
investments." The Fund may use other derivative investments because they offer
the potential for increased income and principal value.
One example of derivative investments the Fund may invest in is an
"index-linked" note, on which principal and/or interest payments depend on the
performance of an underlying index. Currency-indexed securities are another
example. These are typically short-term or intermediate-term debt securities.
Their value at maturity or the rates at which they pay income are determined by
the change in value of the U.S. dollar against one or more foreign currencies or
an index. In some cases, these securities may pay an amount at maturity based on
a multiple of the amount of the relative currency movements. This variety of
index security offers the potential for greater income or principal payments but
at a greater risk of loss.
Other derivative investments the Fund may invest in include debt
exchangeable for common stock of an issuer or, "equity-linked debt securities"
of an issuer. At maturity, the debt security is exchanged for common stock of
the issuer or is payable in an amount based on the price of the issuer's common
stock at the time of maturity. Both cases present a risk that the amount payable
at
-16-
<PAGE>
maturity will be less than the principal amount of the debt (because the price
of the issuer's common stock may not be as high as was expected).
o Hedging. The Fund may buy and sell certain kinds of futures contracts,
put and call options, forward contracts and options on futures and broadly-based
securities indices. These are all referred to as "hedging instruments." The Fund
does not use hedging instruments for speculative purposes, and has limits on the
use of them, described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It may also use certain kinds of hedging
instruments in an effort to manage its exposure to changing interest rates.
Some of these strategies, such as selling futures, buying puts and writing
covered calls, hedge the Fund's portfolio against price fluctuations. Other
hedging strategies, such as buying futures and call options, tend to increase
the Fund's exposure to the securities market. Forward contracts are used to try
to manage foreign currency risks on the Fund's foreign investments. Foreign
currency options are used to try to protect against declines in the dollar value
of foreign securities the Fund owns, or to protect against an increase in the
dollar cost of buying foreign securities. Writing covered call options may also
provide income to the Fund for liquidity purposes or to raise cash to distribute
to shareholders.
o Futures. The Fund may buy and sell futures contracts that relate to (1)
interest rates (these are referred to as Interest Rate Futures), (2)
broadly-based securities indices (these are referred to as Financial Futures),
(3) foreign currencies (these are referred to as Forward Contracts), or (4)
commodities (these are referred to as commodity futures).
o Put and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in Futures, above. A call or put may be purchased only if,
after the purchase, the value of all call and put options held by the Fund will
not exceed 5% of the Fund's total assets.
-17-
<PAGE>
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 25% of the Fund's net
assets would have to be segregated to cover put options.
o 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.
Other Investment Restrictions. The Fund has certain investment
restrictions that are fundamental policies. Under these
fundamental policies the Fund cannot do any of the following:
o The Fund cannot buy securities issued or guaranteed by any one issuer
(except the U.S. Government or any of its agencies or instrumentalities) if with
respect to 75% of its total assets, more than 5% of its total assets would be
invested in securities of that issuer, or it would then own more than 10% of
that issuer's voting securities;
o The Fund cannot lend money except in connection with the acquisition of
debt securities which the Fund's investment policies and restrictions permit it
to purchase, the Fund may also make loans of portfolio securities, subject to
the restrictions stated under "Loans of Portfolio Securities"; or
o The Fund cannot concentrate investments to the extent of 25%
or more of its total assets in any industry, however, there is no
limitation as to investment in U.S. Government Securities.
Unless the Prospectus states that a percentage restriction
-18-
<PAGE>
applies on an ongoing basis, it applies only at the time the Fund makes an
investment and the Fund need not sell securities to meet the percentage limits
if the value of the investment increases in proportion to the size of the Fund.
Other investment restrictions are listed in "Investment Restrictions" in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios, or
"series" of Oppenheimer Main Street Funds, Inc. (the "Corporation"), an
open-end, management investment company organized as a Maryland corporation in
1987. The Fund is a diversified mutual fund and commenced operations on February
3, 1988.
The Corporation is governed by a Board of Directors, which is responsible
under Maryland corporate law for protecting the interests of shareholders. The
Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Directors and Officers of the Corporation" in the Statement of Additional
Information names the Directors and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold annual
meetings, it may hold shareholder meetings from time to time on important
matters, and shareholders have the right to call a meeting to remove a Director
or to take other action described in the Fund's Articles of Incorporation.
The Board of Directors has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has four classes of shares; Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Each class has
its own dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally on matters submitted to the vote of shareholders. Shares
of each class may have separate voting rights on matters in which interests of
one class are different from interests of another class, and only shares of a
particular class vote as a class on matters that affect that class alone. Shares
are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board of
Directors, under an Investment Advisory Agreement which states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to pay to
-19-
<PAGE>
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o Portfolio Manager. The portfolio manager and a Vice
President of the Fund is Mr. Robert J. Milnamow, who is also a Vice
President of the Manager. On November 1, 1995, Mr. Milnamow became
the person principally responsible for the day-to-day management of
the Fund's portfolio. Previously, Mr. Milnamow was a portfolio
manager with Phoenix Securities Group.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which decline on additional assets
as the Fund grows: 0.65% of the first $200 million of net assets of the Fund,
0.60% of the next $150 million, 0.55% of the next $150 million and 0.45% of
average annual net assets in excess of $500 million. The Fund's management fee
for its fiscal year ended August 31, 1997 was 0.46% of average annual net assets
for each class of shares.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain Directors' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. When deciding which brokers to use, the Manager
is permitted by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment adviser.
o The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is
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<PAGE>
sub-distributor for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as 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 below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return"
and "average annual total return" to illustrate its performance. The performance
of each class of shares is shown separately, because the performance of each
class will usually be different as a result of the different kinds of expenses
each class bears. These returns measure the performance of a hypothetical
investment in the Fund over various periods, and do not show the performance of
each shareholder's investment (which will vary if dividends and distributions
are received in cash or shares are sold or additional shares are purchased). The
Fund's performance information may help you see how well your Fund has done over
time and to compare it to other funds or market indices, as we have done below.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. This performance data is described below, but more detailed
information about how total returns are calculated is contained in the Statement
of Additional Information, which also contains information about other ways to
measure and compare the Fund's performance. The Fund's investment performance
will vary over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
o Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total
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returns are shown for Class B or Class C shares, normally the contingent
deferred sales charge that applies to the period for which total return is shown
has been deducted. Total returns for Class Y shares are shown at net asset
value. However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended August 31, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the fiscal year ended
August 31, 1997, the Fund's performance was positively affected by a number of
factors including the strong overall performance of the U.S. stock market. The
Fund's investments in securities in the financial services sector, particularly
banks and insurance companies helped the Fund's performance. Additionally,
strong corporate earnings and new products in the pharmaceutical industry also
benefited the Funds's performance. The Fund's investment in the hotel industry
performed well because of the higher profitability in that sector. Finally, The
Fund's investments were positively affected by the deregulation in the
telecommunication area.
During the Fund's last fiscal year, the performance of the U.S. Bond
markets was more volatile. Early in 1997, when yields approached 7%, the Fund
increased its holdings in U.S. Treasuries in order to seek current income for
the Fund. This negatively affected the Fund's capital appreciation, however, it
helped the Fund seek current income and helped to protect the Fund's net asset
value from some of the volatility of the stock market during the last few months
of the fiscal year. The Fund's portfolio holdings, allocations and strategies
are subject to change.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in each class of shares of
the Fund held until August 31, 1997. In the case of Class A shares, performance
is measured from the commencement of operations on February 3, 1988; in the case
of Class B shares, from the inception of the class on October 1, 1994; in the
case of Class C shares, from the inception of the class on December 1, 1993; and
in the case of Class Y shares, from the inception of the class on November 1,
1996.
The Fund's performance is compared to the performance of the S&P 500
Index. The S&P 500 Index is a broad-based index of equity securities widely
regarded as a general measurement of the performance of the U.S. equity
securities market. The S&P 500 Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and
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none of the data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the securities in
the S&P 500 Index, which tend to be securities of larger, well-capitalized
companies. Moreover, the index data does not reflect any assessment of the risk
of the investments included in the index.
Oppenheimer Main Street Income & Growth Fund
Comparison of Change in Value of $10,000 Hypothetical Investment in:
Oppenheimer Main Street Income & Growth Fund and the S&P 500 Index
(GRAPHS)
(1)
Avg. Annual Total Return of the Fund at 8/31/97(2)
A Shares 1 Year 5 Year Life
- -----------------------------------------------
23.55% 23.93% 21.07%
- -----------------------------------------------
Avg. Annual Total Return of the Fund at 8/31/97(3)
B Shares 1 Year Life
- -----------------------------------------------
25.12% 19.85%
Avg. Annual Total Return of the Fund at 8/31/97(4)
C Shares 1 Year Life
- -----------------------------------------------
29.07% 16.94%
Cumulative Total Return of the Fund at 8/31/97(5)
Y Shares Life
- ----------------------------
23.98%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1) The Fund changed its fiscal year end from 6/30 to 8/31. (2) The inception
date of the Fund (Class A shares) was 2/3/88. The Class A returns are shown net
of the applicable 5.75% maximum initial sales charge. (3) Class B shares of the
Fund were first publicly offered on 10/1/94. The average annual total returns
are shown net of the
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applicable 5% and 3% contingent deferred sales charge, respectively for the
1-year period and for the life of the class. The ending account value in the
graph is net of the applicable 3% contingent deferred sales charge. (4)Class C
shares of the Fund were first publicly offered on 12/1/93. The 1-year return is
shown net of the applicable 1% contingent deferred sales charge. (5) Class Y
shares of the Fund, first publicly offered on November 1, 1996, are offered at
net asset value without sales charge to certain institutional investors. Past
Performance is not predictive of Future Performance. Graphs are not drawn to
same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers individual investors three different classes
of shares. Only certain institutional investors may purchase a fourth class of
shares, Class Y shares. The different classes of shares represent investments in
the same portfolio of securities but are subject to different expenses and will
likely have different share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 31). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge value will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares as described in "Buying
Class B Shares," below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1% as
described in "Buying Class C Shares," below .
o Class Y Shares. Class Y shares are offered only to certain
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institutional investors that have special agreements with the Distributor.
Please refer to "Buying Class Y Shares," below.
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 which you should discuss
with your financial advisor. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your investment
will vary your investment results over time. The most important factors to
consider are how much you plan to invest and how long you plan to hold your
investment. If your goals and objectives change over time and you plan to
purchase additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the annual
asset-based sales charge on Class B and Class C expenses (which, like all
expenses, will affect your investment return). For the sake of comparison, we
have assumed that there is a 10% rate of appreciation in the investment each
year. Of course, the actual performance of your investment cannot be predicted
and will vary, based on the Fund's actual investment returns, and the operating
expenses borne by each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares,
for which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
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more than six years), you should probably consider purchasing Class A or Class C
shares rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as well as
the effect of the Class B asset-based sales charge on the investment return for
that class in the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there is no initial
sales charge on Class C shares, and the contingent deferred sales charge does
not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares, from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of the expected
lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed performance return stated above, and therefore, you should analyze
your options carefully.
o Are There Differences in Account Features That Matter To
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You? Because some account features may not be available to Class B or Class C
shareholders, or 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, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy. 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.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charges and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares, that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25, and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension and profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends and distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions and
from unit investment trusts that have made arrangements with the Distributor.
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<PAGE>
o How Are Shares Purchased? You can buy shares several ways --through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Payment by Federal Fund Wire: Shares may be purchased by
Federal Funds wire. The minimum investment is $2,500. You must
first call the Distributor's Wire Department at 1-800-525-7041 to
notify the Distributor of the wire and receive further
instructions.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy shares. You
can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds PhoneLink,
also described below. You should request AccountLink privileges on the
application or dealer settlement instructions used to establish your account.
Please refer to "AccountLink," below, for more details.
o Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the Statement
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<PAGE>
of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
and entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, normally your order must be
transmitted to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor, in its
sole discretion, may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix A in this
Prospectus sets forth conditions for the waiver of or exemption from sales
charges or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
- ----------------------------------------------------------------
Front-End Sales Front-End Sales
Charge as a Charge as a Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
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- ------------------------------------------------------------------
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
- ------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
- -------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
o Purchases by a Retirement Plan qualified under section 401(a) if the
Retirement Plan has total plan assets of $500,000 or more;
o Purchases aggregating $1 million or more;
o Purchases by a Retirement Plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group Retirement Plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP-IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"), that (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds-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 these purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement Plan if
the administrator of that plan has made special arrangements with the
Distributor for those purchases.
The Distributor pays dealers of record commissions on those
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purchases in an amount equal to (i) 1.0% for non-retirement plan accounts, and
(ii) for retirement plan accounts, 1.0% of the first $2.5 million, plus 0.50% of
the next $2.5 million, plus 0.25% of purchases over $5 million, calculated on a
calendar year basis. That commission will be paid only on those purchases that
were not previously subject to a front-end sales charge and dealer commission.
No sales commission will be paid to the dealer, broker or financial institution
on sales of Class A shares purchased with the redemption proceeds of shares of a
mutual fund offered as an investment option in a retirement plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor if the purchase occurs more than 30 days after
the addition of the Oppenheimer funds as an investment option to the retirement
plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge will be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original price (which is the original net asset value)
of the redeemed shares. However, the Class A contingent deferred sales charge
will not exceed the aggregate amount of the commissions the Distributor paid to
your dealer on all Class A shares of all Oppenheimer funds you purchased subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges," below .
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will apply.
o Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
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Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also count Class A
and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of 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. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent of which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
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investors are not subject to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor, the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor (1) providing specifically for
the use of shares of the Fund in particular investment products or employee
benefit plans made available to their clients (those clients may be charged a
transaction fee by their dealer, broker, bank or adviser for the purchase or
sale of Fund shares) or (2) 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;
o (1) investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases, and (3) clients of such investment advisors or financial
planners (who have entered into an agreement for this purpose with the
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Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an
appropriate agreement with the Distributor;
o 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; or
o qualified Retirement Plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements were
consummated and share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a Retirement Plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
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o shares purchased and paid for with 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 sales
charge was paid (this waiver also applies to shares purchased by exchange of
shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for
in this manner), this waiver must be requested when the purchase order is placed
for your shares of the Fund, and the Distributor may require evidence of your
qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal
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Revenue Code; (6) to meet the minimum distribution requirements of the Internal
Revenue Code; (7) to establish "substantially equal periodic payments" as
described in Section 72(t) of the Internal Revenue Code; (8) for retirement
distributions or loans to participants or beneficiaries; (9) separation from
service; (10) participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary) offered as an
investment option in a Retirement Plan in which Oppenheimer funds are also
offered as investment options under a special arrangement with the Distributor;
or (11) plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA;
o for distributions from Retirement plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Corporation's Board of Directors authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
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deferred sales charge will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the time of
redemption or the original offering price (which is the original net asset
value). The contingent deferred sales charge is not imposed on the amount of
your account value represented by the increase in net asset value over the
initial purchase price. The Class B contingent deferred sales charge is paid to
the Distributor to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below .
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since
Beginning of
Month in which Contingent Deferred Sales Charge
Purchase Order On Redemptions in That Year
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. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.
|X| Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
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Class A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class B
Distribution and Service Plan, described below. The conversion is based on the
relative net asset value of the two classes and no sales load or other charge is
imposed. When Class B shares convert, any other Class B shares that were
acquired by the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature is subject to
the continued availability of a tax ruling described in "Alternative Sales
Arrangements - Class A, Class B and Class C Shares" in the Statement of
Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the shares at the time of redemption, or the original
offering price (which is the original net asset value). The contingent deferred
sales charge is not imposed on the amount of your account value represented by
the increase in net asset value over the initial purchase price. The Class C
contingent deferred sales charge is paid to reimburse the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
All purchases are considered to have been made on the first regular business day
of the month in which the purchase was made.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
reimburse the Distributor for its services and costs in distributing Class B and
C shares and servicing accounts. Under the Plans, the Fund pays the Distributor
an annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each plan. If either Plan is
terminated by the Fund, the Board of Directors may allow the Fund to continue
payments of the asset-based sales charge to the Distributor for distributing
shares before the Plan was terminated.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of
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the close of each regular business day during the period. The asset-based sales
charge allows investors to buy Class B or C shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or C shares. Those services are
similar to those provided under the Class A Service Plan, described above. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and retains the
service fee paid by the Fund in that year. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is 4.00% of the
purchase price. The Fund pays the asset-based sales charge to the Distributor to
reimburse it for its services rendered in distributing Class B shares. The
Distributor retains the asset-based sales charge to recoup the sales commissions
it pays, the advances of service fee payments it makes, and its financing costs
of distributing and selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is 1.00% of the
purchase price. Those payments are retained by the Distributor during the first
year Class C shares are outstanding to reimburse the Distributor for its
services rendered in distributing Class C shares. 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's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B and Class C shares. At August 31, 1997, the end of the
Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $92,083,482 (equal to 2.78% of the
Fund's net assets represented by Class B shares on that date). At August 31,
1997, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with sales of Class C shares of $7,962,219
(equal to 0.77% of the Fund's net assets represented by Class C shares on that
date). If either Plan
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is terminated by the Fund, the Board of Directors may allow the Fund to continue
payments of the asset-based sales charge to the Distributor for distributing
shares before the Plan was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent
deferred sales charges will not be applied to shares purchased in certain types
of transactions nor will it apply to Class B and Class C shares redeemed in
certain circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information. In order to
receive a waiver of the Class B and Class C contingent deferred sales charge,
you must notify the Transfer Agent of which conditions apply.
Waivers for Redemptions of Shares in Certain Cases. The Class B and Class
C contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
o distributions to participants or beneficiaries from Retirement plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement plans;
o distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request);
o shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies, below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal
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Revenue Code; (3) to meet minimum distribution requirements as defined in the
Internal Revenue Code; (4) to make "substantially equal periodic payments" as
described in Section 72(t) of the Internal Revenue Code; (5) for separation from
service; or (6) for loans to participants or beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund
is a party.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds (as well as Class Y shares of funds advised by MassMutual) for asset
allocation programs, investment companies or separate investment accounts it
sponsors and offers to its customers. Individual investors are not able to
invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging, or transferring the Fund's
other classes of shares (other than the time those orders must be received by
the Distributor or Transfer Agent) and the special account features available to
purchasers of those other classes of shares described elsewhere in this
Prospectus do not apply to Class Y shares. Instructions for purchasing,
redeeming, exchanging or transferring Class Y shares must be submitted by the
institutional investor, not by its customers for whose benefit the shares are
held.
Special Investor Services
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<PAGE>
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
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send the proceeds directly to your AccountLink bank account. Please refer to
"How to Sell Shares," below, for details.
Shareholder Transactions by Fax. Certain account transactions may be sent to the
Transfer Agent by fax (telecopier). Please call 1-800-525-7048 for information
about which transactions are included. Transaction requests submitted by fax are
subject to the same rules and restrictions as written and telephone requests
described in this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer fund
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan in order to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual basis.
The checks may be sent to you or sent automatically to your bank account through
AccountLink. You may even set up certain types of withdrawals of up to $1,500
per month by telephone. You should consult the Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer fund account is $25. These exchanges are subject to the terms of the
Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased with an initial sales charge and to Class A or Class B shares on which
you paid a contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your reinvestment payment. Please
consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
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o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers
o 403(b)(7) Custodial Plans for employees of eligible
tax-exempt organizations, such as schools, hospitals and charitable
organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including SARSEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons
and other employers, and
o 401(k) prototype retirement plans for Businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer Agent. The Fund offers you a number of ways to sell your shares, in
writing or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have questions
about any of these procedures, especially if you are redeeming shares in a
special situation, such as due to the death of the owner, or from a Retirement
Plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.
o Retirement Accounts. To sell shares held in an
OppenheimerFunds-sponsored retirement account in your name, call the Transfer
Agent for a distribution request form. There are special income tax withholding
requirements for distributions from Retirement Plans and you must submit a
withholding form with your request to avoid delay. If your Retirement Plan
account is held for you by your employer, you must arrange for the distribution
request to be sent by the plan administrator or trustee. There are additional
details in the Statement of Additional Information.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check;
o The redemption check is not payable to all shareholders
listed on the account statement;
o The redemption check is not sent to the address of record
on your account statement;
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o Shares are being transferred to a Fund account with a
different owner or name;
o Shares are redeemed by someone other than the owner(s) (such
as an Executor).
o Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, a foreign bank that has a U.S.
correspondent bank, a U.S. registered dealer or broker in
securities, municipal securities or government securities, or by a
U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing as a
fiduciary on behalf of a corporation, partnership or other
business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
o Your name,
o The Fund's name,
o Your Fund account number (from your account statement), o The dollar
amount or number of shares to be redeemed, o Any special payment
instructions, o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. If your shares are held in an OppenheimerFunds-sponsored
retirement plan or are held under a share certificate, you may not redeem your
shares by telephone.
o To redeem shares through a service representative, call
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<PAGE>
1-800-852-8457, or
o To redeem shares automatically by PhoneLink, call
1-800-533-3310.
Whichever method you use, you may have a check sent to the address on your
account statement, or, if you have linked your Fund account to your bank account
through AccountLink, you may have the proceeds sent to that bank account.
o Telephone Redemptions Paid by Check. You may redeem up to $50,000 by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink or by Wire. 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.
You may also have the Transfer Agent send redemption proceeds of $2,500 or
more by Federal Funds wire to a designated commercial bank account. The bank
must be a member of the Federal Reserve wire system. There is a $10 fee for each
Federal Funds wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that the wire
may be delayed up to seven days to enable the Fund to sell securities to pay the
redemption proceeds. No dividends are accrued or paid on the proceeds of shares
that have been redeemed and are awaiting transmittal by wire. To establish wire
redemption privileges on an account that is already established, please contact
the Transfer Agent for instructions.
Selling 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. Please refer to "Special
Arrangements for Repurchase of Shares from Dealers and Brokers" in the Statement
of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
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o Shares of the fund selected for exchange must be available
for sale in your state of residence;
o The Prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege;
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them, after the account is open 7 days, you
can exchange shares every regular business day;
o You must meet the minimum purchase requirements for the fund
you purchase by exchange; and
o Before exchanging into a fund, you should obtain and read
its Prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be "Class A" shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased into the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of
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shares of the fund you are exchanging into up to seven days if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example, the receipt of multiple exchange requests from a dealer in a
"market-timing" strategy might require the sale of portfolio securities at a
time or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange which is normally 4:00 p.m., but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Board of Directors has established procedures to
value the Fund's securities to determine net asset value. In general, securities
values are based on market value. There are special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more completely in
the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors at any time the Board believes it is in the Fund's
best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
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<PAGE>
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 and until the Transfer Agent receives cancellation
instructions from an owner of the account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent, in its discretion, may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. Additionally, the
redemption price, which is the net asset value per share, will normally be
different for Class A, Class B, Class C and Class Y shares. Therefore, the
redemption value of your shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within seven (7) days after the Transfer Agent
receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker/dealer, payment will be forwarded within three (3) business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be
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<PAGE>
as much as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by Federal Funds wire, certified check or arrange
with your bank to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund 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
also be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund a correct and properly certified Social Security
or employer identification number when you sign your application, or if you
underreport your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A, Class B and
Class C shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B, Class C
and Class Y shares from net investment income on a quarterly basis and normally
pays those dividends to shareholders in March, June, September and December, but
the Board of Directors can change that date. Dividends paid on Class A shares
and Class Y shares generally are expected to be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares will
generally be higher. There is no fixed dividend rate
-50-
<PAGE>
and there can be no assurance as to the payment of any dividends.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. Short-term capital gains are treated as dividends for tax purposes.
Long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year. There can be no assurances
that the Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your application
how you want to receive your dividends and distributions. For
OppenheimerFunds-sponsored retirement accounts, all distributions are
reinvested. For other accounts, you have four options:
o Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or you
can have them sent to your bank account through AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent to
your bank through AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in the same class of
shares of another Oppenheimer fund account you have established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you have held your shares. Dividends
paid from short-term capital gains and net investment income are taxable as
ordinary income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable when paid,
whether you reinvest them in additional shares or receive them in cash. Every
year the Fund will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year. So that the Fund will
not have to pay taxes on the amount it distributes to shareholders as dividends
and capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although the Fund reserves the right not to qualify in a particular year.
o "Buying a Dividend": If you buy shares on or just before the
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<PAGE>
ex-dividend date, or just before the Fund declares a capital gains distribution,
you will pay the full price for the shares and then receive a portion of the
price back as a taxable dividend or capital gain.
o Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally, 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.
o Returns of Capital: In certain cases, distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
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<PAGE>
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment adviser to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax-Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former
Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement Plans. The
following table sets forth the initial sales charge rates for Class A shares
purchased by a "Qualified Retirement Plan" through a single broker, dealer or
financial institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement Plan or that
Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP-IRA or IRA plan for employees of a single
employer.
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<PAGE>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
- --------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement Plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages 31 and 32 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are qualified retirement plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in qualified retirement plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares of
the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
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<PAGE>
o Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in qualified retirement plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the
following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the Internal Revenue Code or from custodial accounts under Section
403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation
plans under Section 457 of the Code, and other employee benefit plans, and
returns of excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or Class C shares
if the annual withdrawal does not exceed 10% of the initial value of the
account, and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum
value of such accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, B or C shares of the
Fund acquired by merger of a Former Quest for Value Fund into the Fund or by
exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into
which such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) distributions to
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participants or beneficiaries from Individual Retirement Accounts under Section
408(a) of the Internal Revenue Code or retirement plans under Section 401(a),
401(k), 403(b) and 457 of the Code, if those distributions are made either (a)
to an individual participant as a result of separation from service or (b)
following the death or disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement plans; (3)
redemptions other than from retirement plans following the death or disability
of the shareholder(s) (as evidenced by a determination of total disability by
the U.S. Social Security Administration); (4) withdrawals under an automatic
withdrawal plan (but only for Class B or Class C shares) where the annual
withdrawals do not exceed 10% of the initial value of the account; and (5)
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, B or C shares of
the Fund described in this section if within 90 days after that redemption, the
proceeds are invested in the same Class of shares in this Fund or another
Oppenheimer fund.
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<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
Graphic material included in the Prospectus of Oppenheimer
Main Street Income & Growth Fund: "Comparison of Total Return of
Oppenheimer Main Street Income & Growth Fund with the S&P 500 Index
- - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Main
Street Income & Growth Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the Fund. In
the case of the Fund's Class A shares, that graph will cover the period from
February 3, 1988 (commencement of operations) through August 31, 1997; in the
case of Class B shares the graph will cover the period from the inception of the
class (October 1, 1994) through August 31, 1997; and in the case of Class C
shares the graph will cover the period from the inception of the class (December
1, 1993) through August 31, 1997. Class Y shares in the graph will cover the
period from the inception of the class (November 1, 1996) through August 31,
1997). The graphs will compare such values with hypothetical $10,000 investments
over the same time periods in the S&P 500 Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the S&P
500 Index, is set forth in the Prospectus under "Performance of the Fund -
Comparing the Fund's Performance to the Market."
Oppenheimer
Main Street
Fiscal Year Income & S&P 500
(Period) Ended Growth Fund A Index
2/03/88 $ 9,425 $10,000
6/30/88 $9,984 $10,815
6/30/89 $11,858 $13,034
6/30/90 $12,933 $15,178
6/30/91 $14,304 $16,297
6/30/92 $19,952 $18,479
6/30/93 $29,206 $20,993
6/30/94 $33,392 $21,287
6/30/95 $40,244 $26,828
6/30/96 $49,203 $33,798
8/31/96(1) $47,602 $32,988
8/31/97 $62,402 $46,390
Oppenheimer
Main Street
Fiscal Year Income & S&P 500
(Period) Ended Growth Fund B(2) Index
10/01/94 $10,000 $10,000
6/30/95 $11,315 $12,017
6/30/96 $13,730 $15,139
8/31/96(1) $13,262 $14,776
8/31/97 $16,957 $20,778
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Oppenheimer
Main Street
Fiscal Year Income & S&P 500
(Period) Ended Growth Fund C(3) Index
12/01/93 $10,000 $10,000
6/30/94 $9,856 $9,779
6/30/95 $11,789 $12,324
6/30/96 $14,308 $15,526
8/31/96(1) $13,825 $15,154
8/31/97 $17,981 $21,310
Oppenheimer
Main Street
Fiscal Year Income & S&P 500
(Period) Ended Growth Fund Y(4) Index
11/01/96 $10,000 $10,000
8/31/97 $12,398 $12,957
(1) The Fund changed its fiscal year end from 6/30 to 8/31. (2)Class B shares of
the Fund were first publicly offered on October 1, 1994. (3)Class C shares of
the Fund were first publicly offered on December 1, 1993. (4)Class Y shares of
the Fund were first publicly offered on November 1, 1996.
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<PAGE>
Oppenheimer Main Street Income & Growth Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or the Statement of Additional Information, and if given or made,
such information and representation must not be relied upon as having been
authorized by the Corporation, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR700.1197 Printed on recycled paper
-59-
<PAGE>
Oppenheimer
Main Street California Municipal Fund(R)
Prospectus dated December 8, 1997
Oppenheimer Main Street California Municipal Fund, a series of Oppenheimer
Main Street Funds, Inc., is a mutual fund that seeks as high a level of current
income which is exempt from Federal and California personal income taxes as is
available from investing in Municipal Securities while attempting to preserve
capital. Please refer to "Investment Policies and Strategies" for more
information about the types of securities the Fund invests in and the risks of
investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the December
8, 1997, Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(Oppenheimer Funds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other agency,
and involve investment risks, including the possible loss of the principal
amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objectives and Policies
11 Investment Risks
13 Investment Techniques and Strategies
19 How the Fund is Managed
20 Performance of the Fund
ABOUT YOUR ACCOUNT
24 How to Buy Shares
Class A Shares
Class B Shares
34 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
35 How to Sell Shares
By Mail
By Telephone
By Checkwriting
38 How to Exchange Shares
39 Shareholder Account Rules and Policies
41 Dividends, Capital Gains and Taxes
A-1 Appendix A: Special Sales Charge Agreements
-2-
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
operating expenses that you might expect to bear indirectly. The calculations
are based on the Fund's expenses during its fiscal year ended August 31, 1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" from pages 24
through 43 for an explanation of how and when these charges apply.
Class A Class B
Shares Shares
- --------------------------------------------------------------------------
Maximum Sales 4.75% None
Charge on Purchases
(as a % of offering price)
- -------------------------------------------------------------------------
Maximum Deferred Sales Charge None(1) 5% in the first year,
(as a % of the lower of the declining to 1% in
original purchase price or the six year and
redemption proceeds) eliminated thereafter(2)
- -------------------------------------------------------------------------
Maximum Sales Charge on
Reinvested Dividends None None
- -------------------------------------------------------------------------
Redemption Fee None(3) None(3)
- -------------------------------------------------------------------------
Exchange Fee None None
(1)If you invest $1 million or more in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 12 calendar months (18
months for shares purchased prior to May 1, 1997) from the end of the calendar
month during which you purchased those shares. See "How to Buy Shares - Buying
Class A Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares," below, for more information
on the contingent deferred sales charge.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds wire
but not for redemptions paid by check or ACH transfer through AccountLink. See
"How to Sell Shares," below.
-3-
<PAGE>
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets):
Class A Class B
Shares Shares
- -------------------------------------------------------------------------
Management Fees .40% .40%
- -------------------------------------------------------------------------
12b-1 Plan Fees None 1.00%
- -------------------------------------------------------------------------
Other Expenses .19% .20%
- -------------------------------------------------------------------------
Total Fund Operating Expenses .59% 1.60%
The numbers in the chart above are based of the Fund's business expenses
in its fiscal year ended August 31, 1997. These amounts are shown as a
percentage of the average net assets of each class of the Fund's shares for that
year. Under the Investment Advisory Agreement the Fund pays the Manager
management fees, at the annual rate of 0.55% of net assets. Pursuant to the
Agreement, the Manager has agreed to waive a portion of the fee when the Fund's
net assets are less than $100 million dollars. The fee rate, reflecting this
waiver, is 0.40% when net assets are $75 million or more but less than $100
million, 0.25% when net assets are $50 million or more but less than $75
million, 0.15% when net assets are $25 million or more but less than $50
million, and 0% when net assets are less than $25 million. The Manager has
voluntarily undertaken to continue to waive those expenses over 0.40% when the
net assets of the Fund exceed $100 million. Without that waiver, the Management
Fee would have been 0.55% for each class of shares after the Fund's total net
assets exceed $100 million. The "12b-1 Distribution Plan Fees" for Class B
shares are the Distribution and Service Plan Fees (Service fee of 0.25%) and the
asset-based sales charge of 0.75%. The actual expenses for each class of shares
in future years may be more or less than the numbers in the chart, depending on
a number of factors, including the actual amount of the assets represented by
each class of shares.
o Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
-4-
<PAGE>
below. Assume that you make a $1,000 investment in each class of shares of the
Fund, and that the Fund's annual return is 5%, and that its operating expenses
for each class are the ones shown in the Annual Fund Operating Expenses chart
above. If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of 1, 3, 5 and 10
years:
1 year 3 years 5 years 10 years(1)
- -------------------------------------------------------------------------
Class A Shares $53 $66 $79 $118
- -------------------------------------------------------------------------
Class B Shares $66 $81 $107 $138
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $53 $66 $79 $118
- -------------------------------------------------------------------------
Class B Shares $16 $51 $87 $138
(1)In the first example, expenses include the Class A initial sales charge and
Class B contingent deferred sales charge. In the second example, Class A
expenses include the initial sales charges but Class B expenses do not include
contingent deferred sales charges. The Class B expenses in years 7 through 10
are based on the Class A expenses shown above, because the Fund automatically
converts your Class B shares into Class A shares after 6 years. Because of the
asset-based sales charge and contingent deferred sales charge on Class B shares,
long-term Class B shareholders could pay the economic equivalent of an amount
greater than the maximum front-end sales charge allowed under applicable
regulatory requirements. The automatic conversion of Class B shares to Class A
shares is designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Buying Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete information can
be found. You should carefully read the entire Prospectus before making a
decision about investing in the Fund. Keep the Prospectus for reference after
you invest, particularly for information about your account, such as how to sell
or exchange shares.
o What is the Fund's Investment Objective? The Fund's investment objective
is to seek as high a level of current income which is exempt from Federal and
California personal income taxes as is available from
-5-
<PAGE>
investing in Municipal Securities while attempting to preserve capital.
o What Does the Fund Invest In? To seek its investment objective, the Fund
primarily invests in investment-grade municipal securities, the interest of
which is exempt from Federal and California individual income tax. The Fund may
also use hedging instruments and certain derivative investments to try to manage
investment risks. These investments are more fully explained in "Investment
Objective and Policies" starting on page 10.
o Who Manages the Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. which (including subsidiaries) manages investment company
portfolios currently having over $75 billion in assets. The Manager is paid an
advisory fee by the Fund, based on its assets. The Fund's portfolio manager is
Jerry A. Webman, who is employed by the Manager. He is primarily responsible for
the selection of the Fund's securities. The Fund's Board of Directors, elected
by shareholders, oversees the investment adviser and the portfolio manager.
Please refer to "How the Fund is Managed," starting on page 19 for more
information about the Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree. The
Fund's investments in municipal bonds are subject to changes in their value from
a number of factors such as changes in general bond market movements, the change
in value of particular bonds because of an event affecting the issuer, or
changes in interest rates that can affect bond prices. These changes affect the
value of the Fund's investments and its price per share. The fact that the Fund
concentrates its investments in California Municipal Securities and that the
Fund is permitted to invest in a small number of issuers entails greater risk
than an investment in a diversified investment company. In the Oppenheimer funds
spectrum, the Fund is generally more conservative than high yield bond funds,
but more aggressive than money market funds. While the Manager tries to reduce
risks by diversifying investments, by carefully researching securities before
they are purchased for the Fund's portfolio and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's objective
and your shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Risks" starting on page 11 for a more
complete discussion.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page 24 for more
details.
o Will I Pay a Sales Charge to Buy Shares? The Fund has two classes of
shares. Both classes have the same investment portfolio but different expenses.
Class A shares are offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Class B shares are
-6-
<PAGE>
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge (starting at 5% and declining as shares are held longer)
if redeemed within 6 years of purchase. There is also an annual asset-based
sales charge on Class B shares. Please review "How to Buy Shares" starting on
page 24 for more details, including a discussion about factors you and your
financial advisor should consider in determining which class may be appropriate
for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer, or by
writing a check against your Fund account (available for Class A shares only).
Please refer to "How to Sell Shares" on page 35. The Fund also offers exchange
privileges to other Oppenheimer funds, described in "How to Exchange Shares" on
page 38.
o How Has the Fund Performed? The Fund measures its performance by quoting
its yield, average annual total return and cumulative total return, which
measure historical performance. Those yields and returns can be compared to the
yields and returns (over similar periods) of other funds. Of course, other funds
may have different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad market index, which we have done on
page 23. Please remember that past performance does not guarantee future
results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose reports on the Fund's
financial statements for the fiscal year ended August 31, 1997, is included in
the Statement of Additional Information.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1997 1996(2) 1996 1995 1994
==================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.16 $12.15 $12.09 $11.82 $12.66
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .73 .12 .73 .73 .75
Net realized and unrealized gain (loss) .49 .01 .07 .27 (.80)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations 1.22 .13 .80 1.00 (.05)
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.74) (.12) (.73) (.69) (.73)
Dividends in excess of net investment
income -- -- -- (.04) (.03)
Distributions from net realized gain -- -- --(5) -- --
Distributions in excess of net realized gain -- -- (.01) -- (.03)
-------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.74) (.12) (.74) (.73) (.79)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.64 $12.16 $12.15 $12.09 $11.82
======== ======== ======== ======== ========
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(6) 10.24% 1.12% 6.73% 8.93% (0.60)%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $89,991 $76,817 $76,913 $78,134 $79,555
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $80,311 $77,584 $78,676 $76,148 $81,741
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.91% 6.00%(7) 5.99% 6.27% 6.09%
Expenses(8) 0.59% 0.57%(7) 0.58% 0.57% 0.53%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(9) 46.4% 1.4% 33.1% 14.2% 20.2%
</TABLE>
1. For the period from October 29, 1993 (inception of offering) to June 30,
1994.
2. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
3. For the period from May 18, 1990 (commencement of operations) to June 30,
1990.
4. Net investment income would have been $0.82 and $0.04 per share in 1991 and
1990 absent the voluntary expense assumption, resulting in an expense ratio of
0.42% and 1.93%, respectively.
5. Less than $0.005 per share.
6. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ---------------------------------------------- ----------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1993 1992 1991 1990(3) 1997 1996(2) 1996 1995 1994(1)
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$12.05 $11.61 $11.56 $11.43 $12.14 $12.14 $12.08 $11.80 $12.90
- -------------------------------------------------------------------------------------------------------------------
.80 .82 .83(4) .06(4) .60 .10 .61 .62 .38
.64 .45 .05 .13 .50 -- .07 .27 (1.07)
- -------- -------- -------- -------- -------- -------- -------- -------- --------
1.44 1.27 .88 .19 1.10 .10 .68 .89 (.69)
- -------------------------------------------------------------------------------------------------------------------
(.81) (.82) (.83) (.06) (.61) (.10) (.61) (.57) (.37)
-- -- -- -- -- -- -- (.04) (.01)
(.02) (.01) -- -- -- -- --(5) -- --
-- -- -- -- -- -- (.01) -- (.03)
- -------- -------- -------- -------- -------- -------- -------- -------- --------
(.83) (.83) (.83) (.06) (.61) (.10) (.62) (.61) (.41)
- -------------------------------------------------------------------------------------------------------------------
$12.66 $12.05 $11.61 $11.56 $12.63 $12.14 $12.14 $12.08 $11.80
======== ======== ======== ======== ======== ======== ======== ======== ========
====================================================================================================================
12.53% 11.21% 7.94% 1.95% 9.24% 0.85% 5.66% 7.90% (5.42)%
====================================================================================================================
$72,387 $40,055 $13,924 $2,027 $11,919 $5,928 $5,442 $2,648 $1,203
- -------------------------------------------------------------------------------------------------------------------
$54,840 $26,304 $ 6,661 $1,685 $ 8,129 $5,767 $3,848 $1,904 $ 649
- -------------------------------------------------------------------------------------------------------------------
6.46% 6.74% 6.94% 5.48%(7) 4.85% 4.92%(7) 4.94% 5.17% 4.91%(7)
0.39% 0.32% 0.33%(4) 0.20%(4)(7) 1.60% 1.62%(7) 1.60% 1.55% 1.62%(7)
- -------------------------------------------------------------------------------------------------------------------
5.8% 25.7% 14.6% 0.0% 46.4% 1.4% 33.1% 14.2% 20.2%
</TABLE>
7. Annualized.
8. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
9. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $53,752,001 and $40,699,816, respectively.
9
Investment Objective and Policies
Objective. The Fund invests its assets to seek as high a level of current income
which is exempt from Federal and California personal income taxes as is
available from investing in Municipal Securities (defined below), while
attempting to preserve capital.
Investment Policies and Strategies. The Fund seeks its objective by following
the fundamental policy of investing, under normal market conditions, at least
80% of its total assets in California Municipal Securities.
Dividends paid by the Fund derived from interest attributable to California
Municipal Securities will be exempt from Federal individual income taxes. Such
dividends will also be exempt from California personal income taxes provided
that at the close of each quarter, at least 50% of the value of the Fund's
assets are invested in obligations the interest of which is exempt from taxation
under California law when held by an individual. Dividends derived from interest
on Municipal Securities of
-7-
<PAGE>
other governmental issuers will be exempt from Federal individual income tax,
but will be subject to California personal income taxes. Any net interest income
on taxable investments and repurchase agreements will be taxable as ordinary
income when distributed to shareholders.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, which is described above, as well as investment policies
it follows to try to achieve its objective. Additionally, the Fund uses certain
investment techniques and strategies in carrying out those investment policies.
The Fund's investment policies and techniques are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a particular
policy is "fundamental." The Fund's investment objective is a fundamental
policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Board of Directors of Oppenheimer Main Street
Funds, Inc. may change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
o Portfolio Turnover. "Portfolio turnover" describes the rate at which the
fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during the year, its portfolio turnover
rate would have been 100%. Portfolio turnover affects brokerage costs the Fund
pays. While short-term trading increases portfolio turnover and may increase the
Fund's transaction costs, the Fund incurs little or no brokerage costs because
most of the Fund's portfolio transactions are principal trades without brokerage
commissions. The Financial Highlights table above shows the Fund's portfolio
turnover rates during prior fiscal years.
Investment Risks.
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors
-8-
<PAGE>
seeking assured income. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased, and
in some cases by using hedging techniques, changes in overall market prices can
occur at any time, and because the income earned on securities is subject to
change there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
o Special Considerations - California Municipal Securities. Because the Fund
concentrates its investments in California Municipal Securities, the market
value and marketability of such Municipal Securities and the interest income to
the Fund from them could be adversely affected by a default or a financial
crisis relating to any of such issuers. You should consider these matters as
well as economic trends in California, summarized in the Statement of Additional
Information under "Special Investment Considerations - California Municipal
Securities."
o Interest Rate Risks. In addition to credit risks, described below,
Municipal Securities are subject to changes in value due to changes in
prevailing interest rates. When prevailing interest rates fall, the values of
outstanding Municipal Securities generally rise and (if purchased at principal
amount) would sell at a premium. Conversely, when interest rates rise, the
values of outstanding Municipal Securities generally decline and (if purchased
at principal amount) would sell at a discount. The magnitude of these
fluctuations will be greater when the average maturity of the portfolio is
longer. Changes in the value of Municipal Securities held in the Fund's
portfolio arising from changes in interest rates will not affect interest income
derived from these securities, but will affect the Fund's net asset value per
share.
o Credit Risks. Municipal Securities are also subject to credit risks.
Credit risk relates to the ability of the issuer of a Municipal Security to make
interest or principal payments on the security as they become due. The economic
and other factors that can affect that ability are summarized in the Statement
of Additional Information under "Special Investment Considerations-California
Municipal Securities." While the Manager may rely to some extent on credit
ratings by nationally recognized rating agencies, such as Standard & Poor's
Corporation ("Standard & Poor's"), Fitch Investors Service, Inc. ("Fitch"), Duff
& Phelps, Inc. ("Duff & Phelps") or Moody's Investor Services, Inc. ("Moody's"),
in evaluating the credit risk of securities selected for the Fund's portfolio,
it may also use its own research and analysis. However, many factors affect an
issuer's ability to make timely payments, and there can be no assurance that the
credit risks of a particular security will not change over time.
o There are special risks in investing in derivative investments. The Fund
can invest in a number of different kinds of "derivative" investments. In
general, a "derivative investment" is a specially designed investment whose
performance is linked to the performance of another investment or security, such
as an option, future, index, currency
-9-
<PAGE>
or commodity. The company issuing the instrument may fail to pay the amount due
on the maturity of the instrument. Also, the underlying investment or security
on which the derivative is based, and the derivative itself, may not perform the
way the Manager expects it to perform. Markets, underlying securities and
indices may move in a direction not anticipated by the Manager. Performance of
derivative investments may also be influenced by interest rate and stock market
changes in the United States and abroad. All of this can mean that the Fund will
realize less principal or income from the investment than expected. Certain
derivative investments held by the Fund may be illiquid. Please refer to
"Illiquid and Restricted Securities," below.
o Non-diversification. The Fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940 (the "Investment
Company Act") so that the proportion of the Fund's assets that may be invested
in the securities of a single issuer is not limited by the Investment Company
Act. An investment in the Fund therefore will entail greater risk than an
investment in a diversified investment company because a higher percentage of
investments among fewer issuers may result in greater credit risk exposure to a
smaller number of issuers, greater fluctuation in the total market value of the
Fund's portfolio, and economic, political or regulatory developments may have a
greater impact on the value of the Fund's portfolio than would be the case if
the portfolio were diversified among more issuers. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), pursuant to which: (1) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer, and
(2) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets may be invested in the securities of
a single issuer and the Fund must not own more than 10% of the outstanding
voting securities of a single issuer.
o Hedging instruments can be volatile investments and may involve special
risks. The Fund may invest in a number of hedging instruments. The use of
hedging instruments requires special skills and knowledge of investment
techniques that are different from 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 or if it could not
close out a position because of an illiquid market for the future or option.
Such losses might cause previously distributed short-term capital gains to be
re-characterized as a non-taxable return of capital to shareholders.
Options trading involves the payment of premiums and has special tax effects
on the Fund. There are also special risks in particular hedging strategies. 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
-10-
<PAGE>
the investment at the call price and will not be able to realize any profit if
the investment has increased in value above the call price. If the value of the
investment does not rise above the call price, it is likely that the call will
lapse without being exercised, while the Fund keeps the cash premium (and the
investment). Interest rate swaps are subject to credit risks (if the other party
fails to meet its obligations) and also to interest rate risks. The Fund could
be obligated to pay more under its swap agreements than it receives under them,
as a result of interest rate changes. These risks and the hedging strategies
that the Fund may use are described in greater detail in the Statement of
Additional Information
Investment Techniques and Strategies.
The Fund may also use the investment techniques and strategies described below.
These techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on their
use that are designed to reduce some of the risks.
o Municipal Securities. Municipal Securities are municipal bonds, municipal
notes and municipal commercial paper, certificates of participation and other
debt obligations issued by or on behalf of the State of California, other states
and the District of Columbia, their political subdivisions, or any commonwealth,
territory or possession of the United States, or their respective agencies,
instrumentalities or authorities, the interest from which, in the opinion of
bond counsel to the respective issuer at the time of issue, is not subject to
Federal individual income tax. California Municipal Securities are obligations
of the State of California and its political subdivisions, and their respective
agencies, authorities or instrumentalities, the interest from which, in the
opinion of bond counsel to the respective issuer at the time of issue, is not
includable in gross income for purposes of the California personal income tax.
From time to time, the Fund may purchase private activity municipal securities,
the interest from which may be subject to Federal alternative minimum tax,
although no independent investigation will be made by the Manager as to the
users of proceeds of bond offerings or the application of such proceeds. It is
anticipated that under normal market conditions, the Fund's portfolio will have
an average weighted maturity of approximately 7 to 30 years. During periods when
the Fund is defensively invested in municipal notes and municipal commercial
paper, the average weighted maturity of the Fund's portfolio may decline to 3 to
4 years.
"Municipal bonds" are Municipal Securities that have a maturity when issued
of one year or more and "municipal notes" are Municipal Securities that have a
maturity when issued of less than one year. The two principal classifications of
Municipal Securities are "general obligations" (secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest) and "revenue obligations" (payable only from the revenues derived from
a particular facility or class of
-11-
<PAGE>
facilities, or specific excise tax or other revenue source). The Fund may
invest in Municipal Securities of both classifications.
o Investments in Taxable Securities and Temporary Defensive Investment
Strategy. Under normal market conditions, the Fund may invest up to 20% of its
assets in taxable investments, including (i) certain "Temporary Investments"
(described immediately below); (ii) covered call options and hedging instruments
(described in "Hedging" below); and (iii) repurchase agreements (explained
below).
For temporary defensive purposes, the Fund may invest an unlimited amount of
assets in: (i) obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; (ii) cash equivalents; (iii) commercial paper
rated in the highest category by an established rating agency; (iv) short-term
debt obligations; (v) certificates of deposit of domestic banks with assets of
$1 billion or more; or (vi) repurchase agreements. To the extent the Fund
assumes a temporary defensive position, a portion of the Fund's distributions
may be subject to Federal and state income taxes and the Fund may not achieve
its objective.
o Municipal Lease Obligations. The Fund may invest in certificates of
participation, which are tax-exempt obligations that evidence the holder's right
to share in lease, installment loan or other financing payments by a public
entity. Projects financed with certificates of participation generally are not
subject to state constitutional debt limitations or other statutory requirements
that may be applicable to Municipal Securities. Payments by the public entity on
the obligation underlying the certificates are derived from available revenue
sources, such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the certificates
are not guaranteed. While some municipal lease securities may be deemed to be
"illiquid" securities (the purchase of which would be limited as described below
in "Illiquid and Restricted Securities"), from time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations that the Manager
has determined to be liquid under guidelines set by the Corporation's Board of
Directors. See "Investment Objective and Policies - Municipal Securities -
Municipal Lease Obligations" in the Statement of Additional Information for more
details.
o Floating Rate/Variable Rate Obligations. Some of the Municipal Securities
the Fund may purchase may have variable or floating interest rates. Variable
rates are adjusted at stated periodic intervals. Floating rates are
automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the 91-day
U.S. Treasury bill rate. Such obligations may be secured by bank letters of
credit or other credit support arrangements.
o Inverse Floaters and Other Derivative Investments. The Fund may
-12-
<PAGE>
invest in variable rate bonds known as "inverse floaters." Yields on inverse
floaters move in the opposite direction from short-term interest rates. As
interest rates rise, inverse floaters produce less current income. Prices of
inverse floaters may be more volatile than the price of a comparable fixed-rate
security. Inverse floaters are a type of "derivative security," which is a
specially designed investment whose performance is linked to the performance of
another security or investment. Some inverse floaters have a "cap" whereby if
interest rates rise above the "cap," the security pays additional interest
income. If rates do not rise above the "cap," the Fund will have paid an
additional amount for a feature that proves worthless. The Fund may also invest
in municipal derivative securities that pay interest that depends on an external
pricing mechanism. Examples are interest rate swaps or caps and municipal bond
or swap indices. The Fund anticipates that it would invest no more than 10% of
its total assets in inverse floaters or such other municipal derivative
securities. Derivative Securities are subject to special risks described in
"Investment Risks," above.
o Ratings of Municipal Securities. Municipal Securities purchased by the
Fund must be rated at the time of purchase within the four highest rating
categories assigned by Moody's, Standard & Poor's, Duff & Phelps or Fitch (or
other similar rating organizations) or, if unrated, judged by the Manager to be
of comparable quality to Municipal Securities rated within such grades. See
Appendix A of the Statement of Additional Information for a description of these
ratings. Investments in unrated Municipal Securities will not exceed 20% of the
Fund's total assets. Not more than 25% of the Fund's total assets will be
invested in Municipal Securities that are (a) municipal bonds rated either "Baa"
by Moody's or "BBB" by either Standard & Poor's, Fitch or Duff & Phelps, (b)
municipal notes rated "SP-2" by Standard & Poor's, "MIG" by Moody's or "F-2" by
Fitch, or (c) if unrated, Municipal Securities, judged by the Manager to be of
comparable quality to Municipal Securities rated within the grades described in
(a) or (b) above, because such Municipal Securities, although investment grade,
may be subject to greater market fluctuations and risks of loss of income and
principal than higher-rated Municipal Securities, and may be considered to have
some speculative characteristics. A reduction in the rating of a security after
its purchase by the Fund will not require the Fund to dispose of such security.
Securities that have fallen below investment grade entail a greater risk that
the ability of the issuers of such securities to meet their debt obligations
will be impaired.
o Borrowing for Leverage. The Fund may not borrow in excess of 10% of the
value of its total assets and may do so only as a temporary measure for
extraordinary or emergency purposes. Additionally, the Fund cannot make any
investment when borrowings exceed 5% of its total assets. Interest on borrowed
money is an expense the Fund would not otherwise incur, so that it may have
substantially reduced net investment income during periods of substantial
borrowings. The Fund may 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.
-13-
<PAGE>
Other Investment Techniques and Strategies. The Fund may also use the investment
techniques and strategies described below. These techniques involve certain
risks. The Statement of Additional Information contains more information about
these practices, including limitations on their use that may help to reduce some
of the risks.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
Municipal Securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. "When-issued" and "delayed delivery"
refer to securities that have been created and for which a market exists, but
which are not available for immediate delivery. The Fund does not intend to make
such purchases for speculative purposes. During the period between the purchase
and settlement, no payment is made for the security and no interest accrues to
the buyer from the investment. There may be a risk of loss if the value of the
security declines prior to the settlement date.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements to generate income, for liquidity purposes to meet
anticipated redemptions, pending the investment of proceeds from sales of Fund
shares, or pending settlement of purchases of portfolio investments. In a
repurchase transaction, the Fund buys a security and simultaneously sells it to
the vendor for delivery at a future date. Repurchase agreements must be fully
collateralized. However, if the seller of the securities fails to pay the
agreed-upon repurchase price on the delivery date, the Fund's risks may include
any costs of disposing of the collateral for the agreement, and losses that
might result from any delays in foreclosing on the collateral. Income earned on
repurchase transactions is not tax-exempt and, accordingly, under normal market
conditions, the Fund will limit its investments in repurchase transactions to
20% of its total assets. When the Fund assumes a temporary defensive position,
there is no limit on the amount of its assets that may be subject to repurchase
agreements maturing in seven days or less. Repurchase agreements having a
maturity beyond seven days are subject to the percentage limitation on illiquid
and restricted securities, discussed below. See "Repurchase Agreements" in the
Statement of Additional Information for more details.
o Illiquid and Restricted Securities. Under the policies and procedures
established by the Board of Directors of Oppenheimer Main Street Funds, Inc.,
the Manager determines the liquidity of the Fund's investments. Investments may
be illiquid because of the absence of 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 will not invest more than 10% of its net assets in illiquid or
restricted securities (the Board may increase that limit to 15%). The Fund's
percentage limitation on these investments does not apply to certain restricted
securities that are eligible for resale to qualified institutional buyers.
Illiquid securities include repurchase agreements
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maturing in more than 7 days, or certain participation interests other than
those with puts exercisable within 7 days. The Manager monitors holdings of
illiquid securities on an ongoing basis and at times the Fund may be required to
sell some holdings to maintain adequate liquidity.
o Puts and Stand-By Commitments. The Fund may acquire "stand-by commitments"
or "puts" with respect to municipal obligations held in its portfolio. Under a
stand-by commitment or put option, the Fund would have the right to sell
specified securities at a specific price on demand to the issuing broker-dealer
or bank. The Fund will acquire stand-by commitments or puts solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes.
o Loans of Portfolio Securities. To attempt to raise income or to raise cash
for liquidity purposes, the Fund may lend its portfolio securities to certain
types of eligible borrowers approved by the Board of Directors. Each loan must
be collateralized in accordance with applicable regulatory requirements. After
any loan, the value of the securities loaned must not exceed 25% of the value of
the Fund's net 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 in the coming year.
o Hedging. The Fund may buy and sell certain kinds of futures contracts, put
and call options, and options on futures and broadly-based municipal bond
indices, or enter into interest rate swap agreements. These are referred to as
"hedging instruments." The Fund does not use hedging instruments for speculative
purposes, and has limits on the use of them, described below. The hedging
instruments the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options and futures for a number of purposes. It
may do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures, buying puts and
writing covered calls, hedge the Fund's portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options, tend to
increase the Fund's exposure to the securities market. Writing covered call
options may also provide income to the Fund for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
o Futures. The Fund may buy and sell futures contracts that relate to (1)
interest rates (these are referred to as Interest Rate Futures), and (2)
municipal bond indices (these are referred to as Municipal Bond Index Futures).
At present, the Fund does not intend to enter into
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futures contracts and options on futures if, after any such practice, the sum of
margin deposits on futures and premiums paid on futures would exceed 5% of the
Fund's total assets. These types of Futures are described in "Hedging" in the
Statement of Additional Information.
o Put and Call Options. The Fund may only buy exchange-traded and
over-the-counter calls only on debt securities, broadly-based municipal bond
indices, Municipal Bond Index Futures and Interest Rate Futures, or to terminate
its obligation on a call the Fund previously wrote. A call or put may be
purchased only if, after the purchase, the value of all call and put options
held by the Fund will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls. The Fund may write
calls on Futures contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to enable it to
satisfy its obligations if the call is exercised.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 25% of the Fund's net
assets would have to be segregated to cover put options.
o Interest Rate Swaps. In an interest rate swap, the Fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets of any type, including
equity and debt securities of any grade, to cover any amounts it could owe under
swaps that exceed the amounts it is entitled to receive, and it will adjust that
amount daily, as needed.
Income from interest rate swaps may be taxable.
Other Investment Restrictions. The Fund has other investment restrictions
that are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following:
o The Fund cannot lend money except in connection with the acquisition of
debt securities which the Fund's investment policies and restrictions permit it
to purchase, the Fund may also make loans of portfolio securities, subject to
the restrictions stated under "Loans of Portfolio Securities"; or
o The Fund cannot concentrate investments to the extent of 25% of its
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assets in any industry, however, there is no limitation as to investment in U.S.
Government Securities, Municipal Securities or as to investment in obligations
issued by the State of California or its subdivisions, agencies, authorities or
instrumentalities, the Fund cannot invest in securities or any other investment
other than Municipal Securities, temporary investments and Hedging Instruments.
Unless the Prospectus states that a percentage restriction applies on an
ongoing basis, it applies only at the time the Fund makes an investment and the
Fund need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios or
"series" of Oppenheimer Main Street Funds, Inc. (the "Corporation"), an
open-end, management investment company organized as a Maryland corporation in
1987. The Fund commenced operations on May 18, 1990.
The Corporation is governed by a Board of Directors, which is responsible
under Maryland corporate law for protecting the interests of shareholders. The
Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Directors and Officers of the Corporation" in the Statement of Additional
Information names the Directors and officers of the Fund and provides more
information about them. 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
Director or to take other action described in the Fund's Articles of
Incorporation.
The Board of Directors has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has two classes of shares, Class A and Class B. Both
classes invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be different for
the different classes. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares voting
proportionally on matters submitted to the vote of shareholders. Shares of each
class may have separate voting rights on matters in which the interests of one
class are different from the interests of another class, and only shares of a
particular class vote as a class on matters that affect that class alone.
Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
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Board of Directors, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the Fund
to the Manager, and describes the expenses that the Fund is responsible to pay
to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
o Portfolio Manager. The Portfolio Manager of the Fund is Jerry A.
Webman. He is a Senior Vice President of the Manager. He has been the
person responsible for the day-to-day management of the Fund's portfolio
since April, 1996. Mr. Webman also serves as an officer and portfolio
manager for other Oppenheimer funds. Previously, Mr. Webman was a
Managing Director with Prudential Mutual Funds - Investment Management,
Inc.
o Fees and Expenses. Under the Investment Advisory Agreement the Fund pays
the Manager monthly, at the annual rate of 0.55% of net assets. Pursuant to the
Agreement, the Manager has agreed to waive a portion of the fee when the Fund's
net assets are less than $100 million dollars. The fee rate, reflecting this
waiver, is 0.40% when net assets are $75 million or more but less than $100
million, 0.25% when net assets are $50 million or more but less than $75
million, 0.15% when net assets are $25 million or more but less than $50
million, and 0% when net assets are less than $25 million. The Manager has
voluntarily undertaken to continue to waive those expenses over 0.40% when the
net assets of the Fund exceed $100 million dollars. That voluntary undertaking
may be altered or rescinded at any time. When asset level breakpoints are
reached, the fee applies to total net assets of the Fund, not only to assets in
excess of such breakpoint. The Fund's management fee for its fiscal year ended
August 31, 1997 was 0.40% of average annual net assets for each class of shares.
The Fund pays expenses related to its daily operations, such as custodian
fees, Directors' fees, transfer agency fees, legal fees and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. Because the Fund
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purchases most of its portfolio securities directly from the sellers and not
through brokers, it therefore incurs relatively little expense for brokerage.
From time to time it may use brokers when buying portfolio securities. When
deciding which brokers to use, the Manager is permitted by the Investment
Advisory Agreement to consider whether brokers have sold shares of the Fund or
any other funds for which the Manager serves as investment adviser.
o The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of the other "Oppenheimer funds" and is
sub-distributor for funds managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as 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 number
shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses several types of yields
and total returns to illustrate its performance. The performance of each class
of shares is shown separately, because the performance of each class of shares
will usually be different as a result of the different kinds of expenses each
class bears. These returns and yields measure the performance of a hypothetical
investment in the Fund over various periods, and do not show the performance of
each shareholder's investment (which will vary if dividends and distributions
are received in cash, or shares are sold or additional shares are purchased).
The Fund's performance may be useful to help you see how well your investment
has done and to compare it to other funds or a market index.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio, expenses and which class of
shares you purchase.
o Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
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all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the entire
period (for example, ten years). An average annual total return shows the
average rate of return for each year in a period that would produce the
cumulative total return over the entire period. However, average annual total
returns do not show the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B shares, normally the contingent deferred sales charge that applies to
the period for which total return is shown has been deducted. Total returns may
also be quoted at "net asset value," without considering the effect of the sales
charge, and those returns would be less if sales charges were deducted.
o Yield. Different types of yields may be quoted to show performance. Each
class of shares calculates its standardized yield by dividing the annualized net
investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the period. Tax-equivalent yield is
the equivalent yield that would be earned in the absence of income taxes. It is
calculated by dividing that portion of the yield that is tax-exempt by a factor
equal to one minus the applicable tax rate. The yield of each class will differ
because of the different expenses of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does not
measure an investment return based on dividends actually paid to shareholders.
To show that return, a dividend yield may be calculated. Dividend yield is
calculated by dividing the dividends of a class paid for a stated period by the
maximum offering price on the last day of the period and annualizing the result.
Yields for Class A shares normally reflect the deduction of the maximum initial
sales charge, but may also be shown without deducting sales charge. Yields for
Class B shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During the fiscal year ended
August 31, 1997, the Fund's performance was affected by the volatility in the
bond markets. Because of that volatility, the Fund sought to actively manage its
portfolio duration, a measure of the portfolio's sensitivity to changes in
interest rates. By modestly changing that duration, the Fund was able to benefit
when interest rates were falling and have some protection when interest rates
rose. Because of the strengthening economy in California, the Fund was able to
benefit from some relatively high-yielding bonds issued by smaller municipal
issuers such as school districts that were not rated by the major agencies.
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The Fund was negatively affected by the strong economic conditions in
California which helped to produce adequate tax revenues for California's
municipal borrowers reducing the need to finance deficits in the public market.
This lowered the supply of new Municipal Securities and reduced the difference
in the yields between investment grade and below-investment grade bonds. The
Fund's policy of seeking to maintain a steady dividend for its Class A shares
did not materially affect portfolio management strategies during its last fiscal
year. The Fund's portfolio holdings, allocations and strategies are subject to
change.
o Comparing the Fund's Performance to the Market. The graphs below show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund from the inception of the class held through August 31, 1997, with all
dividends and capital gains distributions reinvested in additional shares. The
graphs reflect the deduction of the 4.75% maximum initial sales charge on Class
A shares and the applicable contingent deferred sales charge on Class B shares.
Because the Fund invests in a variety of Municipal Securities, the Fund's
performance is compared to the performance of the Lehman Brothers Municipal Bond
Index. The Lehman Brothers Municipal Bond Index is an unmanaged index of a broad
range of investment grade municipal bonds widely regarded as a measure of the
performance of the general municipal bond market. Index performance reflects the
reinvestment of dividends but does not consider the effect of capital gains or
transaction costs, and none of the data below shows the effect of taxes. While
index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in any one index. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index.
Comparison of Change
in Value of $10,000
Hypothetical Investments in:
Main Street California Municipal Fund
and Lehman Brothers Municipal Bond Index
[Graphs]
(1)
Avg. Annual Total Return of the Fund at 8/31/97(2)
A Shares 1 Year 5 Year Life of Class
- ------------------------------------------------
5.01% 6.18% 7.44%
- ------------------------------------------------
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Avg. Annual Total Return of the Fund at 8/31/97(3)
B Shares 1 Year Life of Class
- ------------------------------------------------
4.24% 3.90%
- ------------------------------------------------
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
(1) The Fund changed its fiscal year end from 6/30 to 8/31.
(2) The inception date of the Fund (Class A shares) was 5/18/90. The Class A
returns are shown net of the applicable 4.75% maximum sales charge.
(3) Class B shares of the Fund were first publicly offered on 10/29/93. The
average annual total returns are shown net of the applicable 5% and 3%
contingent deferred sales charge for the one year period and for the life of the
class, respectively. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices.
o Class A Shares. If you buy Class A shares, you may pay an initial sales
charge on investments up to $1 million. If you purchase Class A shares as part
of an investment of at least $1 million in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge value will vary depending on the amount you
invested. Sales charge rates are described in "Buying Class A Shares" below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares as described in "Buying
Class B Shares" below.
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Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, and considered the effect of the annual
asset-based sales charge on Class B expenses (which, like all expenses, will
affect your investment return). For the sake of comparison, we have assumed that
there is a 10% rate of appreciation in the investment each year. Of course, the
actual performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns, and the operating expenses borne by
each class of shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B for which
no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A shares rather than Class B shares,
because of the effect of the Class B contingent deferred sales charge if you
redeem in less than 7 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 A shares might be more advantageous than Class B shares for
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investments of more than $100,000 expected to be held for 5 or 6 years (or
more). For investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class B shares. If investing
$500,000 or more, Class A shares may be more advantageous as your investment
horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
and do not expect to need access to your money for seven years or more, Class B
shares may be an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long term, Class A
shares will likely be more advantageous than Class B shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in Class A shares
under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed performance return stated above, and therefore, you should analyze
your options carefully.
o Are There Differences in Account Features That Matter To You? Because
some account features may not be available to Class B shareholders, such as
checkwriting, or other features (such as Automatic Withdrawal Plans) may not be
advisable (because of the effect of the contingent deferred sales charge) for
Class B shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Share
certificates are not available for Class B shares, and if you are considering
using your shares as collateral for a loan, that may be a factor to consider.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B contingent deferred sales charge and the asset-based
sales charge is the same as the purpose of the front-end sales charge on sales
of Class A shares, that is, to compensate the Distributor for commissions it
pays to dealers and financial institutions for selling shares. The Distributor
may pay additional periodic compensation from its own resources to securities
dealers or financial institutions based upon the value of shares of the Fund
owned by the dealer or financial institution for its own account or for its
customers.
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How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
o With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as little as
$25, and subsequent purchases of at least $25 can be made by telephone through
AccountLink.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your dealer
or call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways --through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, directly through the Distributor, or automatically from your bank
account through an Asset Builder Plan under the OppenheimerFunds AccountLink
service. The distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. When you buy
shares, be sure to specify Class A or Class B shares. If you do not choose, your
investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment first with a financial advisor to be sure that it is appropriate for
you.
o Payment by Federal Fund Wire: Shares may be purchased by Federal
Funds wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to notify the Distributor
of the wire and receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, to have the Transfer
Agent send redemption proceeds, or to transmit
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dividends and distributions to your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, normally your order must be
transmitted to the Distributor so that it is received before the Distributor's
close of business that day, which is normally 5:00 P.M. The Distributor, in its
sole discretion, may reject any purchase order for the Fund's shares.
o Special Sales Charge Arrangements for Certain Persons. Appendix A in
this Prospectus sets forth conditions for the waiver of or exemption from sales
charge or the special sales charge rates that apply to purchases of shares of
the Fund (including purchases by exchange) by a person who was a shareholder of
one of the former Quest for Value Funds (as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some
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<PAGE>
cases, reduced sales charges may be available, as described below. Out of the
amount you invest, the Fund receives the net asset value to invest for your
account. The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and allocated to
your dealer as commission. The current sales charge rates and commissions paid
to dealers and brokers are as follows:
Front-End Sales Front-End Sales
Charge as a Charge as a Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ----------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- -----------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- -----------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- -----------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
- -----------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
o 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.
The Distributor pays dealers of record commissions on those purchases in
an amount equal to 1.0% of purchases. That commission will be paid only on the
amount of those purchases in excess of $1 million that were not previously
subject to a front-end sales charge and dealer commission.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption
-27-
<PAGE>
proceeds of any of those shares purchased on or after May 1, 1997 that are
redeemed within 12 months of the end of the calendar month of their purchase.
That sales charge will be equal to 1.0% of the lesser of (1) the aggregate net
asset value of the redeemed shares (not including shares purchased by
reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares,
whichever is less. However, the Class A contingent deferred sales charge will
not exceed the aggregate amount of the commissions the Distributor paid to your
dealer on all Class A shares of all Oppenheimer funds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also count Class A
and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of
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the shares you previously purchased and currently own to the value of current
purchases to determine the sales charge rate that applies. The Oppenheimer funds
are listed in "Reduced Sales Charges" in the Statement of Additional
Information, or a list can be obtained from the Distributor. The reduced sales
charge will apply only to current purchases and must be requested when you buy
your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
Shares or Class A and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of 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. This can include purchases made
up to 90 days before the date of the Letter. More information is contained in
"Reduced Sales Charges" in the Statement of Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent of which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor, the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
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<PAGE>
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker or adviser for the purchase or sale of Fund shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts; or
o any unit investment trust that has entered into an appropriate agreement
with the Distributor.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the 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 your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited
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annually to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase); or
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase).
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B Sales Charge," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Beginning Contingent Deferred Sales Charge
of Month in which On Redemptions in That Year
Purchase Order Was Accepted (As % of Amount Subject to Charge)
- ------------------------------------------------------------------
0-1
5.0%
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<PAGE>
- ------------------------------------------------------------------
1-2
4.0%
- ------------------------------------------------------------------
2-3
3.0%
- ------------------------------------------------------------------
3-4
3.0%
- ------------------------------------------------------------------
4-5
2.0%
- ------------------------------------------------------------------
5-6
1.0%
- ------------------------------------------------------------------
6 and following
None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A and Class B
Shares" in the Statement of Additional Information.
o Distribution and Service Plan for Class B Shares. The Fund has adopted
a Distribution and Service Plan for Class B shares to reimburse the Distributor
for its services and costs in distributing Class B shares and servicing
accounts. Under the Plan, the Fund pays the Distributor an annual "asset-based
sales charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per year.
Both fees are computed on the average annual net assets of Class B shares,
determined as of the close of each regular business day. The asset-based sales
charge allows investors to buy Class B shares without a front-end sales charge
while allowing the Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for providing
personal services for accounts that hold Class B shares. Services to be provided
include, among others, answering customer
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<PAGE>
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 asset-based sales
charge and service fees increase Class B expenses by up to 1.00% of average net
assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for the
first year after Class B shares have been sold by the dealer. After the shares
have been held for a year, the Distributor pays the service fee on a quarterly
basis. The Distributor pays sales commissions of 3.75% of the purchase price to
dealers from its own resources at the time of sale. The Distributor retains the
asset-based sales charge to recoup the sales commissions it pays, the advances
of service fee payments it makes, and its financing or other distribution costs.
Because the Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Those expenses may be carried over and paid in
future years. At August 31, 1997, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses in connection with sales of Class
B shares of $384,028 (equal to .40% of the Fund's net assets represented by
Class B shares on that date). If the Plan is terminated by the Fund, the Board
of Directors may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for certain expenses it incurred before the Plan was
terminated.
o Waivers of Class B Sales Charge. The Class B contingent deferred sales
charges will not be applied to shares purchased in certain types of transactions
nor will it apply to Class B shares redeemed in certain circumstances, as
described below. The reasons for this policy are discussed in "Reduced Sales
Charges" in the Statement of Additional Information. In order to receive a
waiver of the Class B contingent deferred sales charge, you must notify the
Transfer Agent of which condition applies.
Waivers for Redemptions of Shares in Certain Cases. The Class B contingent
deferred sales charges will be waived for redemptions of shares in the following
cases:
o 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 disability must have occurred after
the account was established and you must provide evidence of a determination of
disability by the Social Security Administration);
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B shares sold or issued in the
following cases:
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<PAGE>
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below;
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose; or
o shares issued in plans of reorganization to which the Fund is a
party.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to
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<PAGE>
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for these
purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Shareholder Transactions by Fax. Requests for certain account transactions may
be sent to the Transfer agent by fax (telecopier). Please call 1-800-525-7048
for information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic Withdrawal Plan in order to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual basis.
The checks may be sent to you or sent automatically to your bank account through
AccountLink. You may even set up certain types of withdrawals of up to $1,500
per month by telephone. You should consult the Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of up to
five other Oppenheimer funds on a monthly, quarterly, semi-annual or annual
basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies to Class A shares that you
purchased with 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. You must be
sure to ask the Distributor for this privilege when you send your reinvestment
payment. Please consult the Statement of Additional Information for more
details.
-35-
<PAGE>
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received and accepted
by the Transfer Agent. The Fund offers you a number of ways to sell your shares,
in writing, 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, as
described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due to
the death of the owner, please call the Transfer Agent first, at 1-800-525-7048,
for assistance.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive
a check;
o The redemption check is not payable to all shareholders listed on
the account statement;
o The redemption check is not sent to the address of record on your
account statement;
o Shares are being transferred to a Fund account with a different
owner or name;
o Shares are redeemed by someone other than the owners (such as an
Executor).
o Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing on behalf of a corporation, partnership or other business
or as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
o Your name,
o The Fund's name,
o Your Fund account number (from your account statement), o The dollar
amount or number of shares to be redeemed, o Any special payment
instructions, o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the account is
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<PAGE>
registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days. You may not redeem shares held under a share certificate
by telephone.
o To redeem shares through a service representative, call
1-800-852-8457, or
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 you
account statement, or, if you have linked your Fund account to your bank account
through AccountLink, you may have the proceeds sent to that bank account.
o Telephone Redemptions Paid by Check. You may redeem up to $50,000 by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
o Telephone Redemptions Through AccountLink or By Wire. 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.
You may also have the Transfer Agent send redemption proceeds of $2,500 or
more by Federal Funds wire to a designated commercial bank account. The bank
must be a member of the Federal Reserve wire system. There is a $10 fee for each
Federal Funds wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that the wire
may be delayed up to seven days to enable the Fund to sell securities to pay the
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<PAGE>
redemption proceeds. No dividends are accrued or paid on the proceeds of shares
that have been redeemed and are awaiting transmittal by wire. To establish wire
redemption privileges on an account that is already established, please contact
the Transfer Agent for instructions.
Selling 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. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request checkwriting for an
account in this Fund with the same registration as the previous checkwriting
account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class B
shares, or Class A shares that are subject to a contingent deferred sales
charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your account
value.
Remember: your shares fluctuate in value and you should not write a
check close to the total account value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the prior 10
days.
o Don't use your checks if you changed your Fund account number.
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:
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<PAGE>
o Shares of the fund selected for exchange must be available for sale
in your state of residence;
o The Prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege;
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them, after the account is open 7 days, you
can exchange shares every regular business day;
o You must meet the minimum purchase requirements for the fund you
purchase by exchange;
o Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc., offers only one class of shares which are
considered to be "Class A" shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
o Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457 or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased into the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund
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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 transfer of the
proceeds to buy shares. For example, the receipt of multiple exchange requests
from a dealer in a "market-timing" strategy might require the sale of portfolio
securities at a time or price disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange which is normally 4:00 P.M., but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Board of Directors has established procedures to
value the Fund's securities to determine net asset value. In general, securities
values are based on market value. There are special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more completely in
the Statement of Additional Information.
o The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Directors at any time the Board believes it is in the Fund's
best interest to do so.
o Telephone Transaction Privileges for purchases, redemptions or exchanges
may be modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record
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<PAGE>
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. Additionally, the
redemption price, which is the net asset value per share, will normally be
different for Class A and Class B shares. Therefore, the redemption value of
your shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within seven (7) days after the Transfer Agent
receives redemption instructions in proper form, except under unusual
circumstances determined by the Securities and Exchange Commission delaying or
suspending such payments. For accounts registered in the name of a
broker/dealer, payment will be forwarded within three (3) business days. The
Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by Federal Funds
wire, certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
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<PAGE>
o 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
also be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances, shares of the Fund may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding"of Federal income tax may be applied at the rate of
31% from taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charges when redeeming certain Class A and Class B
shares.
o To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class B shares
from net tax-exempt income and/or net investment income each regular business
day and pays those dividends to shareholders monthly on a date selected by the
Board of Directors. Daily dividends will not be declared or paid on newly
purchased shares until Federal Funds (funds credited to a member bank's account
at the Federal Reserve Bank) are available from the purchase payment for such
shares. The amount of dividends and distributions may vary from time to time,
depending upon market conditions, the composition of the Fund's portfolio, and
expenses borne by that class. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class B shares
because expenses allocable to Class B shares will generally be higher. During
the Fund's fiscal year ended August 31, 1997, the Fund maintained the practice,
to the extent consistent with the amount of the Fund's net investment income and
other distributable income, of attempting to pay dividends on Class A shares at
a constant level, although the amount of
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such dividends was subject to change from time to time depending on market
conditions, the composition of the Fund's portfolio and expenses borne by the
Fund. The Board of Directors may change the level of dividends at any time
without notice to shareholders.
Capital Gains. Although the Fund does not seek 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 each year. The Fund may make supplemental distributions of dividends
and capital gains following the end of its fiscal year. Long-term capital gains
will be separately identified in the tax information the Fund sends you after
the end of the calendar year. Short-term capital gains are treated as taxable
dividends for tax purposes. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your dividends and distributions. You
have four options:
o Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or you
can have them sent to your bank account through AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them
sent to your bank through AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Funds Account.
You can reinvest all distributions in the same class of shares of another
Oppenheimer fund account.
Taxes. 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. Dividends paid from short-term capital gains are taxable as ordinary
income. Dividends paid from net investment income earned by the Fund on
Municipal Securities will be excludable from your gross income for Federal
income tax purposes. A portion of the dividends paid by the Fund may be an item
of tax preference if you are subject to alternative minimum tax. 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
as well as the amount of your tax-exempt income. So that the Fund will not have
to pay taxes on the amount it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although the Fund reserves the right not to qualify in a particular year.
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<PAGE>
o "Buying a Dividend:" If you buy shares on or just before Fund declares a
capital gains distribution, you will pay the full price for the shares and then
receive a portion of the price back as a taxable capital gain. If that occurs,
it will be identified in the information that the Fund sends you for tax
purposes after the end of the calendar year.
o Taxes on Transactions: Even though the Fund seeks tax-exempt income for
distribution to shareholders, 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.
o Returns of Capital: In certain cases, distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
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APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class A and
Class B shares of the Fund described elsewhere in this Prospectus are modified
as described below for those shareholders of (i) Quest for Value Fund, Inc.,
Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund, Quest
for Value Small Capitalization Fund and Quest for Value Global Equity Fund, Inc.
on November 24, 1995, when OppenheimerFunds, Inc. became the investment adviser
to those funds, and (ii) Quest for Value U.S. Government Income Fund, Quest for
Value Investment Quality Income Fund, Quest for Value Global Income Fund, Quest
for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and
Quest for Value California Tax-Exempt Fund when those funds merged into various
Oppenheimer funds on November 24, 1995. The funds listed above are referred to
in this Prospectus as the "Former Quest for Value Funds." The waivers of initial
and contingent deferred sales charges described in this Appendix apply to shares
of the Fund (i) acquired by such shareholder pursuant to an exchange of shares
of one of the Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any of the Former
Quest for Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Shares Charge Rates for Certain Former Quest
Shareholders
o 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 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.
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<PAGE>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
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 on pages 28 and 29 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of members of an Association or the
sales charge rate that applies under the Rights of Accumulation described above
in the Prospectus. 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 Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
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<PAGE>
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 the law.
Class A and Class B Contingent Deferred Sales Charge Waivers
o Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A or B shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with (i) withdrawals
under an automatic withdrawal plan holding only Class B shares if the annual
withdrawal does not exceed 10% of the initial value of the account, and (ii)
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum value of such
accounts.
o Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995.
In the following case, the contingent deferred sales charge will be waived for
redemptions of Class A or B shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest for Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to November 24, 1995:
(1) 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); (2) withdrawals under an automatic withdrawal plan (but only
for Class B shares) where the annual withdrawals do not exceed 10% of the
initial value of the account; and (3) 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 or B shares of the Fund described in this section if within 90 days
after that redemption, the proceeds are invested in the same Class of shares in
this Fund or another Oppenheimer fund.
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APPENDIX TO PROSPECTUS OF
Oppenheimer Main Street California Municipal Fund
Graphic material included in the Prospectus of Oppenheimer Main
Street California Municipal Fund: "Comparison of Total Return of
Oppenheimer Main Street California Municipal Fund and the Lehman Brothers
Municipal Bond Index - Change in Value of a $10,000 Hypothetical
Investment"
A linear graph will be included in the Prospectus of Oppenheimer Main
Street California Municipal Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment in the
Fund. In the case of the Fund's Class A shares, that graph will cover the period
from the commencement of the Fund's operations (May 18, 1990) through August 31,
1997 and in the case of Class B shares the graph will cover the period from the
inception of the class (October 29, 1993) through August 31, 1997. The graphs
will compare such values with hypothetical $10,000 investments over the same
time periods in the Lehman Brothers Municipal Bond Index. Set forth below are
the relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the Lehman
Brothers Municipal Bond Index, is set forth in the Prospectus under "Performance
of the Fund - Comparing the Fund's Performance to the Market."
<TABLE>
<CAPTION>
Fiscal Year Oppenheimer Main Street Lehman Brothers
Period) Ended California Municipal Fund A(2) Municipal Bond Index
<S> <C> <C>
5/18/90 $ 9,525 $10,000
6/30/90 $ 9,711 $10,088
6/30/91 $10,482 $10,997
6/30/92 $11,657 $12,292
6/30/93 $13,098 $13,761
6/30/94 $13,020 $13,785
6/30/95 $14,182 $15,002
6/30/96 $15,135 $15,997
8/31/96(1) $15,304 $16,139
8/31/97 $16,872 $17,633
Fiscal Oppenheimer Main Street Lehman Brothers
Period Ended California Municipal Fund B(3) Municipal Bond Index
10/29/93 $10,000 $10,000
6/30/94 $9,458 $9,671
6/30/95 $10,205 $10,525
6/30/96 $10,782 $11,224
8/31/96(1) $10,874 $11,323
8/31/97 $11,584 $12,371
</TABLE>
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(1) The Fund changed its fiscal year end from 6/30 to 8/31.
(2) The inception date of the Fund (Class A shares) was 5/18/90. The Class A
returns are shown net of the applicable 4.75% maximum sales charge.
(3) Class B shares of the Fund were first publicly offered on 10/29/93. The
average annual total returns are shown net of the applicable 5% and 3%
contingent deferred sales charge for the one year period and for the life of the
class, respectively. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
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<PAGE>
Oppenheimer Main Street California Municipal Fund
6803 S. Tucson Way
Denver, Colorado 80112
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or the Statement of Additional Information, and if given or made,
such information and representation must not be relied upon as having been
authorized by the Corporation, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR725.1197 *Printed on recycled paper
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<PAGE>
Oppenheimer Main Street Income & Growth Fund(R)
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated December 8, 1997
This Statement of Additional Information of Oppenheimer Main Street Income
& Growth Fund is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated December 8,
1997. It should be read together with the Prospectus, which may be obtained upon
written request 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.
Table of Contents
Page
About the Fund
Investment Objective and Policies...................................... 2
Investment Policies and Strategies................................. 2
Other Investment Techniques and Strategies......................... 3
Other Investment Restrictions...................................... 14
How the Fund is Managed ............................................... 15
Organization and History........................................... 15
Directors and Officers of the Corporation.......................... 15
The Manager and Its Affiliates..................................... 21
Brokerage Policies of the Fund......................................... 22
Performance of the Fund................................................ 24
Distribution and Service Plans......................................... 27
About Your Account
How To Buy Shares...................................................... 29
How To Sell Shares..................................................... 37
How To Exchange Shares................................................. 41
Dividends, Capital Gains and Taxes..................................... 43
Additional Information About the Fund.................................. 44
Financial Information About the Fund
Independent Auditors' Report........................................... 44
Financial Statements................................................... 45
Appendix A: Description of Ratings..................................... A-1
Appendix B: Corporate Industry Classifications......................... B-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
o Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and debt securities of foreign governments that are traded on
foreign securities exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of the Fund's investment allocations, because they are not subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including 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.
o Risks of Foreign Investing. Investments in foreign securities present
special additional risks and considerations not typically associated with
investments in domestic securities: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to changes in currency
rates and control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers; less volume on foreign exchanges than on
U.S. exchanges; greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and brokers than
in the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement of
portfolio transactions or loss of certificates for portfolio securities;
possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and unfavorable differences between the U.S. economy and foreign economies. In
the past, U.S. Government policies have discouraged certain investments abroad
by U.S. investors, through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
o U.S. Government Securities. Obligations of U.S. Government agencies or
instrumentalities (including mortgage-backed securities) may or may not be
guaranteed or supported by the "full faith and credit" of the United States.
Some are backed by the right of the issuer to borrow from the U.S. Treasury;
others, by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the credit of the
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<PAGE>
instrumentality. All U.S. Treasury obligations are backed by the full faith and
credit of the United States. If the securities are not backed by the full faith
and credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and may not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. The Fund will invest in U.S.
Government Securities of such agencies and instrumentalities only when the
Manager is satisfied that the credit risk with respect to such instrumentality
is minimal.
o Convertible Securities. While convertible securities are a form of debt
security in many cases, their conversion feature (allowing conversion into
equity securities) causes 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 examines 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.
o Rights and Warrants. 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.
o Investing in Small, Unseasoned Companies. The securities of small,
unseasoned companies 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. If other investment companies and investors
that invest in this type of securities trade the same securities when the Fund
attempts to dispose of its holdings, the Fund may receive lower prices than
might otherwise be obtained, because of the thinner, less liquid market for such
securities.
Other Investment Techniques and Strategies
o When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in securities on a "when-issued" or "delayed
delivery" basis. Payment for and delivery of the securities generally settles
within 45 days of the date the offer is accepted. The purchase price and yield
are fixed at the time the buyer enters into the commitment. 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. However, the Fund
intends to be as fully invested as possible and will not invest in when-issued
securities if its income or net asset value will be materially adversely
affected. At the time the Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction on its books and reflect the
value of the security in determining its net asset value. It will also segregate
liquid assets of any type including equity and debt securities of any grade
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<PAGE>
equal in value to the commitment for the when-issued securities. While
when-issued securities may be sold prior to settlement date, the Fund intends to
acquire the securities upon settlement unless a prior sale appears desirable for
investment reasons. There is a risk that the yield available in the market when
delivery occurs may be higher than the yield on the security acquired.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor" is a U.S.
commercial bank or the U.S. branch of a foreign bank or a broker-dealer that has
been designated a primary dealer in government securities, that must meet credit
requirements set by the Corporation's Board of Directors from time to time. 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. The majority of these transactions run from day to day,
and delivery pursuant to the resale typically will occur within one to five days
of the purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the repurchase agreement
is in effect, the value of the collateral must equal or exceed the repurchase
price to fully collateralize the repayment obligation. Additionally, the Manager
will impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.
o Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the Fund
may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid.
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o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the loaned
securities and must consist of cash, bank letters of credit or securities of the
U.S. Government (or its agencies or instrumentalities). To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. When it lends securities, the Fund
receives amounts equal to the dividends or interest on loaned securities and
also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on 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. 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.
o Hedging. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain unrealized
gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may: (i) sell
Futures, (ii) buy puts on such Futures or securities, or (iii) write covered
calls on securities or Futures. When hedging to permit the Fund to establish a
position in the securities market as a temporary substitute for purchasing
particular securities (which the Fund will normally purchase, and then terminate
that hedging position), or to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the market the
Fund may: (i) buy Futures, or (ii) buy calls on such Futures or on securities.
Normally, the Fund would then purchase the securities and terminate the hedging
portion.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's activities in the underlying cash market. In the
future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, and are legally
permissible and disclosed in the Prospectus. Additional information about the
Hedging Instruments the Fund may use is provided below.
o Writing Covered Call Options. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call, it receives a premium and
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period (usually not more than nine months) at
a fixed exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The Fund
has retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium previously received on the call written
is more or less than the price of the call subsequently purchased. A profit may
also be realized if the call expires unexercised, because the Fund retains the
underlying security and the premium received. Any such profits are considered
short-term capital gains for Federal income tax purposes,
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and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to lack of a market, it
would have to hold the callable securities until the call expired or was
exercised.
The Fund may also write calls on Futures without owning a futures contract
or a deliverable bond, provided that at the time the call is written, the Fund
covers the call by segregating in escrow an equivalent dollar amount of liquid
assets. The Fund will segregate additional liquid assets if the value of the
escrowed assets drops below 100% of the current value of the Future. In no
circumstances would an exercise notice 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.
o Writing Put Options. 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. The Fund will not write puts if,
as a result, more than 25% of the Fund's net assets would be required to be
segregated to cover such put options. Writing a put covered by segregated liquid
assets equal to the exercise price of the put has the same economic effect to
the Fund as writing a covered call. The premium the Fund receives from writing a
put option represents a profit, as long as the price of the underlying
investment remains equal to or above the exercise price. However, the Fund has
also assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though the
value of the investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) 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 purchase the underlying investment at the
exercise price, which will usually exceed the market value of the investment at
that time. In that case, the Fund may incur a loss, 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 incurred.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets with
a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore foregoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against payment
of the exercise price. The Fund has no control over when it may be required to
purchase the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from
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writing the option. As described above for writing covered calls, any and all
such profits described herein from writing puts are considered short-term
capital gains for Federal tax purposes, and when distributed by the Fund, are
taxable as ordinary income.
o Purchasing Calls and Puts. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and has the right to
buy the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if the call is sold at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the call is exercised.
If the call is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When the Fund
purchases a put, it pays a premium and, except as to puts on indices, has the
right to sell the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price. Buying a put on
securities or Futures the Fund owns enables the Fund to attempt to protect
itself during the put period against a decline in the value of the underlying
investment below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and, as a result,
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment; the put may, however, be sold prior to expiration
(whether or not at a profit).
When the Fund purchases a call or put on an index or Future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
o Options on Foreign Currencies. The Fund intends to write and purchase
calls and puts on foreign currencies. The Fund may purchase and write puts and
calls on foreign currencies that are traded on a securities or commodities
exchange or over-the-counter markets or are quoted by major recognized dealers
in such options. It does so to protect against declines in the dollar value of
foreign securities and against increases in the dollar cost of foreign
securities to be acquired. 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 such securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If a decline in the dollar value of a
foreign currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would lose the premium it paid
and transaction costs.
A call written on a foreign currency by the Fund 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 for additional cash consideration held in a segregated account
by its Custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call may be written by the Fund on a foreign currency to
provide a hedge against a
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<PAGE>
decline in the U.S. dollar value of a security which the Fund owns or has the
right to acquire and which is denominated in the currency underlying the option
due to an expected adverse change in the exchange rate. This is a cross-hedging
strategy. In such circumstances, the Fund covers the option by maintaining in a
segregated account with the Fund's Custodian, cash or U.S. government securities
or other liquid, high grade debt securities in an amount equal to the exercise
price of the option.
o Futures. No payment 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"). The initial margin payment will be deposited
with the Fund's Custodian in an account registered in the futures broker's name;
however, the futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. At any time prior to expiration of the
Future, if the Fund elects to close out its position by taking an opposite
position, a final determination of variation margin is made, and additional cash
is required to be paid by or released to the Fund. Any loss or gain is then
realized. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
o Forward Contracts. A Forward Contract involves bilateral obligations of
one party to purchase, and another party to sell, a specific currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties), at a price set at the time the contract is entered
into. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment. To do so, the Fund enters into a Forward Contract,
for a fixed amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction ("transaction hedge"). The Fund will thereby be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value
of portfolio positions ("position hedge"). In a position hedge, for example,
when the Fund believes that foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
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Fund's portfolio securities denominated in such foreign currency. When the Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount. In either situation the Fund may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed U.S. dollar amount where the Fund believes that the U.S. dollar
value of the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will identify liquid assets for a separate account
having a value equal to the aggregate amount of the Fund's commitment under
Forward Contracts to cover its short positions. The Fund will not enter into
such Forward Contracts or maintain a net exposure to such contracts where 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. The Fund, however, in order to avoid excess transactions
and transaction costs, may maintain a net exposure to Forward Contracts in
excess of the value of the Fund's portfolio securities or other assets
denominated in these currencies provided the excess amount is "covered" by
liquid securities denominated in any currency, at lest equal at all times to the
amount of such excess. As an 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 or
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. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it had not entered
into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize
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a gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o Interest Rate Swap Transactions. The Fund may enter into Interest Rate
Swap agreements which entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will have been greater than those received by
it. Credit risk arises from the possibility that the counterparty will default.
If the counterparty to an interest rate swap defaults, the Fund's loss will
consist of the net amount of contractual interest payments that the Fund has not
yet received. The Manager will monitor the creditworthiness of counterparties to
the Fund's interest rate swap transactions on an ongoing basis. The Fund will
enter into swap transactions with appropriate counterparties pursuant to master
netting agreements.
A master netting agreement provides that all swaps done between the Fund
and that counterparty under the master agreement shall be regarded as parts of
an integral agreement. If on any date amounts are payable in the same currency
in respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with respect
to each swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as
"aggregation." The Fund will not invest more than 25% of its total assets in
interest rate swap transactions.
o Additional Information About Hedging Instruments and Their Use. The
Corporation'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 securities on which the Fund has written
options or as to other acceptable escrow securities, so that no margin will be
required for such transactions. OCC will release the securities on the
expiration of the option or upon
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the Fund's entering into a closing transaction. The Fund cannot issue "senior
securities", but this does not prohibit it from borrowing money as described in
the prospectus, or entering into margin, collateral or escrow arrangements as
permitted by its other invest policies.
When the Fund writes an over-the-counter ("OTC") option, it will normally
enter into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the absolute
right to repurchase that OTC option. This formula price would generally be based
on a multiple of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying security
("in-the-money"). For any OTC option the Fund writes, it will treat as illiquid
(for purposes of the restriction on illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it, unless
subject to a buy-back agreement with the executing broker. The SEC is evaluating
the general issue of whether or not OTC options should be considered as liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by the Fund may cause the Fund to sell related
portfolio securities, thus increasing its turnover rate in a manner beyond the
Fund's control. The exercise by the Fund of puts on securities or Futures may
cause the sale of related investments, also increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might cause
the Fund to sell the underlying investment for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each time it
buys or sells a call, a put or an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher, on a relative basis,
than those which would apply to direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of such investments and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in the
Fund's net asset value being more sensitive to changes in the value of the
underlying investment.
o Regulatory Aspects of Hedging Instruments. 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 ("CFTC").
In particular, the Fund is excluded from registration as a "commodity pool
operator" if it 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 no 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, as to its short positions,
use Futures and options thereon solely for bona fine hedging purposes within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations established
by option exchanges governing the maximum number of options that may be written
or held by a single investor or group of investors acting in concert, regardless
of whether the options were written or purchased on the
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same or different exchanges or are held in one or more accounts or through one
or more different exchanges or through one or more brokers. Thus the number of
options which the Fund may write or hold may be affected by options written or
held by other entities, including other investment companies having the same
adviser as the Fund (or an adviser that is an affiliate of the Fund's adviser).
The exchanges also impose position limits on Futures transactions. An exchange
may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions. Due to requirements under the Investment
Company Act of 1940 (the "Investment Company Act"), when the Fund purchases a
Future, the Fund will maintain in a segregated account or accounts with its
Custodian, liquid assets in an amount equal to the market value of the
securities underlying such Future, less the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax).
Certain foreign currency exchange contracts ("Forward Contracts") in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also
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are treated as ordinary gain or loss. 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 company income
available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by: (i) selling Futures or (ii) purchasing puts on broadly-based indices
or Futures to attempt to protect against declines in the value of the Fund's
portfolio securities, that the prices of such Futures or the applicable index
will correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions, due to differences in the
natures of those markets. First, all participants in the futures 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 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 may use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged if the historical
volatility of the prices of such portfolio securities being hedged is more than
the historical volatility of the applicable index. It is also possible that
where the Fund has used hedging instruments in a short hedge, the market may
advance and the value of portfolio securities held in the Fund's portfolio may
decline. If this occurred, the Fund would lose money on the hedging instruments
and also experience a decline in value in its 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.
If the Fund uses 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 the market may
decline. If the Fund then concludes not to invest in securities at that time
because of concerns as to possible further market decline or for other reasons,
it will realize a loss on the hedging instruments that is not offset by a
reduction in the price of the securities purchased. In the future, the Fund may
employ hedging instruments and strategies that are not presently contemplated
but which may be developed, to the extent such investment methods are consistent
with the Fund's investment objective, are legally permissible and adequately
disclosed.
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<PAGE>
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objective cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
majority vote is defined as the vote of the holders of the lesser of: (i) 67% or
more of the shares present or represented by proxy at a shareholder meeting, if
the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
Under these additional restrictions:
o The Fund cannot invest in interests in oil or gas exploration or
development programs or in commodities; however, the Fund may buy and sell any
of the hedging instruments that it may use as permitted by any of its other
policies, whether or not such hedging instrument is considered to be a commodity
or commodity contract;
o The Fund cannot invest in real estate or in interests in real estate;
however, the Fund may purchase securities of issuers holding real estate or
interests therein (including securities of real estate investment trusts);
o The Fund cannot purchase securities on margin; however, the Fund may
make margin deposits in connection with the use of hedging instruments as
permitted by any of its other policies;
o The Fund cannot invest in companies for the purpose of acquiring control
or management thereof;
o The Fund cannot underwrite securities of other companies, except insofar
as it might be deemed to be an underwriter for purposes of the Securities Act in
the resale of any securities held in its own portfolio;
o The Fund cannot invest or hold securities of any issuer if those
officers and directors of the Corporation or its adviser owning individually
more than 1/2 of 1% of the securities of such issuer together own more than 5%
of the securities of such issuer;
o The Fund cannot invest in other open-end investment companies, or invest
more than 5% of its net assets through open market purchases in closed-end
investment companies, including small business investment companies, nor make
any such investments at commission rates in excess of normal brokerage
commissions;
o The Fund cannot issue "senior securities," but this does not prohibit it
from borrowing money as described in the Prospectus, or entering into margin,
collateral, segregation or escrow arrangements, or options, futures, hedging
transactions or other investments as permitted by its other investment policies;
or
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<PAGE>
o The Fund cannot pledge, mortgage or otherwise encumber, transfer or
assign any of its assets to secure a debt; collateral arrangements for premium
and margin payments in connection with hedging instruments are not deemed to be
a pledge of assets.
For purposes of the Fund's policy not to concentrate its assets as
described in the Prospectus, 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. Oppenheimer Main Street Income & Growth Fund (referred
to as the "Fund") is one of two series of Oppenheimer Main Street Funds, Inc.
(the "Corporation"), a Maryland corporation. This Statement of Additional
Information may be used with the Fund's Prospectus only to offer shares of the
Fund.
Each share of the Fund represents an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitles the
holder to one vote per share (and a fractional vote for a fractional share) on
matters submitted to their vote at a shareholders' meeting. Shareholders of the
Fund and of the Corporation's other series vote together in the aggregate on
certain matters at shareholders' meetings, such as the election of Directors and
ratification of appointment of auditors of the Corporation. Shareholders of a
particular series or class vote separately on proposals which affect that series
or class, and shareholders of a series or class which is not affected by that
matter are not entitled to vote on the proposal. For example, only shareholders
of a series, such as the Fund, vote exclusively on any material amendment to the
investment advisory agreement with respect to the series. Only shareholders of a
class of a series vote on certain amendments to the Distribution and/or Service
Plans if the amendments affect that class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Corporation or its series or
classes into additional series or classes of shares. The Directors may also
divide or combine the shares of a class into a greater or lesser number of
shares without thereby 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.
It is not contemplated that regular annual shareholder meetings will be
held. The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law, or when a shareholder meeting is called by
the Directors or upon proper request of the shareholders. A meeting of
shareholders will be called for a specified purpose (which may include removal
of a Director) upon the written request of the record holders of at least 25% of
the outstanding shares eligible to be voted at that meeting. The Fund has
undertaken that it will then either give the applicants access to the Fund's
shareholder list or mail the applicants' communication to all other shareholders
at the applicants' expense.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal
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<PAGE>
occupations and business affiliations and occupations during the past five years
are listed below. All of the Directors are also trustees, directors or managing
general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer Cash Reserves, Oppenheimer Real Asset Fund, Oppenheimer
Strategic Income Fund, Centennial America Fund, L.P., The New York Tax-Exempt
Income Fund, Inc., Oppenheimer Variable Account Funds, Oppenheimer Champion
Income Fund, Oppenheimer International Bond Fund, Oppenheimer Integrity Funds,
Oppenheimer Limited-Term Government Fund, Oppenheimer Municipal Fund, Panorama
Series Fund, Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt Trust,
and Centennial Tax Exempt Trust (all of the foregoing funds are collectively
referred to as the "Denver-based Oppenheimer funds") except for Ms. Macaskill,
who is a Trustee, Director or Managing General Partner of all the Denver-based
Oppenheimer funds except Oppenheimer Integrity Funds, Panorama Series Fund,
Inc., Oppenheimer Strategic Income Fund and Oppenheimer Variable Account Funds.
In addition, Mr. Fossel is not a Trustee of Centennial New York Tax-Exempt Trust
or a Managing General Partner of Centennial America Fund, L.P. Messrs. Bishop,
Bowen, Donohue, Farrar and Zack hold similar positions as officers of all such
funds. Ms. Macaskill is President and Mr. Swain is Chairman and Chief Executive
Officer of the Denver-based Oppenheimer funds. As of November 21, 1997, the
Directors and officers of the Fund as a group owned less than 1% of its
outstanding shares, not including shares held of record by an employee benefit
plan of the Manager (for which two of the officers listed below, Ms. Macaskill
and Mr. Donohue, are Directors) other than shares beneficially owned under that
plan by the officers of the Fund listed above.
Robert G. Avis, Director*; Age 66 One North Jefferson Ave., St. Louis,
Missouri 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer)
and A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Director; Age 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Director; Age 67 1501 Quail Street, Newport Beach, CA
92660 Chairman and CEO of Universal Space Lines, Inc. (a space services
management company); formerly Vice President of McDonnell Douglas Space
Systems Co. and associated with the National Aeronautics and Space
Administration.
- ------------------------
* A Director who is an "interested person" of the Fund.
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<PAGE>
Jon S. Fossel, Director+; Age 55
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a
national trade association of investment companies), Chairman of the
Investment Company Institute Education Foundation; formerly Chairman and a
director of the Manager, President and a director of Oppenheimer Acquisition
Corp. ("OAC"), the Manager's parent holding company, and Shareholder
Services, Inc. ("SSI") and Shareholder Financial Services, Inc. ("SFSI"),
transfer agent subsidiaries of the Manager.
Sam Freedman, Director; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of
OAC and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Director; Age 68 44 Portland Drive, St. Louis,
Missouri 63131 Director of Wave Technologies International, Inc. (a
computer products training company).
C. Howard Kast, Director; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director; Age 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Director*#; Age: 49
Two World Trade Center, New York, New York 10048
President (since June 1991), Chief Executive Officer (since September 1995)
and a Director (since December 1994) of the Manager; President and director
(since June 1991) of HarbourView; Chairman and a director of SSI (since
August 1994), and SFSI (since September 1995); President (since September
1995) and a director (since October 1990) of OAC; President (since September
1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of the Manager ("OFIL") and Oppenheimer
Millennium Funds plc (since October 1997); President and a director of other
Oppenheimer funds; a director of the NASDAQ Stock Market, Inc. and of
Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Manager.
- ------------------------
+ Not a Trustee of Centennial New York Tax-Exempt Trust
nor a managing General Partner of Centennial America Fund, L.P.
* A Director who is an "interested person" of the Fund.
# Not a Trustee of Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Integrity Funds,
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<PAGE>
Panorama Series Fund, Inc., Centennial New York Tax-Exempt Trust nor a Managing
General Partner of Centennial America Fund, L.P.
Ned M. Steel, Director; Age 82 3416 South Race Street, Englewood, Colorado
80110 Chartered Property and Casualty Underwriter; a director of Visiting
Nurse Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Director*; Age 63 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager
(since September 1988); formerly President and a director of Centennial
Asset Management Corporation, an investment adviser subsidiary of the
Manager ("Centennial"), and Chairman of the Board of SSI.
Robert J. Milnamow, Vice President and Portfolio Manager; Age: 47
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since November 1995); an officer of other
Oppenheimer funds; previously a portfolio manager with Phoenix Securities
Group (August 1989-August 1995) .
Andrew J. Donohue, Vice President and Secretary; Age 47
Two World Trade Center, New York, New York 10048
Executive Vice President (since January 1993), General Counsel (since
October 1991) and a Director (since September 1995) of the Manager;
Executive Vice President (since September 1993), and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel
and a director of HarbourView, SSI, SFSI and Oppenheimer Partnership
Holdings, Inc. (since September 1995) and MultiSource Services, Inc. (a
broker-dealer) (since December 1995); President and a director of Centennial
(since September 1995); President and a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of OAC; Vice President of OFIL and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age 61
6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President
(since September 1987) and Treasurer (since March 1985) of the Manager; Vice
President (since June 1983) and Treasurer (since March 1985) of the
Distributor; Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President (since February 1992), Treasurer
(since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996);
Chief Executive Officer, Treasurer and a director of MultiSource Services,
Inc., a broker-dealer (since December 1995); an officer of other Oppenheimer
funds.
- ------------------------
* A Director who is an "interested person" of the Fund.
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<PAGE>
Robert J. Bishop, Assistant Treasurer; Age 38
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 Farrar, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Manager/Mutual Fund Accounting (April 1994-May 1996), and a
Fund Controller for the Manager.
Robert G. Zack, Assistant Secretary; Age 49
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 SSI (since May 1985), and
SFSI (since November 1989); Assistant Secretary of Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
o Remuneration of Directors. The officers of the Fund and certain Directors
of the Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the Manager,
receive no salary or fee from the Fund. Mr. Fossel did not receive any salary or
fees from the Fund prior to January 1, 1997. The remaining Directors of the Fund
received the compensation shown below. Mr. Freedman became a Director on June
27, 1996, and received no compensation from the Fund before that date. The
compensation from the Fund was paid during its fiscal year ended August 31,
1997. The compensation from all of the Denver-based Oppenheimer funds includes
the Fund and is compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1996.
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $9,346 $58,003
Director
- ------------------------
1 For the 1996 calendar year.
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<PAGE>
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
William a. Baker $12,843 $79,715
Audit and Review
Committee Ex-Officio
Member2 and Director
Charles Conrad, Jr. $12,039 $74,717
Director3
Jon S. Fossel - None
Director
Sam Freedman $4,754 $29,502
Audit and Review Committee
Member2 and Director
Raymond J. Kalinowski $11,951 $74,173
Audit and Review Committee
Member2 and Director
C. Howard Kast $11,951 $74,173
Audit and Review Committee
Chairman2 and Director
Robert M. Kirchner $12,039 $74,717
Director3
Ned M. Steel $9,346 $58,003
Director
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1 For the 1996 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation Plan for disinterested trustees that enable 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 Director is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds elected by the Director. The amount paid to the
Director under the plan
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<PAGE>
will be determined based upon the performance of the selected funds. Deferral of
Director's 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 Director or to pay any particular level of
compensation to any Director. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Director
under the plan without shareholder approval for the limited purpose of
determining the value of the Director's deferred fee account.
o Major Shareholders. As of November 21, 1997 the only persons who owned of
record or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B, Class C or Class Y shares was Merrill Lynch Pierce
Fenner & Smith, Inc., 4800 Deer Lake Dr. E Floor 3, Jacksonville, FL 32246, who
owned 10,090,104.863 Class B shares (representing approximately 9.79% of the
Fund's then outstanding Class B shares), 7,609,771.216 Class C shares
(representing approximately 24.50% of the Fund's then outstanding Class C
shares) and Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA
01111, who owned 655,561.172 Class Y shares (representing 100% of the Fund's
then outstanding Class Y shares).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Corporation
and two of whom (Ms. Macaskill and Mr. Swain) serve as directors of the
Corporation.
The Manager and the Fund have a Code of Ethics. It is designed to detect and
prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o The Investment Advisory Agreement. The investment advisory agreement
between the Manager and the Corporation on behalf of the Fund requires the
Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective corporate
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor under the General Distributor's Agreement are paid by the
Fund. The advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage commissions, fees
to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. During the Fund's fiscal
years ended June 30, 1995 and 1996, its fiscal period ended August 31, 1996 and
its fiscal year ended August 31, 1997 the management fees paid by the Fund to
the Manager were $8,976,524, $19,932,096, $4,428,137 and $34,036,569,
respectively.
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<PAGE>
The advisory agreement provides 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 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 thereunder. The advisory agreement permits the
Manager to act as investment adviser for any other person, firm or corporation,
and to use the names "Oppenheimer" and "Main Street" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the right of the Corporation to use the names "Oppenheimer" and "Main
Street" as part of its name and the name of the Fund may be withdrawn.
o The Distributor. Under its General Distributor's Agreement with the
Corporation, the Distributor acts as the Corporation's principal underwriter in
the continuous public offering of shares of the Fund's Class A, Class B, Class C
and Class Y shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales, are borne by the Distributor. During
the Fund's fiscal years ended June 30, 1995 and 1996 its fiscal period ended
August 31, 1996 and its fiscal year ended August 31, 1997, the aggregate amount
of sales charges on sales of the Fund's Class A shares was $36,545,570,
$34,680,166, $5,372,166 and $25,549,129, respectively, of which the Distributor
and an affiliated broker-dealer retained $8,951,501, $8,833,275, $1,443,507 and
$6,671,014, respectively. During the Fund's fiscal years ended June 30, 1995 and
1996, the fiscal period ended August 31, 1996 and its fiscal year ended August
31, 1997, the contingent deferred sales charges collected on the Fund's Class B
shares totaled $393,448, $2,198,614, $594,878 and $5,230,649, respectively, all
of which the Distributor retained. During the Fund's fiscal years ended June 30,
1995 and 1996, the fiscal period ended August 31, 1996 and its fiscal year ended
August 31, 1997, the contingent deferred sales charges collected on the Fund's
Class C shares totaled $233,149, $204,629, $39,798 and $227,950, respectively,
all of which the Distributor retained. During the fiscal year ended August 31,
1997 commissions paid to broker-dealers by the Distributor on sales of the
Fund's Class B and Class C shares totaled $38,556,921 and $2,094,866,
respectively. Of those amounts, $1,206,092 and $48,602 were paid to an
affiliated broker-dealer. For additional information about distribution of the
Fund's shares and the payments made by the Fund to the Distributor in connection
with such activities, please refer to "Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding, but is expected to 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 Directors. Purchases of securities from underwriters include a
commission
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<PAGE>
or concession paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to 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 its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement, and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. In connection with transactions
on foreign exchanges, the Fund may be required to pay fixed brokerage
commissions and thereby forego the benefit of negotiated commissions available
in U.S. markets. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it appears
likely that a better price or execution can be obtained. When the Fund engages
in an option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to which
the option relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account. Option commissions may be
relatively higher than those which would apply to direct purchases and sales of
portfolio securities.
Most purchases of money market instruments and 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 it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities for
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 research services provided by a particular broker may be useful only to
one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analysis on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems,
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<PAGE>
computer hardware and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager in the investment decision-making process may be paid
in commission dollars. The Board of Directors permits the Manager to use
concessions on fixed-price offerings to obtain research, in the same manner as
is permitted for agency transactions. The Board also permits the Manager to use
stated commissions on secondary fixed-income agency trades to obtain research
where the broker has represented to the Manager that (i) the trade is not from
or for the broker's own inventory, (ii) the trade was executed by the broker on
an agency basis at the stated commission, and (iii) the trade is not a riskless
principal transaction.
The research services provided by brokers broadens the scope and supplements
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Manager provides information as to the
commissions paid to brokers furnishing such services, together with the
Manager's representation that the amount of such commissions was reasonably
related to the value or benefit of such services.
During the Fund's fiscal year ended August 31, 1997, the total brokerage
commissions paid by the Fund (not including spreads or concessions on principal
transactions on a net trade basis) was $10,046,510. Of that amount, during that
same period, $5,358,032 was paid to brokers as commission in return for research
services. The transactions giving rise to those commissions were allocated in
accordance with the Manager's internal allocation procedures described above.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to time the
"average annual total return," "cumulative total return," "average annual total
return at net asset value" and "total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1-, 5-,
and 10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the
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formula below) held for a number of years ("n") to achieve an Ending Redeemable
Value ("ERV") of that investment, according to the following formula.
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class A shares of the
Fund (using the method described above) for the 1- and 5-year periods ended
August 31, 1997 and for the period from February 3, 1988 (commencement of
operations) to August 31, 1997 were 23.55%, 23.93% and 21.07%, respectively.
The "average annual total return" on Class B shares for the 1-year period
ended August 31, 1997 and for the period October 1, 1994 (commencement of the
public offering of the class) to August 31, 1997 were 25.12% and 19.85%,
respectively.
The "average annual total return" on Class C shares for the 1-year period
ended August 31, 1997 and for the period December 1, 1993 (commencement of the
public offering of the class) to August 31, 1997 were 29.07% and 16.94%,
respectively.
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5% for the first year, 4% for the second year, 3% for the
third and fourth years, 2% for the fifth year, 1% for the sixth year, and none
thereafter) is applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For Class C
shares, the 1.0% contingent deferred sales charge is applied to the investment
result for the 1-year period (or less). Class Y shares are not subject to a
sales charge. Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional shares at net
asset value per share, and that the investment is redeemed at the end of the
period.
The "cumulative total return" on Class A shares for the period from February
3, 1988 (commencement of operations) to August 31, 1997 was 524.01%. The
"cumulative total return" on Class B shares for the period from October 1, 1994
(the commencement of the offering of the class) through August 31, 1997 was
69.57%. The "cumulative total return" on Class C shares for the period from
December 1, 1993 (the commencement of the offering of the class) through August
31,
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1997 was 79.82%. The Fund's Class Y shares are not subject to a sales charge.
The "cumulative total return" on Class Y shares for the period from November 1,
1996 (the commencement of the offering of the class) through August 31, 1997 was
23.98%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an "average annual total return at net asset value" or a "cumulative total
return at net asset value" for Class A, Class B, Class C or Class Y shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
"cumulative total return at net asset value" on the Fund's Class A shares for
the period ended August 31, 1997 was 562.08%. The "cumulative total return" at
net asset value for the Fund's Class B shares for the period ended August 31,
1997 was 72.57%. The "cumulative total return" at net asset value for the Fund's
Class C shares for the period ended August 31, 1997 was 79.82%. The "cumulative
total return" at net asset value for the Fund's Class Y shares for the period
ended August 31, 1997 was 23.98%.
Total return information may be useful to investors in reviewing the
performance of the Fund and Class A, Class B, Class C or Class Y shares.
However, when comparing total return of an investment in shares of the Fund with
that of other alternatives, investors should understand that as the Fund is an
equity fund seeking total return which includes capital appreciation, its shares
are subject to greater market risks and volatility than shares of funds having
more conservative investment objectives and policies and that the Fund is
designed for investors who are willing to accept greater risk of loss in the
hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other funds, (ii) all other "income & growth"
funds and (iii) all other "income & growth" funds in a specific size category.
The Lipper performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but do not take
sales charges or taxes into consideration. The Fund may also compare its
performance from time to time with that of Morgan Stanley Capital International
index, a capitalized weighted index which is widely utilized as a measure of
world wide stock market performance.
From time to time, the Fund may publish the star ranking of the performance
of its Class A, Class B, Class C or Class Y shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories; domestic stock funds, international stock funds,
taxable bond funds an municipal bond funds, based on risk-adjusted total
investment returns. The Fund is ranked among domestic stock funds. Investment
return measures a fund's or class' 1-, 3-, 5- and 10-year average annual total
returns (depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns. Risk and investment return are combined to produce
star rankings reflecting performance relative to the average fund in the fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
ranking is the fund's or class' 3-year ranking or its combined
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3- and 5-year ranking (weighted 60%/40%, respectively, or its combined 3-, 5-
and 10-year ranking (weighted 40%, 30% and 30% respectively), depending on the
inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar's
classification may be based on 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.
The total return on an investment in the Fund's Class A, Class B, Class C or
Class Y shares may be compared with performance for the same period of the S&P
500 Index, as described in the Prospectus. The performance of the index includes
a factor for the reinvestment of income dividends, but does not reflect
reinvestment of capital gains, expenses or taxes. The performance of the Fund's
Class A, Class B, Class C or Class Y shares may also be compared in publications
to (i) the performance of various market indices or to other investments for
which reliable performance data is available, and (ii) to averages, performance
rankings or other benchmarks prepared by recognized mutual fund statistical
services.
Investors may also wish to compare the Fund's returns to the returns on
fixed income investments available from banks and thrift institutions, such as
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 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, and Treasury bills are guaranteed as to principal and
interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings of the
Manager or Transfer Agent or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Corporation has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act pursuant to which the Corporation will reimburse the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of that class, as described in the
Prospectus. Each Plan has been approved by a vote of (i) the Board of Directors
of the Corporation, including a majority of the Independent Directors, cast in
person at a meeting called for the purpose of voting on that Plan, and (ii) the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of each class. For the Distribution and Service Plan for Class B and
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<PAGE>
Class C shares, that vote was cast by the Manager as the sole initial holder of
Class B and Class C shares of the Fund, respectively.
In addition, under the Plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources (which, in the case
of the Manager, may include profits from the advisory fee it receives from the
Fund), to make payments to brokers, dealers or other financial institutions
(each is referred to as a "Recipient" under the Plans) for distribution and
administrative services they perform, at no cost to the Fund. The Distributor
and the Manager may, in their sole discretion, increase or decrease the amount
of payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Corporation's Board of Directors and its "Independent
Directors" by a vote cast in person at a meeting called for the purpose of
voting on such continuance. A Plan may be terminated at any time by the vote of
a majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class. No Plan may be amended to increase materially the amount of
payments to be made unless such amendment is approved by shareholders of the
class affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
by a Securities and Exchange Commission rule to obtain the approval of Class B
as well as Class A shareholders for a proposed material amendment to the Class A
Plan that would materially increase payments under the Plan. Such approval must
be by a "majority" of the Class A and Class B shares (as defined in the
Investment Company Act), voting separately by class. All material amendments
must be approved by the Independent Directors.
While the Plans are in effect, the Treasurer of the Corporation shall
provide separate written reports to the Corporation's Board of Directors at
least quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payments were made and the identity of each Recipient that
received any such payment. The reports for the Class B Plan and Class C Plan
shall also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the Prospectus
and below. Those reports, will be subject to the review and approval of the
Independent Directors in the exercise of their fiduciary duty. Each Plan further
provides that while it is in effect, the selection and nomination of those
Directors of the Corporation who are not "interested persons" of the Corporation
is committed to the discretion of the Independent Directors. This does not
prevent the involvement of others in such selection and nomination if the final
decision on any such selection or nomination is approved by a majority of the
Independent Directors.
Under the Plans, no payment will be made to any Recipient in any quarter if
the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Corporation's Independent
Directors. The Board of Directors has set the fees at the maximum rate and set
no minimum amount.
For the fiscal year ended August 31, 1997 payments under the Class A Plan
totaled $9,363,505,
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<PAGE>
all of which was paid by the Distributor to Recipients, including $428,606, paid
to an affiliated broker-dealer as reimbursement for Class A personal service and
account maintenance services. For the fiscal year ended August 31, 1997,
payments under the Class B Plan totaled $26,361,853, of which the Distributor
paid $74,879 to an affiliated broker-dealer as reimbursement for Class B
personal service and maintenance expenses, and retained $22,635,581, as
reimbursement for Class B sales commissions and service fee advances, as well as
financing costs. For the fiscal year ended August 31, 1997, payments under the
Class C Plan totaled $9,012,625, of which the Distributor paid $135,581, to an
affiliated broker-dealer as reimbursement for Class C personal service and
maintenance expenses, and retained $2,838,009, as reimbursement for Class C
sales commissions and service fee advances, as well as financing costs.
The Class B and Class C Plans allow the service fee payment to be paid by
the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of shares sold.
An exchange of shares does not entitle the Recipient to an advance service fee
payment. In the event shares are redeemed during the first year such shares are
outstanding, the Recipient will be obligated to repay a pro rata portion of such
advance payment to the Distributor.
Although the Class B and the Class C Plans permit the Distributor to retain
both the asset-based sales charges and the service fees on such shares, or to
pay Recipients the service fee on a quarterly basis, without payment in advance,
the Distributor presently intends to pay the service fee to Recipients in the
manner described above. A minimum holding period may be established from time to
time under the Class B Plan and the Class C Plan by the Board. The Board has set
no minimum holding period. All payments under the Class B and the Class C Plan
are subject to the limitations imposed by the Conduct Rules of the National
Association of Securities Dealers, Inc. on payments of asset-based sales charges
and service fees.
Any unreimbursed expenses incurred with respect to Class A shares for any
fiscal quarter by the Distributor may not be recovered under the Class A Plan in
subsequent fiscal quarters. Payments received by the Distributor under the Class
A Plan will not be used to pay any interest expense, carrying charges, or other
financial costs, or allocation of overhead by the Distributor. The Class B Plan
and the Class C Plan allow for the carry-forward of distribution expenses, to be
recovered from asset-based sales charges in subsequent fiscal periods, as
described in the Prospectus. The asset-based sales charges paid to the
Distributor by the Fund under the Class B Plan and the Class C Plan are intended
to allow the Distributor to recoup the cost of sales commissions paid to
authorized brokers and dealers at the time of sale, plus financing costs, as
described in the Prospectus. Such payments may also be used to pay the
Distributor for the following expenses in connection with the distribution of
Class B and Class C shares: (i) financing the advance of the service fee payment
to Recipients under the Class B and the Class C Plan, (ii) compensation and
expenses of personnel employed by the Distributor to support distribution of
Class B and Class C shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and certain
other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
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<PAGE>
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than another. The
Distributor will generally not accept any order at $500,000 or $1 million or
more of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of the
Fund instead. A Fourth Class of Shares may be purchased only by certain
institutional investors at net asset value per share ("Class Y Shares").
The four classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by expenses borne solely by that class, including the asset-based sales charges
to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B, Class C and Class Y shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any class are allocated pro rata to the shares of each class,
based on the percentage of the net assets of such class to the Fund's total
assets, and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports, prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to Independent Directors, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (i) Distribution and/or Service Plan fees, (ii) transfer and shareholder
servicing agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A, Class
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B, Class C and Class Y shares of the Fund are determined as of the close of
business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing the value of the Fund's net assets attributable to
that class by the number of shares of that class outstanding. The Exchange
normally closes at 4:00 P.M. New York time, but may close earlier on some days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Martin Luther King Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. Trading may
occur in debt securities and in foreign securities when the Exchange is closed
(including weekends and holidays). Because the Fund's net asset value will not
be calculated at those times, if securities held in the Fund's portfolio are
traded at such time, the net asset values per share of Class A, Class B, Class C
and Class Y shares of the Fund may be significantly affected at times when
shareholders may not purchase or redeem shares.
The Corporation's Board of Directors has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity securities
traded on a U.S. securities exchange or on the Automated Quotation System
("NASDAQ") of the Nasdaq Stock Market, Inc. for which last sale information is
regularly reported are valued at the last reported sale price on the principal
exchange for such security or NASDAQ that day (the "Valuation Date") or, in the
absence of sales that day, 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, the closing "bid" price on the
Valuation Date; (ii) equity securities traded on a foreign securities exchange
are valued generally at the last sales price available to the pricing service
approved by the Fund's Board of Trustees or to the Manager as reported by the
principal exchange on which the security is traded at its last trading session
on or immediately preceding the Valuation Date, or, if unavailable, at the mean
between "bid" and "asked" prices obtained from the principal exchange or two
active market makers in the security on the basis of reasonable inquiry; (iii) a
non-money market fund will value (x) debt instruments that had a maturity of
more than 397 days when issued, (y) debt instruments that had a maturity of 397
days or less when issued and have a remaining maturity in excess of 60 days, and
(z) non-money market type debt instruments that had a maturity of 397 days or
less when issued and have a remaining maturity of sixty days or less, at the
mean between "bid" and "asked" prices determined by a pricing service approved
by the Fund's Board of Trustees or, if unavailable, obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(iv) money market-type debt securities held by a non-money market fund that had
a maturity of less than 397 days when issued and have a remaining maturity of 60
days or less, and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less, shall be valued at cost, adjusted for
amortization of premiums and accretion of discount; and (v) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (ii) and (iii)
above), the 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) provided that the Manager is
satisfied that the firm rendering the quotes is reliable and that the quotes
reflect the current market value.
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to
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the prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Manager may use pricing services
approved by the Board of Directors to price any of the types of securities
described above to price U.S. Government Securities, mortgage-backed securities,
foreign government securities and corporate bonds. The Manager will monitor the
accuracy of such pricing services, which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of Directors or the Manager, under procedures established
by the Board of Directors, determines that the particular event is likely to
effect a material change in the value of such security. Foreign currency,
including forward contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank, dealer or
pricing service. The values of securities denominated in foreign currency will
be converted to U.S. dollars at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the principal
exchange on which they are traded, or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Directors or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing bid and asked prices on
the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing bid price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an exchange or on
NASDAQ, it shall be valued at the mean between bid and asked prices obtained by
the Manager from two active market makers (which in certain cases may be 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, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal funds
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are received 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 Rights of Accumulation and Letters
of Intent because of the economies of sales efforts and in expenses realized by
the Distributor, dealers and brokers making such sales. No sales charge is
imposed in certain circumstances described in the Prospectus because the
Distributor, dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren, parents,
grandparents, aunts, uncles, nieces, nephews, parents-in-law, sons- and
daughters-in-law, siblings, a sibling's spouse and a spouse's siblings.
Relations by virtue of a remarriage (step-children, step-parents, etc.) are
included.
o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer California Municipal Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Life Span Balanced Fund
Oppenheimer Life Span Growth Fund
Oppenheimer Life Span Income Fund
Limited Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Mid-Cap Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Panorama Series Fund, Inc.
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Rochester Fund Municipals
Oppenheimer Series Fund, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
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and the following "Money Market 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 Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except money market funds (under certain circumstances
described herein, redemption proceeds of money market fund shares may be subject
to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund (and other Oppenheimer
funds) during a 13-month period (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge)
applicable to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional Information
and the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those amendments
will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended
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purchase amount and exceed the amount needed to qualify for the next sales
charge rate reduction set forth in the applicable prospectus, the sales charges
paid will be adjusted to the lower rate, but only if and when the dealer returns
to the Distributor the excess of the amount of commissions allowed or paid to
the dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be used to
purchase additional shares for the investor's account at the net asset value per
share in effect on the date of such purchase, promptly after the Distributor's
receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares acquired subject to a contingent deferred sales
charge, and (c) Class A shares or Class B shares acquired in exchange for either
(i) Class A shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or (ii) Class B
shares of one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
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Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "Shareholder
Account Rules and Policies," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for monthly
automatic purchases of shares of up to four other Oppenheimer funds. If payments
are made from a bank account to purchase shares of the Fund, the bank account
will automatically be debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the record keeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
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Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the record keeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more is assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less the
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B
contingent deferred sales charge.
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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.
o Involuntary Redemptions. The Board of Directors has the right to cause the
involuntary redemption of the shares held in any Fund 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 of Directors will not cause the involuntary redemption
of shares in an account if the aggregate net asset value of the shares has
fallen below the stated minimum solely as a result of market fluctuations.
Should the Board elect to exercise this right, it may also fix, in accordance
with the Investment Company Act, and the provisions of Maryland law, the
requirements for any notice to be given to the shareholders in question (not
less than 30 days), or the Board may set requirements for the Shareholder to
increase
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the investment, and set other terms and conditions so that the shares would not
be involuntarily redeemed.
o Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors of the
Corporation may determine that it would be detrimental to the best interests of
the remaining shareholders of the Fund to make payment of a redemption order
wholly or partly in cash. In that case the Fund may pay the redemption proceeds
in whole or in part by a distribution "in kind" of securities from the portfolio
of the Fund, in lieu of cash, in conformity with applicable rules of the
Securities and Exchange Commission. The Fund has elected to be governed by Rule
18f-1 under the Investment Company Act, pursuant to which the Fund is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
assets of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or other
costs in selling the securities for cash. The method of valuing securities used
to make redemptions in kind will be the same as the method the Fund uses to
value it portfolio securities described above under "Determination of Net Asset
Values Per Share" and that valuation will be made as of the time the redemption
price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial or contingent deferred sales charge, or (ii)
Class B shares on which you paid a contingent deferred sales charge when you
redeemed them. It does not apply to Class C shares. The reinvestment may be made
without sales charge only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are exchangeable as described
below, at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized when
the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge at the time of transfer to the name of another person or
entity (whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares will
remain subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same manner
and at the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed at the time
of transfer, the priorities described in the Prospectus under "How to Buy
Shares" for the imposition of the Class B or the Class C contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans,
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the
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Transfer Agent at its address listed in "How To Sell Shares" in the Prospectus
or on the back cover of this Statement of Additional Information. The request
must: (i) state the reason for the distribution; (ii) state the owner's
awareness of tax penalties if the distribution is premature; and (iii) conform
to the requirements of the plan and the Fund's other redemption requirements.
Participants, other than self-employed persons, maintaining a plan account in
their own name, in OppenheimerFunds-sponsored prototype pension, profit-sharing
or 401(k) plans may not directly redeem or exchange shares held for their
account under those plans. The employer or plan administrator must sign the
request. Distributions from pension and profit sharing plans are subject to
special requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the distribution
may be made. Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available from
the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the shareholder
has provided the Transfer Agent with a certified taxpayer identification number,
the Internal Revenue Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld. The Fund, the Manager,
the Distributor, the Trustee and the Transfer Agent assume no responsibility to
determine whether a distribution satisfies the conditions of applicable tax laws
and will not be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date selected in the account application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not
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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 Class B or the Class C contingent
deferred sales charge is waived as described in the Prospectus under "Waivers of
Class B Sales or Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink transfer payments of the proceeds of Plan withdrawals will normally
be transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder
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by writing to the Transfer Agent. The Planholder should allow at least two
weeks' time in mailing such notification for the requested change to be put in
effect. The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held under the
Plan. In that case, the Transfer Agent will redeem the number of shares
requested at the net asset value per share in effect in accordance with the
Fund's usual redemption procedures and will mail a check for the proceeds to the
Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B or Class C
shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate. If the
Transfer Agent ceases to act as transfer agent for the Fund, the Planholder will
be deemed to have appointed any successor transfer agent to act as agent in
administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. All of the Oppenheimer funds offer Class A, 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 and Oppenheimer Main Street California Municipal
Fund which only offers Class A and Class B shares (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange from the same
class of shares of other Oppenheimer funds or through OppenheimerFunds-sponsored
401(k) plans). A current list showing which funds offer which class can be
obtained by calling the distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund. Shares of any money market fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales
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charge (or, if applicable, may be used to purchase shares of Oppenheimer funds
subject to a contingent deferred sales charge). However, shares of Oppenheimer
Money Market Fund, Inc. purchased with the redemption proceeds of shares of
other mutual funds (other than funds managed by the Manager or its subsidiaries)
redeemed within the 30 days prior to that purchase may subsequently be exchanged
for shares of other Oppenheimer funds without being subject to an initial or
contingent deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the Distributor of
eligibility for this privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased, and, if requested, must supply proof of
entitlement to this privilege. Shares of this Fund acquired by reinvestment of
dividends or distribution from any other of the Oppenheimer funds (except
Oppenheimer Cash Reserves) or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be exchanged
at net asset value for shares of any of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares of
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 12 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares (18 months for shares purchased prior to May 1, 1997),
the Class A contingent deferred sales charge is imposed on the redeemed shares
(see "Class A Contingent Deferred Sales Charge" in the Prospectus). The Class B
contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within six 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 A, 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 A, Class B or the Class C contingent deferred sales
charge will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any exchange on
the applicability and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans, Checkwriting, if available, and retirement
plan contributions will be switched to the new account unless the Transfer Agent
is instructed otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders might
not be able to request exchanges by telephone and would have to submit written
exchange requests.
-42-
<PAGE>
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Board of
Directors and the Manager might determine in a particular year that it would be
in the best interest of shareholders for the Fund not to make such distributions
at the required levels and to pay the excise tax on the undistributed amounts.
That would reduce the amount of income or capital gains available for
distribution to shareholders.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year, and intends to qualify in future
years, but reserves the right not to qualify. 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.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks
-43-
<PAGE>
returned to the Transfer Agent by the Postal Service as undeliverable will be
invested in shares of Oppenheimer Money Market Fund, Inc., as promptly as
possible after the return of such checks to the Transfer Agent, in order to
enable the investor to earn a return on otherwise idle funds.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies, shareholders
may have a non-taxable return of capital, which will be identified in notices of
shareholders. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends or the realization of any capital gains.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds (other
than Oppenheimer Cash Reserves) may be invested in shares of this Fund on the
same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income of the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships with the Custodian have
been and will continue to be unrelated to and unaffected by the relationship
between the Fund and the Custodian. It will be the practice of the Fund to deal
with the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates. 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 Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
-44-
<PAGE>
<PAGE>
Independent Auditors' Report
================================================================================
The Board of Directors and Shareholders of Oppenheimer Main Street Income &
Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street Income & Growth Fund as
of August 31, 1997, the related statement of operations for the year then ended,
the statements of changes in net assets for the year then ended, for the two
months ended August 31, 1996 and the year ended June 30, 1996, and the financial
highlights for the period July 1, 1992 to August 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Main Street Income & Growth Fund at August 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
September 22, 1997
<PAGE>
Statement of Investments August 31, 1997
Market Value
Shares See Note 1
================================================================================
Common Stocks--85.8%
- --------------------------------------------------------------------------------
Basic Materials--3.3%
- --------------------------------------------------------------------------------
Chemicals--3.3%
Du Pont (E.I.) De Nemours & Co. 1,000,000 $62,312,500
- --------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 1,092,000 55,828,500
- --------------------------------------------------------------------------------
Monsanto Co. 2,065,500 90,752,906
- --------------------------------------------------------------------------------
Morton International, Inc. 1,300,000 43,225,000
- --------------------------------------------------------------------------------
Olin Corp. 275,100 12,241,950
- --------------------------------------------------------------------------------
Sigma-Aldrich Corp. 900,000 29,362,500
-----------
293,723,356
- --------------------------------------------------------------------------------
Consumer Cyclicals--13.8%
- --------------------------------------------------------------------------------
Autos & Housing--0.7%
Oakwood Homes Corp. 345,200 9,363,550
- --------------------------------------------------------------------------------
Stanley Works (The) 1,182,500 50,330,156
-----------
59,693,706
- --------------------------------------------------------------------------------
Leisure & Entertainment--7.9%
Disney (Walt) Co. 455,000 34,949,687
- --------------------------------------------------------------------------------
Gaylord Entertainment Co., Cl. A 1,553,035 36,205,128
- --------------------------------------------------------------------------------
Hilton Hotels Corp. 2,485,000 76,258,437
- --------------------------------------------------------------------------------
ITT Corp. (New)(1) 800,000 50,250,000
- --------------------------------------------------------------------------------
Marriott International, Inc. 1,295,000 86,198,437
- --------------------------------------------------------------------------------
McDonald's Corp. 5,382,500 254,659,531
- --------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 1,700,000 45,581,250
- --------------------------------------------------------------------------------
Time Warner, Inc. 2,124,900 109,432,350
-----------
693,534,820
- --------------------------------------------------------------------------------
Media--1.6%
Cox Communications, Inc., Cl. A(1) 1,060,000 28,686,250
- --------------------------------------------------------------------------------
Evergreen Media Corp., Cl. A(1) 500,000 23,937,500
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 1,027,900 69,640,225
- --------------------------------------------------------------------------------
Scholastic Corp.(1) 525,000 17,981,250
-----------
140,245,225
- --------------------------------------------------------------------------------
Retail: General--1.3%
Federated Department Stores, Inc.(1) 1,974,500 82,929,000
- --------------------------------------------------------------------------------
May Department Stores Cos. 629,400 33,869,587
-----------
116,798,587
11 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Retail: Specialty--2.3%
AutoZone, Inc.(1) 1,000,000 $28,250,000
- --------------------------------------------------------------------------------
CVS Corp. 889,000 50,117,375
- --------------------------------------------------------------------------------
Gap, Inc. (The) 2,250,000 99,984,375
- --------------------------------------------------------------------------------
Tiffany & Co. 509,100 23,036,775
-----------
201,388,525
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--19.0%
- --------------------------------------------------------------------------------
Beverages--2.2%
Anheuser-Busch Cos., Inc. 3,061,000 130,475,125
- --------------------------------------------------------------------------------
PepsiCo, Inc. 1,675,000 60,300,000
-----------
190,775,125
- --------------------------------------------------------------------------------
Food--3.0%
CPC International, Inc. 527,100 46,977,787
- --------------------------------------------------------------------------------
H.J. Heinz Co. 900,000 37,462,500
- --------------------------------------------------------------------------------
Nabisco Holdings Corp., Cl. A 1,069,600 44,388,400
- --------------------------------------------------------------------------------
Ralston-Ralston Purina Group 800,200 72,018,000
- --------------------------------------------------------------------------------
Unilever NV, NY Shares 300,000 60,375,000
-----------
261,221,687
- --------------------------------------------------------------------------------
Healthcare/Drugs--7.7%
American Home Products Corp. 1,000,000 72,000,000
- --------------------------------------------------------------------------------
Amgen, Inc.(1) 1,630,000 80,786,875
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,100,000 83,600,000
- --------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 300,000 10,687,500
- --------------------------------------------------------------------------------
Johnson & Johnson 2,000,000 113,375,000
- --------------------------------------------------------------------------------
Lilly (Eli) & Co. 416,000 43,524,000
- --------------------------------------------------------------------------------
Merck & Co., Inc. 1,305,000 119,815,312
- --------------------------------------------------------------------------------
Schering-Plough Corp. 1,544,800 74,150,400
- --------------------------------------------------------------------------------
Warner-Lambert Co. 600,000 76,237,500
-----------
674,176,587
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--2.7%
Bard (C.R.), Inc. 1,075,000 37,087,500
- --------------------------------------------------------------------------------
Becton, Dickinson & Co. 819,200 39,270,400
- --------------------------------------------------------------------------------
Boston Scientific Corp.(1) 853,050 60,140,025
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 493,400 32,687,750
- --------------------------------------------------------------------------------
HEALTHSOUTH Corp.(1) 1,500,000 37,406,250
- --------------------------------------------------------------------------------
Medtronic, Inc. 375,000 33,890,625
-----------
240,482,550
12 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Household Goods--0.6%
Avon Products, Inc. 883,800 $56,618,438
- --------------------------------------------------------------------------------
Tobacco--2.8%
Philip Morris Cos., Inc. 3,675,000 160,321,875
- --------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 2,500,000 87,031,250
-----------
247,353,125
- --------------------------------------------------------------------------------
Energy--5.5%
- --------------------------------------------------------------------------------
Energy Services & Producers--1.7%
Apache Corp. 750,000 29,765,625
- --------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 700,000 24,106,250
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1,220,000 92,948,750
-----------
146,820,625
- --------------------------------------------------------------------------------
Oil-Integrated--3.8%
Atlantic Richfield Co. 1,050,000 78,750,000
- --------------------------------------------------------------------------------
Exxon Corp. 1,300,000 79,543,750
- --------------------------------------------------------------------------------
Mobil Corp. 440,000 32,010,000
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 740,000 37,555,000
- --------------------------------------------------------------------------------
Texaco, Inc. 675,000 77,793,750
- --------------------------------------------------------------------------------
Unocal Corp. 625,000 24,414,063
-----------
330,066,563
- --------------------------------------------------------------------------------
Financial--18.0%
- --------------------------------------------------------------------------------
Banks--7.2%
BankAmerica Corp. 1,200,000 78,975,000
- --------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 900,000 100,068,750
- --------------------------------------------------------------------------------
Citicorp 550,000 70,193,750
- --------------------------------------------------------------------------------
Commercial Federal Corp. 562,500 23,660,156
- --------------------------------------------------------------------------------
First America Bank Corp. 409,950 21,112,425
- --------------------------------------------------------------------------------
KeyCorp 600,000 36,375,000
- --------------------------------------------------------------------------------
Mellon Bank Corp. 435,000 20,934,375
- --------------------------------------------------------------------------------
Northern Trust Corp. 415,000 22,046,875
- --------------------------------------------------------------------------------
Societe Generale 500,000 62,026,983
- --------------------------------------------------------------------------------
Summit Bancorp 745,000 44,234,375
- --------------------------------------------------------------------------------
U.S. Bancorp. 350,700 30,708,169
- --------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR Representing 500 Units of
one Preferred Share of Unibanco and one
Preferred Share of Unibanco Ho1dings SA(1) 1,000,000 35,000,000
- --------------------------------------------------------------------------------
Union Planters Corp. 400,000 20,500,000
- --------------------------------------------------------------------------------
Wells Fargo & Co. 283,333 72,037,415
-----------
637,873,273
13 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Diversified Financial--8.9%
AMBAC Financial Group, Inc. 157,200 $12,703,725
- --------------------------------------------------------------------------------
American Express Co. 2,758,400 214,465,600
- --------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 977,200 56,738,675
- --------------------------------------------------------------------------------
Fannie Mae 1,006,000 44,264,000
- --------------------------------------------------------------------------------
MBNA Corp. 1,170,000 44,971,875
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 200,000 12,300,000
- --------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 2,621,200 126,145,250
- --------------------------------------------------------------------------------
Student Loan Marketing Assn. 400,000 54,200,000
- --------------------------------------------------------------------------------
Travelers Group, Inc. 3,402,934 216,086,309
-----------
781,875,434
- --------------------------------------------------------------------------------
Insurance--1.9%
Allstate Corp. 1,130,500 82,597,156
- --------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 890,000 32,206,875
- --------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 139,000 5,186,438
- --------------------------------------------------------------------------------
St. Paul Cos., Inc. 649,500 47,657,063
-----------
167,647,532
- --------------------------------------------------------------------------------
Industrial--6.5%
- --------------------------------------------------------------------------------
Electrical Equipment--3.6%
AMP, Inc. 1,175,000 58,750,000
- --------------------------------------------------------------------------------
Emerson Electric Co. 600,000 32,812,500
- --------------------------------------------------------------------------------
General Electric Co. 900,000 56,250,000
- --------------------------------------------------------------------------------
Grainger (W.W.), Inc. 504,500 44,805,906
- --------------------------------------------------------------------------------
Honeywell, Inc. 100,000 6,912,500
- --------------------------------------------------------------------------------
Hubbell, Inc., Cl. B 606,500 27,823,188
- --------------------------------------------------------------------------------
Raychem Corp. 433,100 40,305,369
- --------------------------------------------------------------------------------
Westinghouse Electric Corp. 2,062,000 53,096,500
-----------
320,755,963
- --------------------------------------------------------------------------------
Industrial Materials--0.2%
Bemis Co., Inc. 415,600 18,260,425
- --------------------------------------------------------------------------------
Industrial Services--1.3%
Donnelley (R.R.) & Sons Co. 1,100,000 42,831,250
- --------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. 1,526,850 74,433,938
-----------
117,265,188
- --------------------------------------------------------------------------------
Manufacturing--1.4%
American Standard Cos., Inc.(1) 950,000 44,650,000
- --------------------------------------------------------------------------------
Avery-Dennison Corp. 1,453,900 59,700,769
- --------------------------------------------------------------------------------
Sealed Air Corp.(1) 390,900 20,277,938
-----------
124,628,707
14 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Technology--17.6%
- --------------------------------------------------------------------------------
Computer Hardware--7.9%
Adaptec, Inc.(1) 1,440,000 $69,120,000
- --------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 1,815,000 54,903,750
- --------------------------------------------------------------------------------
Compaq Computer Corp.(1) 987,500 64,681,250
- --------------------------------------------------------------------------------
Diebold, Inc. 400,000 18,550,000
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 660,000 40,466,250
- --------------------------------------------------------------------------------
International Business Machines Corp. 3,210,000 323,808,750
- --------------------------------------------------------------------------------
Seagate Technology, Inc.(1) 1,074,600 41,036,288
- --------------------------------------------------------------------------------
Sun Microsystems, Inc.(1) 1,700,000 81,600,000
-----------
694,166,288
- --------------------------------------------------------------------------------
Computer Software--2.8%
Automatic Data Processing, Inc. 500,000 22,781,250
- --------------------------------------------------------------------------------
BMC Software, Inc.(1) 810,000 50,726,250
- --------------------------------------------------------------------------------
First Data Corp. 1,853,600 76,113,450
- --------------------------------------------------------------------------------
Microsoft Corp.(1) 530,000 70,059,375
- --------------------------------------------------------------------------------
Sungard Data Systems, Inc.(1) 484,000 25,228,500
-----------
244,908,825
- --------------------------------------------------------------------------------
Electronics--3.1%
General Motors Corp., Cl. H 500,900 31,838,456
- --------------------------------------------------------------------------------
Intel Corp. 1,000,000 92,125,000
- --------------------------------------------------------------------------------
LSI Logic Corp.(1) 700,000 22,531,250
- --------------------------------------------------------------------------------
Solectron Corp.(1) 800,000 33,500,000
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 215,000 24,429,375
- --------------------------------------------------------------------------------
Thermo Electron Corp.(1) 837,500 33,709,375
- --------------------------------------------------------------------------------
Waters Corp.(1) 500,000 16,656,250
- --------------------------------------------------------------------------------
Xilinx, Inc.(1) 450,000 21,375,000
-----------
276,164,706
- --------------------------------------------------------------------------------
Telecommunications-Technology--3.8%
ADC Telecommunications, Inc.(1) 600,000 22,275,000
- --------------------------------------------------------------------------------
Ascend Communications, Inc.(1) 800,000 33,950,000
- --------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 875,000 65,953,125
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. 800,000 62,300,000
- --------------------------------------------------------------------------------
Millicom, Inc.(1) 75,000 --
- --------------------------------------------------------------------------------
QUALCOMM, Inc.(1) 350,000 16,187,500
- --------------------------------------------------------------------------------
Tellabs, Inc.(1) 880,000 52,525,000
- --------------------------------------------------------------------------------
WorldCom, Inc. 2,726,048 81,611,062
-----------
334,801,687
15 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Utilities--2.1%
- --------------------------------------------------------------------------------
Gas Utilities--1.0%
Consolidated Natural Gas Co. 701,600 $41,438,250
- --------------------------------------------------------------------------------
Sonat, Inc. 950,000 47,321,875
-----------
88,760,125
- --------------------------------------------------------------------------------
Telephone Utilities--1.1%
GTE Corp. 1,000,000 44,562,500
- --------------------------------------------------------------------------------
SBC Communications, Inc. 520,000 28,275,000
- --------------------------------------------------------------------------------
Teleport Communications Group, Inc., Cl. A(1) 645,000 23,461,875
-----------
96,299,375
-----------
Total Common Stocks (Cost $5,766,939,363) 7,556,306,447
================================================================================
Other Securities--0.9%
- --------------------------------------------------------------------------------
Cia de Inversiones en Telecomunicaciones SA,
7% Provisionally Redeemable Income Debt
Exchangeable for Stock, 3/3/98(2) 225,000 14,540,625
- --------------------------------------------------------------------------------
Continental Airlines Finance Trust, 8.50% Cv.
Trust Originated Preferred Securities(2) 125,000 10,171,875
- --------------------------------------------------------------------------------
Houston Industries, Inc., 7% Automatic Common
Exchange Securities, Exchangeable for Time
Warner, Inc. Common Stock, 7/1/00 703,000 35,677,250
- --------------------------------------------------------------------------------
James River Corp. of Virginia, Depositary
Shares each representing a one-hundredth
interest in a share of Series P, 9% Cum. Cv.
Preferred Stock, Dividend Enhanced
Convertible Stock 500,000 19,062,500
-----------
Total Other Securities (Cost $60,806,633) 79,452,250
Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp.
6/99 (Cost $0) 18,750 --
Face
Amount
================================================================================
U.S. Government Obligations--6.8%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.50%, 11/15/26 $249,950,000 245,185,442
6.625%, 2/15/27 147,500,000 147,269,599
STRIPS, Zero Coupon, 6.929%, 5/15/21(3) 762,000,000 154,822,294
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 5%, 1/31/98 50,000,000 49,890,648
-----------
Total U.S. Government Obligations (Cost $586,123,733) 597,167,983
16 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Face Market Value
Amount See Note 1
================================================================================
Convertible Corporate Bonds and Notes--0.6%
- --------------------------------------------------------------------------------
ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 $12,800,000 $13,040,000
- --------------------------------------------------------------------------------
Continental Airlines, Inc., 6.75%
Cv. Sub. Nts., 4/15/06(2) 15,000,000 20,493,750
- --------------------------------------------------------------------------------
Corporate Express, Inc., 4.50% Cv. Sub. Nts., 7/1/00 10,000,000 9,200,000
- --------------------------------------------------------------------------------
Saks Holdings, Inc., 5.50% Cv. Sub. Nts., 9/15/06 4,800,000 4,254,000
- --------------------------------------------------------------------------------
Time Warner, Inc., Zero Coupon Cv. Sr. Sub. Nts.,
10.178%, 6/22/13(3) 20,000,000 9,500,000
-----------
Total Convertible Corporate Bonds and Notes
(Cost $51,650,380) 56,487,750
================================================================================
Short-Term Notes--5.1%
Associates Corp. of North America, 5.52%, 9/2/97(4) 100,000,000 99,984,667
- --------------------------------------------------------------------------------
CIESCO, L.P., 5.50%, 9/3/97(4) 50,000,000 49,984,722
- --------------------------------------------------------------------------------
CIESCO, L.P., 5.52%, 9/30/97(4) 50,000,000 49,777,667
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 5.51%, 9/4/97(4) 50,000,000 49,977,042
- --------------------------------------------------------------------------------
General Electric Capital Corp., 5.50%, 9/8/97(4) 50,000,000 49,946,528
- --------------------------------------------------------------------------------
General Electric Capital Services, Inc.,
5.50%, 9/18/97(4) 50,000,000 49,870,139
- --------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 5.53%, 9/15/97(4) 50,000,000 49,892,472
- --------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 5.60%, 9/12/97(4) 50,000,000 49,915,819
-----------
Total Short-Term Notes (Cost $449,349,056) 449,349,056
================================================================================
Repurchase Agreements--0.5%
- --------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.55%, dated 8/29/97, to
be repurchased at $46,628,737 on 9/2/97, collateralized by U.S. Treasury Bonds,
7.25%-11.25%, 2/15/03-8/15/19, with a value of $44,461,925 and U.S. Treasury
Nts., 5.875%, 10/31/98, with a value of $3,115,499
(Cost $46,600,000) 46,600,000 46,600,000
- --------------------------------------------------------------------------------
Total Investments, at Value (Cost $6,961,469,165) 99.7% 8,785,363,486
- --------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 26,219,659
---------- --------------
Net Assets 100.0 $8,811,583,145
========== ==============
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $45,206,250 or 0.51% of the Fund's net
assets, at August 31, 1997. 3. For zero coupon bonds, the interest rate shown is
the effective yield on the date of purchase. 4. Short-term notes are generally
traded on a discount basis; the interest rate is the discount rate received by
the Fund at the time of purchase. See accompanying Notes to Financial
Statements.
17 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Assets and Liabilities August 31, 1997
================================================================================
Assets
Investments, at value (cost $6,961,469,165)--
see accompanying statement $8,785,363,486
- --------------------------------------------------------------------------------
Receivables:
Investments sold 38,951,695
Shares of capital stock sold 19,610,548
Interest and dividends 18,056,937
Daily variation on futures contracts--Note 5 119,250
- --------------------------------------------------------------------------------
Other 167,921
--------------
Total assets 8,862,269,837
================================================================================
Liabilities
Bank overdraft 3,282,404
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 32,709,961
Shares of capital stock redeemed 8,103,035
Distribution and service plan fees 3,687,556
Transfer and shareholder servicing agent fees 1,340,737
Shareholder reports 833,993
Directors' fees 2,713
Other 726,293
--------------
Total liabilities 50,686,692
================================================================================
Net Assets $8,811,583,145
==============
================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 2,609,937
- --------------------------------------------------------------------------------
Additional paid-in capital 6,568,618,744
- --------------------------------------------------------------------------------
Undistributed net investment income 17,874,940
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions 399,302,803
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 1,823,176,721
--------------
Net assets $8,811,583,145
==============
18 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$4,457,349,230 and 131,610,122 shares of capital
stock outstanding) $33.87
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price) $35.94
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $3,307,851,818 and
98,285,988
shares of capital stock outstanding) $33.66
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $1,030,131,940 and
30,618,749
shares of capital stock outstanding) $33.64
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $16,250,157 and 478,846 shares
of capital stock outstanding) $33.94
See accompanying Notes to Financial Statements.
19 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Operations For the Year Ended August 31, 1997
================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $381,901) $ 89,719,895
- --------------------------------------------------------------------------------
Interest 75,478,119
------------
Total income 165,198,014
================================================================================
Expenses
Distribution and service plan fees--Note 4:
Class A 9,363,505
Class B 26,361,853
Class C 9,012,625
- --------------------------------------------------------------------------------
Management fees--Note 4 34,036,569
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 6,936,594
Class B 4,648,686
Class C 1,630,109
Class Y 3,033
- --------------------------------------------------------------------------------
Shareholder reports 2,873,972
- --------------------------------------------------------------------------------
Registration and filing fees:
Class A 174,708
Class B 272,409
Class C 34,602
Class Y 4,552
- --------------------------------------------------------------------------------
Custodian fees and expenses 305,026
- --------------------------------------------------------------------------------
Legal and auditing fees 128,966
- --------------------------------------------------------------------------------
Directors' fees and expenses 84,269
- --------------------------------------------------------------------------------
Insurance expenses 34,028
- --------------------------------------------------------------------------------
Other 255,375
------------
Total expenses 96,160,881
================================================================================
Net Investment Income 69,037,133
================================================================================
Realized and Unrealized Gain Net realized gain on:
Investments 395,924,250
Closing of futures contracts 32,337,089
Foreign currency transactions 8,205,249
--------------
Net realized gain 436,466,588
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 1,409,166,629
Translation of assets and liabilities denominated in
foreign currencies 1,556,838
--------------
Net change 1,410,723,467
--------------
Net realized and unrealized gain 1,847,190,055
================================================================================
Net Increase in Net Assets Resulting from Operations $1,916,227,188
==============
See accompanying Notes to Financial Statements.
20 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended August 31, Year Ended
1997 1996(1) June 30, 1996
=====================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 69,037,133 $ 11,737,246 $ 52,326,689
- -----------------------------------------------------------------------------------------------------
Net realized gain 436,466,588 38,637,876 384,233,192
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation 1,410,723,467 (240,283,299) 352,369,554
-------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations 1,916,227,188 (189,908,177) 788,929,435
=====================================================================================================
Dividends and Distributions to Shareholders Dividends from net investment
income:
Class A (48,672,471) -- (40,531,298)
Class B (14,534,654) -- (11,334,670)
Class C (4,918,987) -- (5,305,754)
Class Y (39,313) -- --
- -----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (230,404,395) -- (7,115,385)
Class B (151,242,446) -- (3,165,821)
Class C (54,897,836) -- (1,650,409)
Class Y (67) -- --
=====================================================================================================
Capital Stock Transactions Net increase in net assets resulting from capital
stock transactions--Note 2:
Class A 576,537,290 98,647,005 790,272,185
Class B 898,948,324 169,401,905 986,624,829
Class C 114,188,051 27,973,044 178,504,196
Class Y 15,023,989 -- --
=====================================================================================================
Net Assets
Total increase 3,016,214,673 106,113,777 2,675,227,308
- -----------------------------------------------------------------------------------------------------
Beginning of period 5,795,368,472 5,689,254,695 3,014,027,387
-------------- -------------- --------------
End of period (including undistributed net
investment income of $17,874,940,
$17,097,695 and $1,372,571, respectively) $8,811,583,145 $5,795,368,472 $5,689,254,695
============== ============== ==============
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
See accompanying Notes to Financial Statements.
21 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------
Year Ended August 31, Year Ended June 30,
1997 1996(3) 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $27.95 $28.89 $24.07 $20.40 $19.88 $15.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .07 .40 .47 .37 .16
Net realized and unrealized
gain (loss) 7.91 (1.01) 4.93 3.66 2.50 6.65
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 8.30 (.94) 5.33 4.13 2.87 6.81
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.40) -- (.43) (.46) (.36) (.19)
Distributions from net
realized gain (1.98) -- (.08) -- -- (2.20)
Distributions in excess of gains -- -- -- -- (1.99) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (2.38) -- (.51) (.46) (2.35) (2.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.87 $27.95 $28.89 $24.07 $20.40 $19.88
====== ====== ====== ====== ====== ======
====================================================================================================================================
Total Return, at Net
Asset Value(5) 31.09% (3.25)% 22.26% 20.52% 14.34% 46.38%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $4,457 $3,143 $3,147 $1,924 $740 $58
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $3,857 $3,090 $2,516 $1,319 $270 $39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.29% 1.57%(6) 1.55% 2.31% 2.46% 1.02%
Expenses 0.94% 0.98%(6) 0.99% 1.07% 1.28% 1.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 61.7% 17.5% 92.6% 101.3% 199.4% 283.0%
Average brokerage
commission rate(8) $0.0604 $0.0590 $0.0571 -- -- --
</TABLE>
1. For the period from November 1, 1996 (inception of offering) to August 31,
1997. 2. For the period from December 1, 1993 (inception of offering) to June
30, 1994. 3. For the two months ended August 31, 1996. The Fund changed its
fiscal year end from June 30 to August 31. 4. For the period from October 1,
1994 (inception of offering) to June 30, 1995. 5. Assumes a hypothetical initial
investment on the business day before the first day of the fiscal period (or
inception of offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
22 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class B Class C Class Y
- -------------------------------------------------- -------------------------------------------------------- ---------
Period
Ended
Year Ended August 31, Year Ended June 30, Year Ended August 31, Year Ended June 30, Aug. 31,
1997 1997(3) 1996 1995(4) 1997 1996(3) 1996 1995 1994(2) 1997(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27.79 $28.77 $24.00 $21.49 $27.78 $28.75 $23.97 $20.33 $20.76 $29.55
- ------------------------------------------------------------------------------------------------------------------------------------
.17 .04 .23 .25 .16 .04 .21 .33 .13 .41
7.86 (1.02) 4.87 2.54 7.85 (1.01) 4.88 3.62 (.42) 6.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
8.03 (.98) 5.10 2.79 8.01 (.97) 5.09 3.95 (.29) 6.71
- ------------------------------------------------------------------------------------------------------------------------------------
(.18) -- (.25) (.28) (.17) -- (.23) (.31) (.14) (.34)
(1.98) -- (.08) -- (1.98) -- (.08) -- -- (1.98)
-- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(2.16) -- (.33) (.28) (2.15) -- (.31) (.31) (.14) (2.32)
- ------------------------------------------------------------------------------------------------------------------------------------
$33.66 $27.79 $28.77 $24.00 $33.64 $27.78 $28.75 $23.97 $20.33 $33.94
====== ========= ========== ========= ========= ========= ========== ========= ========= =========
====================================================================================================================================
30.12% (3.41)% 21.34% 13.15% 30.07% (3.37)% 21.35% 19.63% (0.97)% 23.98%
====================================================================================================================================
$3,308 $1,909 $1,800 $628 $1,030 $744 $741 $462 $170 $16
- ------------------------------------------------------------------------------------------------------------------------------------
$2,642 $1,818 $1,155 $249 $904 $730 $588 $325 $72 $5
- ------------------------------------------------------------------------------------------------------------------------------------
0.53% 0.82%(6) 0.74% 1.25%(6) 0.54% 0.82%(6) 0.80% 1.57% 1.86%(6) 1.58%(6)
1.69% 1.74%(6) 1.76% 1.89%(6) 1.69% 1.73%(6) 1.74% 1.82% 2.11%(6) 0.65%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
61.7% 17.5% 92.6% 101.3% 61.7% 17.5% 92.6% 101.3% 199.4% 61.7%
$0.0604 $0.0590 $0.0571 -- $0.0604 $0.0590 $0.0571 -- -- $0.0604
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $5,941,676,446 and $3,997,312,471, respectively. 8.
Total brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities. See accompanying Notes to Financial Statements.
23 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
Oppenheimer Main Street Income & Growth Fund (the Fund) is a separate series of
Oppenheimer Main Street Funds, Inc., an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek high total return (which includes current income
and capital appreciation in the value of its shares) from equity and debt
securities. The Fund's investment adviser is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B, Class C and Class Y shares. Class B
and Class C shares may be subject to a contingent deferred sales charge. All
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service plan,
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading date
if it is within the spread between the closing bid and asked prices. If the last
sale price is outside the spread, the closing bid is used.
24 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
25 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
During the period ended August 31, 1997, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1997, amounts have been reclassified to reflect a decrease in undistributed net
investment income of $94,463, an increase in accumulated net realized gain on
investments of $120,688, and a decrease in paid-in capital of $26,225.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
26 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
2. Capital Stock
The Fund has authorized 420 million shares of $.01 par value capital stock (200
million for Class A, 150 million for Class B, 50 million for Class C and 20
million for Class Y). Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Period Ended August 31,
Year Ended August 31, 1997(2) 1996(1) Year Ended June 30, 1996
----------------------------------- --------------------------------- -----------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 33,556,681 $1,034,114,167 7,371,957 $ 205,620,158 45,286,889 $1,228,619,819
Dividends and
distributions
reinvested 9,085,326 266,799,418 -- -- 1,659,231 45,287,552
Redeemed (23,475,410) (724,376,295) (3,858,492) (106,973,153) (17,949,894) (483,635,186)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 19,166,597 $ 576,537,290 3,513,465 $ 98,647,005 28,996,226 $ 790,272,185
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 34,495,825 $1,058,128,830 7,450,147 $ 206,982,201 40,869,800 $1,108,078,820
Dividends and
distributions
reinvested 5,396,671 157,340,936 -- -- 503,255 13,692,209
Redeemed (10,274,858) (316,521,442) (1,363,728) (37,580,296) (4,980,225) (135,146,200)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 29,617,638 $ 898,948,324 6,086,419 $ 169,401,905 36,392,830 $ 986,624,829
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 7,368,632 $ 225,510,151 1,781,668 $ 49,599,528 10,384,545 $ 281,240,862
Dividends and
distributions
reinvested 1,933,297 56,297,865 -- -- 238,379 6,449,836
Redeemed (5,469,271) (167,619,965) (783,587) (21,626,484) (4,094,549) (109,186,502)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 3,832,658 $ 114,188,051 998,081 $ 27,973,044 6,528,375 $ 178,504,196
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class Y:
Sold 530,156 $ 16,705,572 -- $ -- -- $ --
Dividends and
distributions
reinvested 1,199 39,301 -- -- -- --
Redeemed (52,509) (1,720,884) -- -- -- --
------------ -------------- ----------- -------------- ------------ --------------
Net increase 478,846 $ 15,023,989 -- $ -- -- $ --
============ ============== =========== ============== ============ ==============
</TABLE>
1. The Fund changed its fiscal year end from June 30 to August 31. 2. For the
year ended August 31, 1997 for Class A, Class B and Class C shares and for the
period from November 1, 1996 (inception of offering) to August 31, 1997 for
Class Y shares.
27 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Notes to Financial Statements (Continued)
3. Unrealized Gains and Losses on Investments
At August 31, 1997, net unrealized appreciation on investments of
$1,823,894,321 was composed of gross appreciation of $1,866,266,967, and gross
depreciation of $42,372,646.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.65% of the first
$200 million of net assets of the Fund, 0.60% of the next $150 million, 0.55% of
the next $150 million and 0.45% of net assets in excess of $500 million.
For the year ended August 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $25,549,129, of which
$6,761,014 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the Manager as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B and Class C shares totaled $38,556,921 and $2,094,866,
respectively, of which $1,206,092 and $48,602, respectively, was paid to an
affiliated broker/dealer. During the year ended August 31, 1997, OFDI received
contingent deferred sales charges of $5,230,649 and $227,950 upon redemption of
Class B and Class C shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended
August 31, 1997, OFDI paid $428,606 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
28 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to reimburse OFDI for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C shares,
as reimbursement for sales commissions paid from its own resources at the time
of sale and associated financing costs. OFDI also receives a service fee of
0.25% per year as reimbursement for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other financial
institutions. Both fees are computed on the average annual net assets of Class B
and Class C shares, determined as of the close of each regular business day.
During the year ended August 31, 1997, OFDI paid $74,879 and $135,581,
respectively, to an affiliated broker/dealer as reimbursement for Class B and
Class C personal service and maintenance expenses and retained $22,635,581 and
$2,838,009, respectively, as reimbursement for Class B and Class C sales
commissions and service fee advances, as well as financing costs. If either Plan
is terminated by the Fund, the Board of Directors may allow the Fund to continue
payments of the asset-based sales charge to OFDI for distributing shares before
the Plan was terminated. At August 31, 1997, OFDI had incurred unreimbursed
expenses of $92,083,482 for Class B and $7,962,219 for Class C.
================================================================================
5. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts to
gain exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Fund recognizes a realized gain or loss when the contract
is closed or expires.
29 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
5. Futures Contracts (continued)
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
At August 31, 1997, the Fund had outstanding futures contracts as
follows:
Expiration Number of Valuation as of Unrealized
Contracts to Purchase Date Contracts August 31, 1997 Depreciation
- --------------------------------------------------------------------------------
Standard & Poor's 500 9/18/97 78 $35,220,900 $717,600
30 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Appendix A
DESCRIPTION OF RATINGS
Ratings of Investments
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to 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 which are 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 risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are 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 sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade obligations, i.e.,
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 which are 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 not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated "B" generally lack characteristics of 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 which are rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor prospects
of ever retaining any real investment standing.
A-1
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Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an
extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated "D"
are in default and payment of interest and/or repayment of principal is in
arrears.
Description of Fitch Investors Service, Inc. Ratings
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
A-2
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B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity through the
life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery of these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD," "DD," or "D" categories.
Description of Duff & Phelps' Ratings
Long-Term Debt and Preferred Stock
AAA Highest credit quality. The risk factors are negligible, being only slightly
more than for risk-free US Treasury debt.
AA+, AA & AA- High credit quality protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A- Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB & BBB- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB- Below investment grade but deemed to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic
industry conditions, and/or with unfavorable company developments.
A-3
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DD Defaulted debt obligations issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arreages.
A-4
<PAGE>
Appendix B
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
B-1
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Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
Oppenheimer Main Street California Municipal Fund(R)
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated December 8, 1997
This Statement of Additional Information of Oppenheimer Main Street
California Municipal Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus dated
December 8, 1996. It should be read together with the Prospectus which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at
P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent at the
toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies...................................... 2
Investment Policies and Strategies................................. 2
Other Investment Techniques and Strategies......................... 10
Other Investment Restrictions...................................... 18
How the Fund is Managed ............................................... 19
Organization and History........................................... 19
Directors and Officers of the Corporation.......................... 20
The Manager and Its Affiliates..................................... 26
Brokerage Policies of the Fund......................................... 27
Performance of the Fund................................................ 29
Distribution and Service Plan.......................................... 34
About Your Account
How To Buy Shares...................................................... 35
How To Sell Shares..................................................... 42
How To Exchange Shares................................................. 46
Dividends, Capital Gains and Taxes..................................... 47
Additional Information About the Fund.................................. 49
Financial Information About the Fund
Independent Auditors' Report........................................... 50
Financial Statements................................................... 51
Appendix A: Description of Ratings..................................... A-1
Appendix B: Tax Equivalent Yield Table................................. B-1
Appendix C: Industry Classifications................................... C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies of the
Fund are discussed in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
invests, as well as the strategies the Fund may use to try to achieve its
objective. Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.
Municipal Securities. There are variations in Municipal Securities, both within
a particular classification and between classifications, depending on numerous
factors. The yields of Municipal Securities depend on, among other things,
general conditions of the Municipal Securities market, size of a particular
offering, the maturity of the obligation and rating of the issue. The market
value of Municipal Securities will vary as a result of changing evaluations of
the ability of their issuers to meet interest and principal payments, as well as
changes in the interest rates payable on new issues of Municipal Securities. The
market values may also be affected by changes in interest rates and market
fluctuations.
o Municipal Bonds. The principal classifications of long-term municipal
bonds in which the Fund may invest are "general obligation," "revenue" and
"industrial development" bonds. In California, municipal bonds may also be
funded by property taxes in specially created districts (Mello-Roos or Special
Assessment Bonds), tax allocations based on increased property tax assessments
over a specified period (frequently for redevelopment projects) or specified
redevelopment area sales allocations.
o General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
o Revenue Bonds. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities, or, in
some cases, the proceeds of a special excise or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security, including partially
or fully insured mortgages, rent subsidized and/or collateralized mortgages,
and/or the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without obligation)
to make up deficiencies in the debt service reserve fund.
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<PAGE>
o Industrial Development Bonds. Industrial development bonds, which are
considered municipal bonds if the interest paid is exempt from federal income
tax, are issued by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing, housing,
sports, and pollution control. These bonds are also used to finance public
facilities such as airports, mass transit systems, ports, and parking. The
payment of the principal and interest on such bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.
o Advance Refunding. The refinancing of outstanding bonds by the issuance
of a new issue of bonds prior to the date on which the outstanding bonds become
due or are callable is known as advance refunding. Accordingly, for a period of
time, both the issue being refunded and the refunding issue are outstanding.
Bonds are "escrowed to maturity" when the proceeds of the refunding bonds are
deposited in escrow for investment in federal securities in an amount sufficient
to pay, when due, the principal of and interest on the issue being refunded.
Bonds are considered "pre-refunded" when the refunding bond proceeds are
escrowed only until the call date of the refunded issue.
o Mello-Roos Bonds. Bonds issued pursuant to the California Mello-Roos
Community Facilities Act ("Mello-Roos bonds") are used to finance infrastructure
projects (such as roads or sewage treatment plants) and are primarily secured by
real estate taxes levied on property located in the same community as that
project. Mello-Roos bond financing arose in response to limitations contained in
California's statutory limitations on real property taxes (see "Special
Investment Considerations -- California Municipal Securities" below), and do not
constitute obligations of a municipality. Timely payment of such bonds depends
on the developer or other property owners' ability to pay their real estate
taxes, which could be adversely affected by a declining economy and/or real
estate market.
o Municipal Notes. Municipal Securities having a maturity when issued of
less than one year are generally known as municipal notes. Municipal notes
generally are used to provide for short-term working capital needs and include:
o Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use or
business taxes, and are payable from these specific future taxes.
o Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under the Federal revenue sharing programs.
o Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.
o Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration.
-3-
<PAGE>
o Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 397 days or less. It is issued by state and
local governments or their agencies to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term financing.
o Floating Rate/Variable Rate Obligations. The Fund may invest in
instruments with floating or variable interest rates. The interest rate on a
floating rate obligation is based on a stated prevailing market rate, such as a
bank's prime rate, the 91-day U.S. Treasury Bill rate, the rate of return on
commercial paper or bank certificates of deposit, or some other standard. The
rate on the investment is adjusted automatically each time the market rate is
adjusted. The interest rate on a variable rate obligation is also based on a
stated prevailing market rate but is adjusted automatically at a specified
interval of not less than one year. Some variable rate or floating rate
obligations in which the Fund may invest have a demand feature entitling the
holder to demand payment of an amount approximately equal to the amortized cost
of the instrument or the principal amount of the instrument plus accrued
interest at any time, or at specified intervals not exceeding one year. These
notes may or may not be backed by bank letters of credit.
Variable rate demand notes may include master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts in a note. The
amount may change daily without penalty, pursuant to direct arrangements between
the Fund, as the note purchaser, and the issuer of the note. The interest rates
on these notes fluctuate from time to time. The issuer of this type of
obligation normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the obligation plus
accrued interest. The issuer must give a specified number of days' notice to the
holders of those obligations. Generally, the changes in the interest rate on
those securities reduce the fluctuation in their market value. As interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations having the same maturity.
Because these types of obligations are direct lending arrangements between
the note purchaser and issuer of the note, these instruments generally will not
be traded. Generally, there is no established secondary market for these types
of obligations, although they are redeemable from the issuer at face value.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem them is dependent
on the ability of the note issuer to pay principal and interest on demand. These
types of obligations usually are not rated by credit rating agencies. The Fund
may invest in obligations that are not rated only if the Manager determines at
the time of investment that the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Manager, on behalf of the
Fund, will monitor the creditworthiness of the issuers of the floating and
variable rate obligations in the Fund's portfolio on an ongoing basis.
|X| Inverse Floaters and Other Derivative Investments. Some inverse
floaters have a feature known as an interest rate "cap" as part of the terms of
the investment. Investing in inverse floaters that have interest rate caps might
be part of a portfolio strategy to try to maintain a high current yield for the
Fund when the Fund has invested in inverse floaters that expose the Fund to the
risk of short-term interest rate fluctuation. Embedded caps hedge a portion of
the Fund's exposure to rising interest rates. When interest rates exceed the
pre-determined rate, the cap generates
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<PAGE>
additional cash flows that offset the decline in interest rates on the inverse
floater, and the hedge is successful. However, the Fund bears the risk that if
interest rates do not rise above the pre-determined rate, the cap (which is
purchased for additional cost) will not provide additional cash flows and will
expire worthless.
|X| Municipal Lease Obligations. From time to time the Fund may invest
more than 5% of its net assets in municipal lease obligations, generally through
the acquisition of certificates of participation, that the Manager has
determined to be liquid under guidelines set by the Board of Directors. Those
guidelines require the Manager to evaluate: (1) the frequency of trades and
price quotations for such securities; (2) the number of dealers or other
potential buyers willing to purchase or sell such securities; (3) the
availability of market-makers; and (4) the nature of the trades for such
securities. The Manager will also evaluate the likelihood of a continuing market
for such securities throughout the time they are held by the Fund and the credit
quality of the instrument. Municipal leases may take the form of a lease or an
installment purchase contract issued by a state or local government authority to
obtain funds to acquire a wide variety of equipment and facilities. Although
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate and
make the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis.
Projects financed with certificates of participation generally are not subject
to state constitutional debt limitations or other statutory requirements that
may be applicable to Municipal Securities. Payments by the public entity on the
obligation underlying the certificates are derived from available revenue
sources; such revenue may be diverted to the funding of other municipal service
projects. Payments of interest and/or principal with respect to the certificates
are not guaranteed and do not constitute an obligation of the State of
California or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease securities
do not yet have a highly developed market to provide the degree of liquidity of
conventional municipal bonds. Municipal leases, like other municipal debt
obligations, are subject to the risk of non-payment. The ability of issuers of
municipal leases to make timely lease payments may be adversely affected in
general economic downturns and as relative governmental cost burdens are
reallocated among federal, state and local governmental units. Such non-payment
would result in a reduction of income to the Fund, and could result in a
reduction in the value of the municipal lease experiencing non-payment and a
potential decrease in the net asset value of the Fund.
o Private Activity Municipal Securities. The Tax Reform Act of 1986 (the
"Tax Reform Act") reorganized, as well as amended, the rules governing tax
exemption for interest on Municipal Securities. The Tax Reform Act generally
does not change the tax treatment of bonds issued to finance governmental
operations. Thus, interest on obligations issued by or on behalf of state or
local governments, the proceeds of which are used to finance the operations of
such governments (e.g., general obligation bonds) continues to be tax-exempt.
However, the Tax Reform Act further limited the use of tax-exempt bonds for
non-governmental (private) purposes. More stringent restrictions were placed on
the use of proceeds of such bonds. Interest on certain private activity bonds
(other than those specified as "qualified" tax-exempt private activity bonds,
e.g., exempt facility bonds
-5-
<PAGE>
including certain industrial development bonds, qualified mortgage bonds,
qualified Section 501(c)(3) bonds, qualified student loan bonds, etc.) is
taxable under the revised rules.
Interest on certain private activity bonds issued after August 7, 1986,
which continues to be tax-exempt will be treated as a tax preference item
subject to the alternative minimum tax (discussed below) to which certain
taxpayers are subject. Furthermore, a private activity bond which would
otherwise be a qualified tax-exempt private activity bond will not, under
Internal Revenue Code Section 147(a), be a qualified bond for any period during
which it is held by a person who is a "substantial user" of the facilities or by
a "related person" of such a substantial user. This "substantial user" provision
is applicable primarily to exempt facility bonds, including industrial
development bonds. The Fund may not be an appropriate investment for entities
which are "substantial users" (or persons related thereto) of such exempt
facilities, and such persons should consult their own tax advisers before
purchasing shares. A "substantial user" of such facilities is defined generally
as a "non-exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be a
"related person" under the Internal Revenue Code unless such investor or the
investor's immediate family (spouse, brothers, sisters and immediate
descendants) own directly or indirectly in the aggregate more than 50% in value
of the equity of a corporation or partnership which is a "substantial user" of a
facility financed from the proceeds of exempt facility bonds. In addition,
limitations as to the amount of private activity bonds which each state may
issue were revised downward, which will reduce the supply of such bonds. The
value of the Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988 U.S.
Supreme Court decision upholding the constitutionality of the imposition of a
Federal tax on the interest earned on Municipal Securities issued in bearer
form.
A Municipal Security is treated as a taxable private activity bond under a
test for: (a) a trade or business use and security interest, or (b) a private
loan restriction. Under the trade or business use and security interest test, an
obligation is a private activity bond if: (i) more than 10% of bond proceeds are
used for private business purposes and (ii) 10% or more of the payment of
principal or interest on the issue is directly or indirectly derived from such
private use or is secured by the privately used property or the payments related
to the use of the property. For certain types of uses, a 5% threshold is
substituted for this 10% threshold. (The term "private business use" means any
direct or indirect use in a trade or business carried on by an individual or
entity other than a state or municipal governmental unit.) Under the private
loan restriction, the amount of bond proceeds which may be used to make private
loans is limited to the lesser of 5% or $5.0 million of the proceeds. Thus,
certain issues of Municipal Securities could lose their tax-exempt status
retroactively if the issuer fails to meet certain requirements as to the
expenditure of the proceeds of that issue or use of the bond-financed facility.
The Fund makes no independent investigation of the issuers of such bonds or
their use of proceeds. Should the Fund hold a bond that loses its tax-exempt
status retroactively, there might be an adjustment to the tax-exempt income
previously paid to shareholders.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is accomplished
in part by including in taxable income certain tax preference items in arriving
at alternative minimum taxable income. The Tax Reform Act, which makes
tax-exempt interest from certain private activity bonds a tax preference item
for purposes of the alternative minimum tax, specifically states that any
exempt-interest dividend paid by a regulated investment company will be treated
as interest on a specific private activity bond to the extent of its
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<PAGE>
proportionate share of the interest on such bonds received by the regulated
investment company. The Treasury is authorized to issue regulations implementing
this provision. The Fund may hold Municipal Securities the interest on which
(and thus a proportionate share of the exempt-interest dividends paid by the
Fund) will be subject to the Federal alternative minimum tax. In addition,
corporate taxpayers subject to the alternative minimum tax may, under some
circumstances, have to include exempt-interest dividends in calculating their
alternative minimum taxable income in situations where the "adjusted current
earnings" of the corporation exceeds its alternative minimum taxable income.
o Ratings of Municipal Securities. Ratings by Moody's, S&P, Duff & Phelps
and Fitch (see Appendix A) represent their respective opinions of the quality of
the Municipal Securities they undertake to rate. However, such ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different yields,
while Municipal Securities of the same maturity and coupon with different
ratings may have the same yield. Investment in lower quality securities may
produce a higher yield than securities rated in the higher rating categories
described in the Prospectus (or judged by the Manager to be of comparable
quality). However, the added risk of lower quality securities might not be
consistent with a policy of preservation of capital.
Subsequent to its purchase by the Fund, a Municipal Security may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event requires the Fund to sell the security, but the Manager
will consider such events in determining whether the Fund should continue to
hold the security. To the extent that ratings given by Moody's, S&P, Duff &
Phelps or Fitch change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the Fund's investment policies.
Special Investment Considerations - California Municipal Securities. As stated
in the Prospectus, the values of the Fund's California Municipal Securities are
highly sensitive to the fiscal stability of California and its subdivisions,
agencies, instrumentalities or authorities, which issue the Municipal Securities
in which the Trust concentrates its investments. Certain amendments to the
California State constitution, legislative measures, executive orders, civil
actions and voter initiatives in recent years that could adversely affect the
ability of California issuers to pay interest and principal on Municipal
Securities are described below. The following constitutes only a brief summary,
and is based on information drawn from the relevant statutes and certain other
publicly available information. The Fund has not independently verified such
information.
Changes in California constitutional and other laws during the last
several years have caused concerns about the ability of California state and
municipal issuers to obtain sufficient revenue to pay their bond obligations. In
1978, California voters approved an amendment to the California Constitution
known as Proposition 13, which added Article XIIIA to the California
Constitution. Article XIIIA limits ad valorem taxes on real property and
restricts the ability of taxing entities to increase real property taxes.
However, legislation passed subsequent to Proposition 13 provided for the
redistribution of California's General Fund surplus to local agencies, the
reallocation of revenues to local agencies and the assumption of certain local
obligations by the state so as to help California municipal issuers raise
revenue to pay their bond obligations. It is unknown whether additional
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revenue redistribution legislation will be enacted in the future and whether, if
enacted, such legislation will provide sufficient revenue for such California
issuers to pay their obligations.
The state is also subject to another constitutional amendment, Article
XIIIB, which may have an adverse impact on California state and municipal
issuers. Article XIIIB restricts the state from spending certain appropriations
in excess of an appropriations limit imposed for each state and local government
entity. If revenues exceed such appropriations limit, such revenues must be
returned either as revisions in the tax rates or fee schedules. In 1988,
California voters approved an initiative known as Proposition 98, which in
addition to amending Article XIIIB, amended Article XVI to require a minimum
level of funding for public schools and community colleges.
In 1986, California voters approved an initiative known as Proposition 62,
which, among other things, requires that any tax for general governmental
purposes imposed by a local government be approved by a two-thirds vote of the
governmental entity's legislative body and by a majority of its electorate and
that any special tax imposed by a local government be approved by a two-thirds
vote of the electorate. In September 1995 the California Supreme Court upheld
the constitutionality of Proposition 62, creating uncertainty as to the legality
of certain local taxes enacted by non-charter cities in California without voter
approval. It is not possible to predict the impact of the decision.
In November 1996, California voters approved Proposition 218. The
initiative applied the provisions of Proposition 62 to all entities, including
charter cities. It requires that all taxes for general purposes obtain a simple
majority popular vote and that taxes for special purposes obtain a two-thirds
majority vote. Prior to the effectiveness of Proposition 218, charter cities
could levy certain taxes such as transient occupancy taxes and utility user's
taxes without a popular vote. Proposition 218 will also limit the authority of
local governments to impose property-related assessments, fees and charges,
requiring that such assessments be limited to the special benefit conferred and
prohibiting their use for general governmental services. Proposition 218 also
allows voters to use their initiative power to reduce or repeal
previously-authorized taxes, assessments, fees and charges.
Because of the uncertain impact of the aforementioned legislation, the
possible inconsistencies in the respective terms of the statutes and the
impossibility of predicting the level of future appropriations and applicability
of related statutes to such questions, it is not currently possible to assess
the impact of such legislation and policies on the long term ability of the
State of California and California municipal issuers to pay interest or repay
principal on their obligations.
In addition, certain tax-exempt securities in which the Fund may invest
may be obligations payable solely from the revenues of specific institutions, or
may be secured by specific properties, which are subject to provisions of
California law that could adversely affect the holders of such obligations. For
example, the revenues of California health care institutions may be subject to
state laws, and California law limits the remedies of a creditor secured by a
mortgage or deed of trust on real property.
California's economic recovery from the recent recession is continuing at
a strong pace, and recent economic reports indicate that California is on a
stronger economic upturn than the rest of the country. The rate of economic
growth in California in 1996, in terms of job gains, exceeded that of
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the rest of the United States. The State added nearly 350,000 jobs during 1996,
surpassing its pre-recession employment peak of 12.7 million jobs. Another
380,000 jobs are expected to be created in 1997. The unemployment rate, while
still higher than the national average, fell to the low 6 percent range in
mid-1997, compared to over 10 percent during the recession. Many of the new jobs
were created in such industries as computer services, software design, motion
pictures and high technology manufacturing. Business services, export trade and
other manufacturing also experienced growth. All major economic regions of the
State grew, with particular large gains in the Silicon Valley region of Northern
California.
On August 18, 1997, the Governor signed the 1997-98 Budget Act, which
provides for General Fund and Special Fund expenditures of approximately $67.2
billion and projects a 97-98 fiscal year end reserve of $112 million. For the
second year in a row, the State budget contains a large increase in funding for
K-14 education, reflecting strong revenues which have exceeded initial budgeted
amounts. The Budget Act reflects a $1.235 billion pension case judgment payment,
and returns funding of the State's pension contribution to the quarterly basis
existing prior to the deferral actions invalidated by the courts. Because of the
effect of the pension payment, most other State programs were continued at
1996-97 levels. Health and welfare costs are contained, continuing generally the
grant levels from prior years, as part of the initial implementation of the new
CalWORKS welfare reform program. Unlike prior years, this Budget Act does not
depend on uncertain federal budget actions. About $300 million in federal funds,
already included in the federal FY 1997 and 1998 budgets, are included in the
Budget Act to offset incarceration costs for illegal immigrants. The Budget Act
contains no tax increases and no tax reductions. The Renters Tax Credit was
suspended for another year, saving approximately $500 million.
After enactment of the Budget Act, and prior to the end of the Legislative
Session, the Legislature and the Governor reached certain agreements related to
State expenditures and taxes. Legislation signed by the Governor includes a
variety of phased-in tax cuts, conformity with certain provisions of the federal
tax reform law passed earlier this year, and reform of funding for county trial
courts, with the State to assume greater financial responsibility.
Because of the State of California's continuing budget problems, the
state's General Obligation bonds were downgraded in July 1994 from Aa to A1 by
Moody's, from A+ to A by S&P and from AA to A by Fitch. All three rating
agencies expressed uncertainty in the state's ability to balance its budget by
1996. However, in 1996, citing California's improving economy and budget
situation, both Fitch and Standard & Poor's raised their ratings from A to A+.
Prior to California's October 8 sale of $1 billion in General Obligation Bonds
Fitch Investors Service raised California's General Obligation Bond rating from
A+ to AA-, Moody's Investors Service and Standard & Poors did not raise their
ratings, confirming those at A1 and A+, respectively.
On December 6, 1994, Orange County (California) became the largest
municipality in the United States to file for protection under the Federal
bankruptcy laws. The filing stemmed from approximately $1.7 billion in losses
suffered by the County's investment pool due to investments in high risk
"derivative" securities. In September 1995 the state legislature approved
legislation permitting Orange County to use for bankruptcy recovery $820 million
over 20 years in sales taxes previously earmarked for highways, transit and
development. In June 1996 the County completed an $880 million bond offering
secured by real property owned by the County. On June 12, 1996, the
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County emerged from bankruptcy. On January 7, 1997, Orange County returned to
the municipal bond market with a $136 million bond issue maturing in 13 years at
an insured yield of 7.23 percent
Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the county's long-term
bonds was downgraded for the third time since 1992 as a result of, among other
things, severe operating deficits for the county's health care system. In
addition, the County was affected by an ongoing loss of revenue caused by state
property tax shift initiatives in 1993 through 1995. In June, 1997, the Los
Angeles County Board of Supervisors approved an approximate $12 billion 1997-98
budget containing measures to eliminate a $157 million deficit. The County's
budgetary difficulties have continued and their effect, as well as the effect of
the improving California economy, on the 1997-98 budget is still uncertain.
Other Investment Techniques and Strategies
o When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may invest in securities on a "when-issued" or "delayed
delivery" basis. Payment for and delivery of the securities generally shall not
exceed 120 days from the date the offer is accepted. The purchase price and
yield are fixed at the time the buyer enters into the commitment. 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. However, the
Fund intends to be as fully invested as possible and will not invest in
when-issued securities if its income or net asset value will be materially
adversely affected. At the time the Fund makes the commitment to purchase a
Municipal Security on a when-issued basis, it will record the transaction on its
books and reflect the value of the security in determining its net asset value.
It will also segregate cash or other high quality liquid Municipal Securities
equal in value to the commitment for the when-issued securities. While
when-issued securities may be sold prior to settlement date, the Fund intends to
acquire the securities upon settlement unless a prior sale appears desirable for
investment reasons. There is a risk that the yield available in the market when
delivery occurs may be higher than the yield on the security acquired.
o Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated redemptions, or
pending the investment of the proceeds from sales of Fund shares, or pending the
settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-on
future date. An "approved vendor" is a U.S. commercial bank or the U.S. branch
of a foreign bank or a broker-dealer which has been designated a primary dealer
in government securities, which must meet credit requirements set by the
Corporation's Board of Directors from time to time. 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. The majority
of these transactions run from day to day, and delivery pursuant to the resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the value
of the collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially sound
and will continuously
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monitor the collateral's value.
o Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the Fund
may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid.
|X| Puts and Standby Commitments. When the Fund buys Municipal Securities,
it may obtain a standby commitment to repurchase the securities that entitles it
to achieve same-day settlement from the purchaser and to receive an exercise
price equal to the amortized cost of the underlying security plus accrued
interest, if any, at the time of exercise. A put purchased in conjunction with a
Municipal Security enables the Fund to sell the underlying security within a
specified period of time at a fixed exercise price. The Fund may pay for a
standby commitment or put either separately in cash or by paying a higher price
for the securities acquired subject to the standby commitment or put. The Fund
will enter into these transactions only with banks and dealers which, in the
Manager's opinion, present minimal credit risks. The Fund's ability to exercise
a put or standby commitment will depend on the ability of the bank or dealer to
pay for the securities if the put or standby commitment is exercised. If the
bank or dealer should default on its obligation, the Fund might not be able to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. Puts and standby commitments are not transferrable by the Fund, and
therefore terminate if the Fund sells the underlying security to a third party.
The Fund intends to enter into these arrangements to facilitate portfolio
liquidity, although such arrangements may enable the Fund to sell a security at
a pre-arranged price which may be higher than the prevailing market price at the
time the put or standby commitment is exercised. However, the Fund might refrain
from exercising a put or standby commitment if the exercise price is
significantly higher than the prevailing market price, to avoid imposing a loss
on the seller which could jeopardize the Fund's business relationships with the
seller. Any consideration paid by the Fund for the put or standby commitment
(which increases the cost of the security and reduces the yield otherwise
available from the security) will be reflected on the Fund's books as unrealized
depreciation while the put or standby commitment is held, and a realized gain or
loss when the put or commitment is exercised or expires. Interest income
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received by the Fund from Municipal Securities subject to puts or stand-by
commitments may not qualify as tax exempt in its hands if the terms of the put
or stand-by commitment cause the Fund not to be treated as the tax owner of the
underlying Municipal Securities.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the loaned
securities and must consist of cash, bank letters of credit or securities of the
U.S. Government (or its agencies or instrumentalities). To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. When it lends securities, the Fund
receives amounts equal to the dividends or interest on loaned securities and
also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on 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. 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.
o Portfolio Turnover. The Fund may purchase or sell Municipal Securities
without regard to the length of time the security has been held, to take
advantage of short-term differentials in yields consistent with the Fund's
investment objective. While short-term trading increases portfolio turnover, the
execution cost for such securities is substantially less than for equivalent
dollar values of equity securities.
o Hedging. The Fund may use hedging instruments for the purposes
described in the Prospectus. When hedging to attempt to protect against declines
in the market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have appreciated, or
to facilitate selling securities for investment reasons, the Fund may: (1) sell
Interest Rate Futures or Municipal Bond Index Futures, (2) buy puts on such
Futures or securities, or (3) write covered calls on securities, Interest Rate
Futures or Municipal Bond Index Futures (as described in the Prospectus).
Covered calls may also be written on debt securities to attempt to increase the
Fund's income. When hedging to permit the Fund to establish a position in the
debt securities market as a temporary substitute for purchasing individual debt
securities (which the Fund will normally purchase, and then terminate that
hedging position), the Fund may: (1) buy Interest Rate Futures or Municipal Bond
Index Futures, or (2) buy calls or write puts 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 investment activities in the underlying cash market. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated, but which may be developed, to the extent such
investment methods are consistent with the Fund's investment objective and are
legally permissible and disclosed in the Prospectus. Additional information
about the hedging instruments the Fund may use is provided below.
o Writing Covered Call Options. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on a security, it receives
a premium and agrees to sell the
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underlying investment to a purchaser of a corresponding call during the call
period (usually not more than nine months) at a fixed exercise price (which may
differ from the market price of the underlying investment) regardless of market
price changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium received on the call the Fund has written is
more or less than the price of the call the Fund subsequently purchased. A
profit may also be realized if the call lapses unexercised, because the Fund
retains the related investments and the premium received. Any such profits are
considered short-term capital gains for Federal income tax purposes, and when
distributed by the Fund are taxable as ordinary income. An option position may
be closed out only on a market which provides secondary trading for options of
the same series, and there is no assurance that a liquid secondary market will
exist for any particular option. If the Fund could not effect a closing purchase
transaction due to a lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures contract
or deliverable securities, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar value of
liquid assets. The Fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the Future. In no
circumstances would an exercise notice as to that Future put the Fund in a short
futures position.
o Writing Put Options. 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. The Fund will not write puts if,
as a result, more than 25% of the Fund's net assets would be required to be
segregated to cover such put options. Writing a put covered by segregated liquid
assets equal to the exercise price of the put has the same economic effect to
the Fund as writing a covered call. The premium the Fund receives from writing a
put option represents a profit, as long as the price of the underlying
investment remains equal to or above the exercise price. However, the Fund has
also assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though the
value of the investment may fall below the exercise price less transaction costs
incurred. If the put expires unexercised, the Fund (as the writer of the put)
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
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, the Fund
may incur a loss, 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 incurred.
When writing put options on securities, to secure its obligation to pay
for the underlying security, the Fund will deposit in escrow liquid assets with
a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore foregoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against payment
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of the exercise price. The Fund has no control over when it may be required to
purchase the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing a put of the
same series as that previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase transaction.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
Municipal Bond Index Futures, has the right to buy the underlying investment
from a seller of a corresponding call on the same investment during the call
period at a fixed exercise price. In purchasing a call, the Fund benefits only
if the call is sold at a profit or if, during the call period, the market price
of the underlying investment is above the sum of the call price plus the
transaction costs and premium paid for the call, and the call is exercised. If
the call is not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium payment and
the right to purchase the underlying investment. When the Fund purchases a call
or put on a municipal bond index, Municipal Bond Index Future or Interest Rate
Future, it pays a premium, but settlement is in cash rather than by delivery of
the underlying investment to the Fund. Gain or loss depends on changes in the
index in question (and thus on price movements in the debt securities market
generally) rather than on price movements in individual futures contracts.
When the Fund purchases a put, it pays a premium and, except as to puts on
municipal bond indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period at a
fixed exercise price. Buying a put on a debt security, Interest Rate Future or
Municipal Bond Index Future the Fund owns enables the Fund to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date and the Fund will lose its premium payment and the right to sell
the underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
o Interest Rate Futures. The Fund may buy and sell futures contracts
relating to debt securities ("Interest Rate Futures") and municipal bond indices
("Municipal Bond Index Futures," discussed below). No price is paid or received
upon the purchase or sale of an Interest Rate Future. An Interest Rate Future
obligates the seller to deliver and the purchaser to take a specific type of
debt security or cash to settle the futures transaction, or to enter into an
offsetting contract. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment in cash or U.S. Treasury bills,
with the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account registered in
the futures broker's name; however, the futures broker can gain access to that
account only under certain specified conditions. As the Future is marked to
market to reflect changes in its market value, (that is, its value on the Fund's
books is changed) subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect to
close out its position
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by taking an opposite position at which time a final determination of variation
margin is made and additional cash is required to be paid by or released to the
Fund. Any gain or loss is then realized by the Fund on the Future for tax
purposes. Although Interest Rate Futures by their terms call for settlement by
the delivery of debt securities, in most cases the obligation is fulfilled
without such delivery by entering into an offsetting transaction. All futures
transactions are effected through a clearing house associated with the exchange
on which the contracts are traded.
o Municipal Bond Index Futures. A "municipal bond index" assigns relative
values to the municipal bonds included in that index, and is used to serve as
the basis for trading long-term municipal bond futures contracts. Municipal Bond
Index Futures are similar to Interest Rate Futures except that settlement is
made in cash. No physical delivery is made of the underlying bonds in the index.
The obligation under such contracts may also be satisfied by entering into an
offsetting contract to close out the futures position. Net gain or loss on
options on Municipal Bond Index Futures depends on the price movements of the
securities included in the index. The strategies which the Fund employs
regarding Municipal Bond Index Futures are similar to those described above with
regard to Interest Rate Futures.
o Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the Fund
and that counterparty under the master agreement shall be regarded as parts of
an integral agreement. If on any date amounts are payable in the same currency
in respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with respect
to each swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as
"aggregation." The Fund will not invest more than 25% of its total assets in
interest rate swap transactions.
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written options
traded on exchanges, or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into a
closing purchase transaction. Call writing affects the Fund's turnover rate and
the brokerage commissions it pays. Commissions are payable on writing or
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purchasing a call.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer, which
would establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option. This formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security
("in-the-money"). For any OTC option a Fund writes, it will treat as illiquid
(for purposes of the restriction on illiquid securities, stated in the
Prospectus) the mark-to-market value of any OTC option held by it, unless
subject to a buy-back agreement with the selling broker. The SEC is evaluating
the general issue of whether or not OTC options should be considered as liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
An option position may be closed out only in a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by the Fund may cause the Fund to sell related
portfolio securities, thus increasing its turnover rate in a manner beyond the
Fund's control. The exercise by the Fund of puts on securities or Futures may
cause the sale of related investments, also increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might cause
the Fund to sell the underlying investment for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each time it
buys or sells a call, buys a put or an underlying investment in connection with
the exercise of a put or call. Such commissions may be higher, on a relative
basis, than those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of such investments and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options could
result in the Fund's net asset value being more sensitive to changes in the
value of the underlying investment.
o Regulatory Aspects of Hedging Instruments. The Fund must operate within
certain guidelines and restrictions as to its long and short positions in
Futures and options thereon under a rule ("CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC") under the Commodity Exchange Act (the
"CEA"), which excludes the Fund from registration with the CFTC as a "commodity
pool operator" (as defined under the CEA), if it complies with the CFTC Rule.
The Rule does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging position.
However, under the Rule the Fund must limit its aggregate initial futures margin
and related option premiums to 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 also must, as to its short positions, use
Futures and options thereon solely for bona fide hedging purposes within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations established
by each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or
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more different exchanges or through one or more brokers. Thus, the number of
options which the Fund may write or hold may be affected by options written or
held by other entities, including other investment companies having the same
adviser as the Fund or an affiliated investment adviser. Position limits also
apply to Futures. An exchange may order the liquidation of positions found to be
in violation of these limits and may impose certain other sanctions. Due to
requirements under the Investment Company Act, when the Fund purchases an
Interest Rate Future or Municipal Bond Index Future, the Fund will maintain, in
a segregated account or accounts with its Custodian, liquid assets of any type
including equity and debt securities of any grade in an amount equal to the
market value of the investments underlying such Future, less the margin deposit
applicable to it.
o Risks of Hedging with Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by: (i) selling Futures or (ii) purchasing puts on broadly-based indices
or Futures to attempt to protect against declines in the value of the Fund's
portfolio securities, that the prices of such Futures or the applicable index
will correlate imperfectly with the behavior of the cash (i.e., market value)
prices of the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions, due to differences in the
natures of those markets. First, all participants in the futures 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 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 may use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged if the historical
volatility of the prices of such portfolio securities being hedged is more than
the historical volatility of the applicable index. It is also possible that
where the Fund has used hedging instruments in a short hedge, the market may
advance and the value of portfolio securities held in the Fund's portfolio may
decline. If this occurred, the Fund would lose money on the hedging instruments
and also experience a decline in value in its 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.
If the Fund uses 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
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calls on such Futures, broadly-based indices, or on securities, it is possible
that the market may decline. If the Fund then concludes not to invest in
securities at that time because of concerns as to possible further market
decline or for other reasons, it will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the securities purchased. In
the future, the Fund may employ hedging instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, are legally
permissible and are adequately disclosed.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objective cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
majority vote is defined as the vote of the holders of the lesser of: (1) 67% or
more of the shares present or represented by proxy at such a shareholder
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (2) more than 50% of the outstanding shares.
Under these additional restrictions:
o The Fund cannot invest in interests in oil or gas exploration or
development programs or in commodities; however, the Fund may buy and sell any
of the Hedging Instruments that it may use as permitted by any of its other
policies, whether or not such Hedging Instrument is considered to be a commodity
or commodity contract;
o The Fund cannot invest in real estate or in interests in real estate;
however, the Fund may purchase securities of issuers holding real estate or
interests therein (including securities of real estate investment trusts);
o The Fund cannot purchase securities on margin; however, the Fund may
make margin deposits in connection with the use of Hedging Instruments as
permitted by any of its other policies;
o The Fund cannot invest in companies for the purpose of acquiring
control or management thereof;
o The Fund cannot underwrite securities of other companies, except insofar
as it might be deemed to be an underwriter for purposes of the Securities Act of
1933 in the resale of any securities held in its own portfolio;
o The Fund cannot invest or hold securities of any issuer if those
officers and directors of the Corporation or its adviser owning individually
more than 1/2 of 1% of the securities of such issuer together own more than 5%
of the securities of such issuer;
o The Fund cannot invest in other open-end investment companies, or invest
more than 5% of its net assets through open market purchases in closed-end
investment companies, including small
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<PAGE>
business investment companies, nor make any such investments at commission rates
in excess of normal brokerage commissions; or
o The Fund cannot pledge, mortgage or otherwise encumber, transfer or
assign any of its assets to secure a debt; collateral arrangements for premium
and margin payments in connection with Hedging Instruments are not deemed to be
a pledge of assets.
o Diversification. For purposes of diversification under the Investment
Company Act, and the restriction on investing in any "issuer" above, the
identification of the issuer of a Municipal Security depends on the terms and
conditions of the security. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the security is backed only
by the assets and revenues of the subdivision, such subdivision would be deemed
to be the sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the nongovernmental
user, then such nongovernmental user would be deemed to be the sole issuer.
However, if in either case the creating government or some other entity
guarantees the security, such guarantee would be considered a separate security
and is to be treated as an issue of such government or other entity.
In applying the Fund's policy not to concentrate its investments,
described in the Prospectus, the Manager will consider a nongovernmental user of
facilities financed by industrial development bonds as being in a particular
industry, despite the fact that such bonds are Municipal Securities as to which
there is no industry concentration limitation. Although this application of the
restriction is not technically a fundamental policy of the Fund, it will not be
changed without shareholder approval. Should any such change be made, the
Prospectus and/or this Additional Statement will be supplemented to reflect such
change.
For purposes of the Fund's policy not to concentrate its assets described
in the Prospectus, the Fund has adopted the industry classifications set forth
in Appendix C to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. Oppenheimer Main Street California Municipal Fund
(referred to as the "Fund") is one of two series of Oppenheimer Main Street
Funds, Inc. (the "Corporation"), a Maryland corporation. This Statement of
Additional Information may be used with the Fund's Prospectus only to offer
shares of the Fund.
Each share of the Fund represents an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitle the
holder to one vote per share (and a fractional vote for a fractional share) on
matters submitted to their vote at a shareholders' meeting. Shareholders of the
Fund and of the Corporation's other series vote together in the aggregate on
certain matters at shareholders' meetings, such as the election of Directors and
ratification of appointment of auditors of the Corporation. Shareholders of a
particular series or class vote
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<PAGE>
separately on proposals which affect that series or class, and shareholders of a
series or class which is not affected by that matter are not entitled to vote on
the proposal. For example, only shareholders of a series, such as the Fund, vote
exclusively on any material amendment to the investment advisory agreement with
respect to the series. Only shareholders of a class of a series vote on certain
amendments to the Distribution and/or Service Plans if the amendments affect
that class.
The Directors are authorized to create new series and classes of shares.
The Directors may reclassify unissued shares of the Corporation or its series or
classes into additional series or classes of shares. The Directors may also
divide or combine the shares of a class into a greater or lesser number of
shares without thereby 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.
It is not contemplated that regular annual shareholder meetings will be
held. The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law, or when a shareholder meeting is called by
the Directors or upon proper request of the shareholders. A meeting of
shareholders will be called for a specific purpose (which may include removal of
a Director) upon the written request of the record holders of at least 25% of
the outstanding shares eligible to be voted at that meeting. The Fund has
undertaken that it will then either give the applicants access to the Fund's
shareholder list or mail the applicants' communication to all other shareholders
at the applicants' expense.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. All of the Directors are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer
Equity Income Fund, Oppenheimer Cash Reserves, Oppenheimer Real Asset Fund,
Oppenheimer Strategic Income Fund, Centennial America Fund, L.P., The New York
Tax-Exempt Income Fund, Inc., Oppenheimer Variable Account Funds, Oppenheimer
Champion Income Fund, Oppenheimer International Bond Fund, Oppenheimer Integrity
Funds, Oppenheimer Limited-Term Government Fund, Oppenheimer Municipal Fund,
Panorama Series Fund, Inc., Centennial Money Market Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California Tax Exempt
Trust, The New York Tax Exempt Fund, Inc. and Centennial Tax Exempt Trust (all
of the foregoing funds are collectively referred to as the "Denver-based
Oppenheimer funds") except for Ms. Macaskill, who is a Trustee, Director or
Managing General Partner of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Panorama Series Fund, Inc., Oppenheimer Strategic
Income Fund and Oppenheimer Variable Account Funds. In addition, Mr. Fossel is
not a Trustee of Centennial New York Tax-Exempt Trust or a Managing General
Partner of Centennial America Fund, L.P. Messrs. Bishop, Bowen, Donohue, Farrar
and Zack hold similar positions as officers of all such funds. Ms. Macaskill is
President and Mr. Swain is Chairman and Chief Executive Officer of the
Denver-based Oppenheimer funds. As of November 21, 1997, the Directors and
officers of the Fund as a group owned less than 1% of its outstanding shares,
not including shares held of record by an employee benefit plan of the Manager
(for which two of the officers listed below, Ms. Macaskill and Mr. Donohue, are
Trustees) other than shares beneficially owned under that plan by the officers
of the Fund listed above.
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<PAGE>
Robert G. Avis, Director*; Age 66 One North Jefferson Ave., St. Louis,
Missouri, 63103 Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-
dealer) and A.G.Edwards, Inc. (its parent holding company); Chairman
of A.G.E. Asset Management and A.G. Edwards Trust Company (its
affiliated investment adviser and trust company, respectively).
William A. Baker, Director; Age 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Director; Age 67 1501 Quail Street, Newport Beach, CA
92660 Chairman and CEO of Universal Space Lines, Inc. (a space
services management company); formerly Vice President of McDonnell
Douglas Space Systems Co. and associated with the National Aeronautics
and Space Administration.
Jon S. Fossel, Director+; Age 55
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a
national trade association of investment companies), Chairman of the
Investment Company Institute Education Foundation; formerly Chairman and a
director of the Manager, President and a director of Oppenheimer
Acquisition Corp. ("OAC"), the Manager's parent holding company, and
Shareholder Services, Inc. ("SSI") and Shareholder Financial Services,
Inc.
("SFSI"), transfer agent subsidiaries of the Manager.
Sam Freedman, Director; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of SSI,
Chairman, Chief Executive and Officer and director of SFSI, Vice President
and director of OAC and a director of OppenheimerFunds, Inc.
- ------------------------
* A Director who is an "interested person" of the Fund.
+ Not a Trustee of Centennial New York Tax-Exempt Trust nor a managing General
Partner ofCentennial America Fund, L.P.
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<PAGE>
Raymond J. Kalinowski, Director; Age 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company).
C. Howard Kast, Director; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Director; Age 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Director*#; Age: 49
Two World Trade Center, New York, New York 10048
President (since June 1991), Chief Executive Officer (since September
1995) and a Director (since December 1994) of the Manager; President and
director (since June 1991) of HarbourView; Chairman and a director of SSI
(since August 1994), and SFSI (since September 1995); President (since
September 1995) and a director (since October 1990) of OAC; President
(since September 1995) and a director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of the Manager; a
director of Oppenheimer Real Asset Management, Inc. (since July 1996);
President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund manager subsidiary of the Manager
("OFIL") and Oppenheimer Millennium Funds plc (since October 1997);
President and a director of other Oppenheimer funds; a director of the
NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
Ned M. Steel, Director; Age 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
- ------------------------
* A Director who is an "interested person" of the Fund.
# Not a Trustee of Oppenheimer Strategic Income Fund, Oppenheimer Variable
Account Funds, Oppenheimer Integrity Funds, Panorama Series Fund, Inc.,
Centennial New York Tax-Exempt Trust nor a Managing General Partner of
Centennial America Fund, L.P.
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<PAGE>
James C. Swain, Chairman, Chief Executive Officer and Director*; Age 63
6803 South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the
Manager (since September 1988); formerly President and a director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"), and Chairman of the Board of SSI.
Jerry A. Webman, Vice President and Portfolio Manager; Age: 47
Senior Vice President of the Manager; an officer of other Oppenheimer
funds; previously a Managing Director with Prudential Mutual Funds --
Investment Management, Inc.
Andrew J. Donohue, Vice President and Secretary; Age 47
Two World Trade Center, New York, New York 10048
Executive Vice President (since January 1993), General Counsel (since
October 1991) and a Director (since September 1995) of the Manager;
Executive Vice President (since September 1993), and a director (since
January 1992) of the Distributor; Executive Vice President, General
Counsel and a director of HarbourView, SSI, SFSI and Oppenheimer
Partnership Holdings, Inc. (since September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since December 1995); President and a
director of Centennial (since September 1995); President and a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); General Counsel
(since May 1996) and Secretary (since April 1997) of OAC; Vice President
of OFIL and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age 61
6803 South Tucson Way, Englewood, Colorado 80112 Senior Vice President
(since September 1987) and Treasurer (since March 1985) of the Manager;
Vice President (since June 1983) and Treasurer (since March 1985) of the
Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of
Centennial; President, Treasurer and a director of Centennial Capital
Corporation (since June 1989); Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of SSI; Vice President, Treasurer
and Secretary of SFSI (since November 1989); Treasurer of OAC (since June
1990); Treasurer of Oppenheimer Partnership Holdings, Inc. (since November
1989); Vice President and Treasurer of Oppenheimer Real Asset Management,
Inc. (since July 1996); Chief Executive Officer, Treasurer and a director
of MultiSource Services, Inc., a broker-dealer (since December 1995); an
officer of other Oppenheimer funds.
- ------------------------
* A Director who is an "interested person" of the Fund.
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<PAGE>
Robert J. Bishop, Assistant Treasurer; Age 38
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 Farrar, Assistant Treasurer; Age 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Manager/Mutual Fund Accounting (April 1994-May 1996), and
a Fund Controller for the Manager.
Robert G. Zack, Assistant Secretary; Age 49
Two World Trade Center, New York, New York 10048
Senior Vice President (since May 1985) and Associate General Counsel
(since May 1981) of the Manager, Assistant Secretary of SSI (since May
1985), and SFSI (since November 1989); Assistant Secretary of Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
o Remuneration of Directors. The officers of the Fund and certain
Directors of the Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the
Manager, receive no salary or fee from the Fund. Mr. Fossel did not receive any
salary or fees from the Fund prior to January 1, 1997. The remaining Directors
of the Fund received the compensation shown below. Mr. Freedman became a
Director on June 27, 1996, and received no compensation from the Fund before
that date. The compensation from the Fund was paid during its fiscal year ended
August 31, 1997. The compensation from all of the Denver-based Oppenheimer funds
includes the Fund and is compensation received as a director, trustee, managing
general partner or member of a committee of the Board during the calendar year
1996.
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $285 $58,003
Director
- ------------------------
1 For the 1996 calendar year.
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<PAGE>
Total Compensation
Aggregate from all
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
William a. Baker $390 $79,715
Audit and Review
Committee
Ex-Officio Member2
and Director
Charles Conrad, Jr. $367 $74,717
Director3
Jon S. Fossel - None
Director
Sam Freedman $145 $29,502
Audit and Review Committee
Member2 and Director
Raymond J. Kalinowski $364 $74,173
Audit and Review Committee
Member2 and Director
C. Howard Kast $364 $74,173
Audit and Review Committee
Chairman2 and Director
Robert M. Kirchner $367 $74,717
Director3
Ned M. Steel $285 $58,003
Director
- ------------------------
1 For the 1996 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation Plan for disinterested trustees that enable 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 Director is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds elected by the Director. The amount paid to the
Director under the plan will be determined based upon the performance of the
selected funds. Deferral of Director's fees under the
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<PAGE>
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
Director or to pay any particular level of compensation to any Director.
Pursuant to an Order issued by the Securities and Exchange Commission, the Fund
may invest in the funds selected by the Director under the plan without
shareholder approval for the limited purpose of determining the value of the
Director's deferred fee account.
o Major Shareholders. To the knowledge of the Fund, as of November 21,
1997, no person owned beneficially 5% or more of the respective outstanding
shares of either class of the Fund.
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom may also serve as officers of the
Corporation and two of whom (Ms. Macaskill and Mr. and Swain) serve as directors
of the Corporation.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
o The Investment Advisory Agreement. The investment advisory agreement
between the Manager and the Corporation on behalf of the Fund requires the
Manager, at its expense, to provide the Fund with adequate office space,
facilities and equipment and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective corporate
administration for the Fund, including the compilation and maintenance of
records with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor under the General Distributor's Agreement are paid by the
Fund. The advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage commissions, fees
to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. During the Fund's fiscal
years ended June 30, 1995 and 1996, its fiscal period ended August 31, 1996 and
its fiscal year ended August 31, 1997, the management fees paid by the Fund to
the Manager were $284,916, $330,555, $56,478 and $356,873, respectively.
The advisory agreement provides 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 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 thereunder. The advisory
agreement permits the Manager to act as investment adviser for any other person,
firm or corporation, and to use the names "Oppenheimer" and "Main Street" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the right of the Corporation to use the names "Oppenheimer"
and "Main Street" as part of its name and the name of the Fund may be withdrawn.
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<PAGE>
o The Distributor. Under its General Distributor's Agreement with the
Corporation, the Distributor acts as the Corporation's principal underwriter in
the continuous public offering of the Fund's Class A and Class B shares, but is
not obligated to sell a specific number of shares. Expenses normally
attributable to sales are borne by the Distributor. During the Fund's fiscal
years ended June 30, 1995 and 1996, its fiscal period ended August 31, 1996 and
its fiscal year ended August 31, 1997, the aggregate amount of sales charges on
sales of the Fund's Class A shares was $177,634, $134,177, $24,568 and $293,130,
respectively, of which the Distributor retained in the aggregate $28,801,
$28,111, $4,283 and $46,207 in those respective years. During the Fund's fiscal
years ended June 30, 1995 and 1996, its fiscal period ended August 31, 1996 and
its fiscal year ended August 31, 1997, the contingent deferred sales charges
collected on the Fund's Class B shares totaled $6,447, $3,991, $2,863 and
$5,160, respectively, all of which the Distributor retained. During the fiscal
year ended August 31, 1997 commissions paid to broker-dealers by the Distributor
on sales of the Fund's Class B shares totaled $213,863. For additional
information about distribution of the Fund's shares and the expenses connected
with such activities, please refer to "Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent,
is responsible for maintaining the Fund's shareholder registry and shareholder
accounting records, and for shareholder servicing and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions for the Fund. Most of the Fund's portfolio transactions are
principal trades without brokerage commissions. If brokers are used, the
advisory agreement contains provisions relating to the employment of
broker-dealers ("brokers") to effect the Fund's portfolio transactions. In doing
so, the Manager is authorized by the advisory agreement to employ
broker-dealers, including "affiliated" brokers, as that term is defined in the
Investment Company Act, as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding, but is expected to 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 Directors.
Purchases of securities from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers include a
spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to 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 its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination is
made by the Manager that the commission is fair and reasonable in relation to
the services provided. Subject to the foregoing considerations, the Manager may
also consider sales of shares of the Fund and other investment companies managed
by the Manager or its affiliates as a factor in the selection of brokers for the
Fund's portfolio transactions.
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<PAGE>
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement, and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. In connection with transactions
on foreign exchanges, the Fund may be required to pay fixed brokerage
commissions and thereby forego the benefit of negotiated commissions available
in U.S. markets. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market, and are otherwise paid only if it appears
likely that a better price or execution can be obtained. When the Fund engages
in an option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to which
the option relates. When possible, concurrent orders to purchase or sell the
same security by more than one of the accounts managed by the Manager or its
affiliates are combined. The transactions effected pursuant to such combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account. Option commissions may be
relatively higher than those which would apply to direct purchases and sales of
portfolio securities.
Most purchases of money market instruments and 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 it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities for
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 research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analysis on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Directors permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board has also permits the Manager to use stated commissions
on secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis at
the stated commission, and (iii) the trade is not a riskless principal
transaction.
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The research services provided by brokers broadens the scope and
supplements the researchactivities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Manager provides information as
to the commissions paid to brokers furnishing such services, together with the
Manager's representation that the amount of such commissions was reasonably
related to the value or benefit of such services.
Performance of the Fund
As described in the Prospectus, from time to time the "average annual total
return," "cumulative total return," "total return at net asset value" and
"standardized yield"of an investment in a class of shares of the Fund may be
advertised. An explanation of how these total returns are calculated for each
class and the components of those calculations is set forth below.
Yields.
o Standardized Yield. The "standardized yield" (referred to as "yield") is
shown for a class of shares for a stated 30-day period. It is not based on
actual distributions paid by the Fund to shareholders in the 30-day period, but
is a hypothetical yield based upon the net investment income from the Fund's
portfolio investments for that period. It may therefore differ from the
"dividend yield" for the same class of shares, described below. It is calculated
using the following formula set forth in rules adopted by the Securities and
Exchange Commission designed to assure uniformity in the way that all funds
calculate their yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period. b = expenses
accrued for the period (net of any expense reimbursements). c = the
average daily number of shares of that class outstanding during the 30-day
period
that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may differ
from the yield for other periods. The SEC formula assumes that the yield for a
30-day period occurs at a constant rate for a six-month period and is annualized
at the end of the six-month period. Additionally, because each class of shares
is subject to different expenses, it is likely that the standardized yields of
the Fund's classes of shares will differ for any 30 day period. For the 30-day
period ended August 31, 1997 the standardized yields for the Fund's class of
shares were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 4.75% 4.53%
Class B: 3.74% N/A
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o Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts the
Fund's current yield, as calculated above, by a stated combined Federal and
state tax rate. The tax equivalent yield is based on a 30-day period, and is
computed by dividing the tax-exempt portion of the Fund's current yield (as
calculated above) by one minus a stated income tax rate and adding the result to
the portion (if any) of the Fund's current yield that is not tax-exempt. The
tax-equivalent yield may be used to compare the tax effects of income derived
from the Fund with income from taxable investments at the tax rates stated.
Appendix B includes a tax equivalent yield table, based on various effective tax
brackets for individual taxpayers. Such tax brackets are determined by a
taxpayer's Federal and state taxable income (the net amount subject to Federal
and state income tax after deductions and exemptions). The tax-equivalent yield
tables assume that the investor is taxed at the highest bracket, regardless of
whether a switch to non-taxable investments would cause a lower bracket to
apply. For taxpayers with income above certain levels, otherwise allowable
itemized deductions are limited. The For the 30-day period ended August 31, 1997
the Fund's tax-equivalent yield for Class A and Class B shares were 8.27% and
6.83%, respectively, for an individual in the California/Federal combined 45.22%
tax bracket.
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period. from net investment income during a stated
period. To calculate dividend yield, the dividends of a class declared during a
stated period are added together and the sum is multiplied by 12 (to annualize
the yield) and divided by the maximum offering price on the last day of the
dividend period. The formula is shown below:
Dividend Yield of the Class =
Dividends of the Class
----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B shares is the net
asset value per share, without considering the effect of contingent deferred
sales charges. The Class A dividend yield may also be quoted without deducting
the maximum initial sales charge.
The dividend yields for the 30-day dividend period ended August 31, 1997
were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 5.79 5.52%
Class B: 4.75% N/A
Total Return Information. The Fund's advertisements of its performance data
must, under applicable rules of the Securities and Exchange Commission, include
the average annual total returns for each advertised class of shares of the Fund
for the 1-, 5- and 10-year periods (or the life of the class, if less) ending as
of the most recently-ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a number of factors
should be considered before using such information as a basis for comparison
with other investments. An investment in the Fund is not insured; its returns
and share prices are not guaranteed and normally will fluctuate on a daily
basis.
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<PAGE>
When redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A and Class B
shares of the Fund are affected by portfolio quality, the type of investments
the Fund holds and its operating expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class A shares of
the Fund for the 1-and 5-year periods ended August 31, 1997 and for the period
from May 18, 1990 (commencement of operations) to August 31, 1997 were 5.01%,
6.18% and 7.44%, respectively.
The "average annual total return" on Class B shares for the 1-year period
ended August 31, 1997 and for the period October 29, 1993 (commencement of the
public offering of the class) to August 31, 1997 were 4.23% and 3.91%,
respectively.
o Cumulative Total Return. The "cumulative total return" calculation
measures the change in the value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% 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) is applied to the investment result for the period shown
(unless total return is shown at net asset value, as described below). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested to buy additional shares at net asset value per share,
and that the investment is redeemed at the end of the period. The "cumulative
total return" on an investment in Class A shares of the Fund (using the method
described above) for the period from May 18, 1990 (commencement of operations)
through August 31, 1997 was 68.71%. The cumulative total return on Class B
shares for the period from October 29, 1993 (the commencement of the offering of
the shares) through August 31, 1997 was 15.84%.
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o Total Returns at Net Asset Value. From time to time the Fund may also
quote an "average annual total return at net asset value" or a "cumulative total
return at net asset value" for Class A or Class B 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
average annual total returns at net asset value for the Fund's Class A shares
for the one and five year periods ended August 31, 1997 and for the period May
18, 1990 (commencement of operations) through August 31, 1997 were 10.24%,
7.22%, and 8.16%, respectively. The average annual total returns at net asset
value for the Fund's Class B shares for the one year period ended August 31,
1997 and for the period October 29, 1993 (commencement of operations) through
August 31, 1997 were 9.23% and 4.58%, respectively. The cumulative total return
at net asset value on the Fund's Class A shares for May 18, 1990 (commencement
of operations) through August 31, 1997 was 77.13%. The cumulative total return
at net asset value on the Fund's Class B shares for the period October 29, 1993
(commencement of operations) through August 31, 1997 was 18.78%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, and Class B shares. However, when comparing
total return of an investment in shares of the Fund, a number of factors should
be considered before using such information as a basis for comparison with other
investments. No adjustment is made for taxes payable on distributions. An
investment in the Fund's shares is not insured; its total return is not
guaranteed and will fluctuate on a daily basis. Total return for any given past
period is not an indication or representation by the Fund of future rates of
return on its shares. The total return of the Fund's shares is affected by
portfolio quality, portfolio maturity, type of investments held and operating
expenses. When comparing total return of an investment in shares of the fund
with that of other investment instruments, investors should understand that
certain other investment alternatives such as money market instruments,
certificates of deposit, U.S. Government securities or bank accounts provide a
return which remains relatively constant over time and also that bank accounts
may be insured.
o Other Performance Comparisons. From time to time, the Fund may publish
the ranking of the performance of its Class A or Class B shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent mutual
fund monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked against (i) all other funds, (ii) all other California municipal
bond funds. The Lipper performance ranking are based on total returns that
include the reinvestment of capital gain distributions and income dividends but
do not take sales charges or taxes into consideration. From time to time the
Fund may include in its advertisement and sales literature performance
information about the Fund cited in other newspapers and periodicals such as The
New York Times, which may include performance quotations from other sources,
including Lipper and Morningstar.
From time to time, the Fund may publish the star ranking of the
performance of its Class A and Class B 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 an municipal bond funds, based on risk-adjusted total
investment returns. The Fund is ranked among municipal bond funds. Investment
return measures a fund's or class' 1-, 3-, 5- and 10-year average annual total
returns (depending on the inception of the fund or
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class) in excess of 90-day U.S. Treasury bill returns. Risk and investment
return are combined to produce star rankings reflecting performance relative to
the average fund in the fund's category. Five stars is the "highest" ranking
(top 10%), four stars is "above average" (next 22.5%), three stars is "average"
(next 35%), two stars is "below average" (next 22.5%) and one star is "lowest"
(bottom 10%). The current star ranking is the fund's or class' 3-year ranking or
its combined 3- and 5-year ranking (weighted 60%/40%, respectively, or its
combined 3-, 5- and 10-year ranking (weighted 40%, 30% and 30% respectively),
depending on the inception of the fund or class. Rankings are subject to change
monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, 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.
The total return on an investment in the Fund's Class A or Class B shares
may be compared with performance for the same period of the Lehman Brothers
Municipal Bond Index, as described in the Prospectus. The performance of the
index includes a factor for the reinvestment of income dividends, but does not
reflect reinvestment of capital gains, expenses or taxes.
The performance of the Fund's Class A or Class B shares may also be
compared in publications to (i) the performance of various market indices or to
other investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
Investors may also wish to compare the Fund's Class A or Class B return to
the returns on fixed income investments available from banks and thrift
institutions, such as 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 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, and Treasury bills are guaranteed as to
principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plan
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<PAGE>
The Corporation has adopted a Distribution and Service Plan for Class B shares
of the Fund (the "Class B Plan") under Rule 12b-1 of the Investment Company Act
pursuant to which the Corporation will reimburse the Distributor quarterly for
all or a portion of its costs incurred in connection with the distribution
and/or servicing of Class B shares, as described in the Prospectus. Class A
shares of the Fund do not have a plan of distribution. The Plan has been
approved by a vote of (i) the Board of Directors of the Corporation, including a
majority of the "Independent Directors," cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a "majority" (as
defined in the Investment Company Act) of the Class B shares of the Fund, such
vote having been cast by the Manager as the sole initial holder of Class B
shares of the Fund.
In addition, under the Class B Plan, the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources (which, in
the case of the Manager, may include profits from the advisory fee it receives
from the Fund) to make payments to brokers, dealers or other financial
institutions (each is referred to as a "Recipient" under the Class B Plan) for
distribution and administrative services they perform. The Distributor and the
Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, the Class B Plan shall continue in
effect from year to year but only as long as such continuance is specifically
approved at least annually by the Corporation's Board of Directors and its
"Independent Directors" by a vote cast in person at a meeting called for the
purpose of voting on such continuance. The Class B Plan may be terminated at any
time by the vote of a majority of the Independent Directors or by the vote of
the holders of a "majority" (as defined in the Investment Company Act) of the
outstanding Class B shares. The Class B Plan may not be amended to increase
materially the amount of payments to be made, unless such amendment is approved
by shareholders of Class B shares. All material amendments must be approved by
the Independent Directors.
While the Class B Plan is in effect, the Treasurer of the Corporation
shall provide a written report to the Corporation's Board of Directors at least
quarterly on the amount of all payments made pursuant to the Class B Plan, the
purpose for which payments were made and the identity of each Recipient of a
payment. The report for the Class B Plan shall also include the distribution
costs for that quarter, and such costs for previous fiscal periods that are
carried forward, as explained in the Prospectus and below. Those reports,
including the cost allocations on which they are based, will be subject to the
review and approval of the Independent Directors in the exercise of their
fiduciary duty. The Class B Plan further provides that while it is in effect,
the selection and nomination of those Directors of the Corporation who are not
"interested persons" of the Corporation is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others in such
selection and nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Directors.
Under the Class B Plan, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customer does not exceed a minimum amount, if any,
that may be determined from time to time by a majority of theCorporation's
Independent Directors. The Board of Directors has set the fee at the maximum
rate and set no minimum amount.
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<PAGE>
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net assets of the Class B shares
sold. An exchange of shares does not entitle the Recipient to an advance service
fee payment. In the event Class B shares are redeemed during the first year such
shares are outstanding, the Recipient will be obligated to repay a pro rata
portion of such advance payment to the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor intends to pay the service fee to Recipients in the manner described
above. A minimum holding period may be established from time to time under the
Class B Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan are subject to the limitations
imposed by the Conduct Rules of the National Association of Securities Dealers,
Inc. on payments of asset-based sales charges and service fees. For the fiscal
period ended August 31, 1997, payments under the Class B Plan totaled $81,178,
of which the distributor retained $69,604 as reimbursement for the Class B sales
commissions and service fee advances, as well as financing costs.
The Class B Plan allows for the carry-forward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods, as
described in the Prospectus. The asset-based sales charge paid to the
Distributor by the Corporation under the Class B Plan is intended to allow the
Distributor to recoup the cost of sales commissions paid to authorized brokers
and dealers at the time of sale, plus financing costs, as described in the
Prospectus. Such payments may also be used to pay for the following expenses in
connection with the distribution of Class B shares: (i) financing the advance of
the service fee payment to Recipients under the Class B Plan, (ii) compensation
and expenses of personnel employed by the Distributor to support distribution of
Class B shares, and (iii) costs of sales literature, advertising and
prospectuses (other than those furnished to current shareholders) and state
"blue sky" registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The availability of
two classes of shares permits the individual investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B shares are the same as those of the initial sales charge with
respect to Class A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different compensation with
respect to one class of shares than the other. The Distributor will generally
not accept any order at $500,000 or $1 million or more of Class B shares on
behalf of a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that investor to
purchase Class A shares of the Fund instead.
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The two classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B shares and the
dividends payable on Class B shares will be reduced by incremental expenses
borne solely by that class, including the asset-based sales charge to which
Class B shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two types of
expenses. General expenses that do not pertain specifically to either class are
allocated pro rata to the shares of each class, based on the percentage of the
net assets of such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses include (i)
management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and
mailing costs of shareholder reports, prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees to
Independent Directors, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (i) Distribution Plan
fees, (ii) transfer and shareholder servicing agent fees and expenses, (iii)
registration fees and (iv) shareholder meeting expenses, to the extent that such
expenses pertain to a specific class rather than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share of
Class A and Class B shares of the Fund are determined as of the close of
business of The New York Stock Exchange (the "Exchange") on each day that the
Exchange is open, by dividing 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 days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual holiday schedule (which is subject
to change) states that it will close on New Year's Day, Martin Luther King Jr.
Day, Presidents' 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 on days on which the Exchange is
closed including weekends and holidays. Because the Fund's net asset value will
not be calculated at those times, if securities held in the Fund's portfolio are
traded at such time, the net asset values per share of Class A and Class B
shares may be significantly affected on such days when shareholders may not
purchase or redeem shares.
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The Corporation's Board of Directors has established procedures for the
valuation of the Fund's securities, generally as follows: (i) 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 Corporations Board of Directors or obtained by the
Manager from two active market makers in the security on the basis of reasonable
inquiry; (ii) debt instruments having a maturity of more than 397 days when
issued, and non-money market type instruments having a maturity of 397 days or
less when issued, which have a remaining maturity of 60 days or less are valued
at the mean between the "bid" and "asked" prices determined by a pricing service
approved by the Corporations Board of Directors or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(iii) a non-money market fund will value debt instruments that had a maturity of
more than 397 days when issued, debt instruments that had a maturity of 397 days
or less when issued and have a remaining maturity in excess of 60 days, and
non-money market type debt instruments that had a maturity of 397 days or less
when issued and have a remaining maturity of sixty days or less, at the mean
between "bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or, if unavailable, obtained by the Manager from two
active market makers in the security on the basis of reasonable inquiry; (iv)
money market-type debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued and have a remaining maturity of 60
days or less, and debt instruments held by a money market fund that have a
remaining maturity of 397 days or less, shall be valued at cost, adjusted for
amortization of premiums and accretion of discount; and (iv) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value determined under the Board's procedures. If the Manager
is unable to locate two market makers willing to give quotes (see (i) and (ii)
above), the 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 "ask" price is available) provided that the Manager is
satisfied that the firm rendering the quotes is reliable and that the quotes
reflect the current market value.
In the case of Municipal Securities, when last sale information is not
generally available, such pricing procedures may include "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield, maturity,
and other special factors involved (such as the tax-exempt status of the
interest paid by Municipal Securities). The Manager may use pricing services
approved by the Board of Directors to price any of the types of securities
described above. The Manager will monitor the accuracy of such pricing services,
which may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Puts, calls and Futures are valued at the last sales price on the principal
exchange on which they are traded, or on NASDAQ, as applicable, as determined by
a pricing service approved by the Board of Directors or by the Manager. If there
were no sales that day, value shall be the last sale price on the preceding
trading day if it is within the spread of the closing bid and asked prices on
the principal exchange or on NASDAQ on the valuation date, or, if not, value
shall be the closing bid price on the principal exchange or on NASDAQ on the
valuation date. If the put, call or future is not traded on an exchange or on
NASDAQ, it shall be valued at the mean between bid and asked prices obtained by
the Manager from two active market makers (which in certain cases may be the bid
price if no asked price is available).
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When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy shares. Dividends will begin to accrue on shares purchased by
the proceeds of ACH transfers on the business day the Fund receives Federal
funds for 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 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 Rights of Accumulation and Letters
of Intent because of the economies of sales efforts and in expenses realized by
the Distributor, dealers and brokers making such sales. No sales charge is
imposed in certain circumstances described in the Prospectus because the
Distributor, dealer or broker incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren, parents,
grandparents, aunts, uncles, nieces, nephews, parents-in-law, sons- and
daughters-in law, siblings a sibling's spouse and a spouse's siblings. Relations
by virtue of a remarriage (step-children, step-parents, etc.) are included.
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o The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and include
the following:
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer California Municipal Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Life Span Balanced Fund
Oppenheimer Life Span Growth Fund
Oppenheimer Life Span Income Fund
Limited Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Mid-Cap Fund
Oppenheimer Main Street California Municipal
Fund
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Panorama Series Fund, Inc.
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Rochester Fund Municipals
Oppenheimer Series Fund, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
and the following "Money Market 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 Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except money market funds (under certain circumstances
described herein, redemption proceeds of money market fund shares may be subject
to a contingent deferred sales charge).
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o Letters of Intent. A Letter of Intent (referred to as a"Letter") is an
investor's statement in writing to the Distributor of the intention to purchase
Class A or Class A and Class B shares of the Fund (and other Oppenheimer funds)
during a 13-month period (the "Letter of Intend period"), which may, at the
investor's request, include purchases made up to 90 days prior to the date of
the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public
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offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares acquired subject to a contingent deferred sales
charge, and (c) Class A shares or Class B shares acquired in exchange for either
(i) Class A shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or (ii) Class B
shares of one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "Shareholder
Account Rules and Policies," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for monthly
automatic purchases of shares of up to four other Oppenheimer funds. If payments
are made from a bank account to purchase shares of the Fund, the bank account
will automatically be debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor,
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to
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implement them. The Fund reserves the right to amend, suspend, or discontinue
offering such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
How to Sell Shares. Information on how to sell shares of the Fund is stated in
the Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
o Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Directors of the Corporation may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
o Involuntary Redemptions. The Board of Directors has the right to cause
the involuntary redemption of the shares held in any Fund 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 of Directors will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, and the provisions of Maryland law,
the requirements for any notice to be given to the shareholders in question (not
less than 30 days), or the Board may set requirements for the Shareholder to
increase the investment, and set other terms and conditions so that the shares
would not be involuntarily redeemed.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
By choosing the Checkwriting privilege, whether done so by signing the
Account Application or by completing a Checkwriting card, the individual(s)
signing (1) represent that they are either the
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registered owner(s) of the shares of the Fund, or are an officer, general
partner, trustee or other fiduciary or agent, as applicable, duly authorized to
act on behalf of such registered owner(s); (2) authorize the Fund, its Transfer
Agent and any bank through which the Fund's drafts ("checks") are payable (the
"Bank"), to pay all checks drawn on the Fund account of such person(s) and to
effect a redemption of sufficient shares in that account to cover payment of
such checks; (3) specifically acknowledge(s) that if chosen to permit a single
signature on checks drawn against joint accounts, or accounts for corporations,
partnerships, trusts or other entities, the signature of any one signatory on a
check will be sufficient to authorize payment of that check and redemption from
an account even if that account is registered in the names of more than one
person or even if more than one authorized signature appears on the Checkwriting
card or the Application, as applicable; and (4) understand(s) that the
Checkwriting privilege may be terminated or amended at any time by the Fund
and/or the Bank and neither shall incur any liability for such amendment or
termination of for effecting redemptions to pay checks reasonably believed to be
genuine, or for returning or not paying checks which have not been accepted for
any reason.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial or contingent deferred sales charge, or (ii)
Class B shares on which you paid a contingent deferred sales charge when you
redeemed them. The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described below, at the net asset value next
computed after the Transfer Agent receives the reinvestment order. The
shareholder must ask the Distributor for that privilege at the time of
reinvestment. Any capital gain that was realized when the shares were redeemed
is taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge at the time of transfer to the name of another person or
entity (whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares will
remain subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same manner
and at the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed at the time
of transfer, the priorities described in the Prospectus under "How To Buy
Shares" for the imposition of the Class B contingent deferred sales charge will
be followed in determining the order in which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day,
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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, that is 4:00 P.M. but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within three business
days after the shares have been redeemed upon the Distributor's receipt of the
required redemption documents in proper form, with the signature(s) of the
registered owners guaranteed on the redemption document as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Payments are normally made by check, but
shareholders having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank account
designated on the OppenheimerFunds New Account Application or
signature-guaranteed instructions. Shares are normally redeemed pursuant to an
Automatic Withdrawal Plan three business days before the date selected in the
account application. If a contingent deferred sales charge applies to the
redemption, the amount of the check, or payment will be reduced accordingly. The
Fund cannot guarantee receipt of a payment on the date requested and reserves
the right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A share
purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans because of the imposition of
the Class B contingent deferred sales charge on such withdrawals (except where
the Class B contingent deferred sales charge is waived as described in the
Prospectus under "Waivers of Class B Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below, as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchases additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may
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not maintain an Automatic Withdrawal Plan while simultaneously making regular
purchases of Class A shares.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or ACH
transfer payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Share certificates are not issued for Class B shares. Upon
written request from the Planholder, the Transfer Agent will determine the
number of Class A shares for which a certificate may be issued without causing
the withdrawal checks to stop because of exhaustion of uncertificated shares
needed to continue payments. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
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How To Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All of the Oppenheimer funds offer Class A, 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 and Oppenheimer Main Street California Municipal
Fund which only offers Class A and Class B shares, (Class B and Class C shares
of Oppenheimer Cash Reserves are generally available only by exchange from the
same class of shares of other Oppenheimer funds or through
OppenheimerFunds-sponsored 401(k) plans). A current list showing which funds
offer which class can be obtained by calling the distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only for
Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Bond Fund for Growth are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund. Shares of any money market fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days prior to
that purchase may subsequently be exchanged for shares of other Oppenheimer
funds without being subject to an initial or contingent deferred sales charge,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege. Shares of
this Fund acquired by reinvestment of dividends or distribution from any other
of the Oppenheimer funds (except Oppenheimer Cash Reserves) or from any unit
investment trust for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any of the
Oppenheimer funds. No contingent deferred sales charge is imposed on exchanges
of shares of either class purchased subject to a contingent deferred sales
charge. However, when Class A shares acquired by exchange of Class A shares of
other Oppenheimer funds purchased subject to a Class A contingent deferred sales
charge are redeemed within 12 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares (18 months ro shares purchased
prior to May 1, 1997), the Class A contingent deferred sales charge is imposed
on the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares.
When Class B 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 contingent deferred sales charge will be followed in determining the
order in which the shares are exchanged. Shareholders should take into account
the effect of any exchange on the applicability and rate of any contingent
deferred
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sales charge that might be imposed in the subsequent redemption of remaining
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain and acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges of an
account made by telephone, any special account features such as Asset Builder
Plans, Automatic Withdrawal Plans Checkwriting, if available and retirement plan
contributions will be switched to the new account unless the Transfer Agent is
instructed otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders might
not be able to request exchanges by telephone and would have to submit written
exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. During the Fund's fiscal year ended August 31,
1997, the Fund maintained the practice, to the extent consistent with the amount
of the Fund's net investment income and other distributable income, of
attempting to pay dividends on Class A shares at a constant level of $.0611 per
share each month, although the amount of such dividends was subject to change
from time to time depending on market conditions, the composition of the Fund's
portfolio and expenses borne by the Fund. On December 10, 1997, the Board of
Directors reduced the dividend rate for the Class A shares to $.054 per share
each month. The practice of attempting to pay dividends on Class A shares at a
constant level required the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio and
select higher yielding securities when deemed appropriate to maintain necessary
net investment income levels. This practice did not affect the net asset value
of the Fund's Class A shares. The Board of Directors may change the Fund's
-47-
<PAGE>
targeted dividend level at any time, without prior notice to shareholders; the
Fund does not otherwise have a fixed dividend rate and there can be no assurance
as to the payment of any dividends or the realization of any capital gains.
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.,
as promptly as possible after the return of such checks to the Transfer Agent,
in order to enable the investor to earn a return on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest dividends which
are derived from net investment income earned by the Fund on Municipal
Securities will be excludable from gross income of shareholders for Federal
income tax purposes. Net investment income includes the allocation of amounts of
income from the Municipal Securities in the Fund's portfolio which are free from
Federal income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends made during the Fund's tax
year. Such designation will normally be made following the end of each fiscal
year as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of the
Fund's income that was tax-exempt for a given period. A portion of the
exempt-interest dividends paid by the Fund may be an item of tax preference for
shareholders subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund from one
or more of: (1) certain taxable temporary investments (such as certificates of
deposit, repurchase agreements, commercial paper and obligations of the U.S.
government, its agencies and instrumentalities); (2) income from securities
loans; (3) income or gains from options or Futures; or (4) an excess of net
short-term capital gain over net long-term capital loss from the Fund, treats
the dividend as a receipt of either ordinary income or long-term capital gain in
the computation of gross income, regardless of whether the dividend is
reinvested. The Fund's dividends will not be eligible for the dividends-received
deduction for corporations. Shareholders receiving Social Security benefits
should be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized by
shareholders on the redemption of Fund shares within six months of purchase
(which period may be shortened by regulation) will be disallowed for Federal
income tax purposes to the extent of exempt-interest dividends received on such
shares.
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 and intends to qualify in future
years, but reserves the right not to qualify. The Internal Revenue Code contains
a number of complex tests to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. If it does not qualify,
the Fund will be treated for tax purposes as an ordinary corporation and will
receive no tax deduction for payments of dividends and distributions made to
shareholders.
In any year in which the Fund qualifies as a regulated investment company
under the Internal Revenue Code and is exempt from Federal income tax, (1) the
Fund will also be exempt from the California corporate income and franchise
taxes and (2) the Fund will be qualified under California law to pay certain
exempt interest dividends which will be exempt from the California personal
income tax. Individual shareholders of the Fund will generally not be subject to
California personal income tax on exempt-interest dividends received from the
Fund to the extent such distributions are attributable to interest on California
Municipal Securities (and qualifying obligations of the United
-48-
<PAGE>
States Government), provided that at least 50% of the Fund's assets at the close
of each quarter of its taxable year are invested in such obligations.
Distributions from the Fund attributable to sources other than California
Municipal Securities will generally be taxable to such shareholders as ordinary
income. In addition, certain distributions to corporate shareholders may be
includable in income subject to the California alternative minimum tax.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Directors and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
Distributions by the Fund from investment income and long-term and
short-term capital gains will generally not be excludable from taxable income in
determining the California corporate franchise or income tax for corporate
shareholders of the Fund. Certain distributions may also be includable in income
subject to the corporate alternative minimum tax.
The Internal Revenue Code requires that a holder (such as the Fund) of a
zero coupon security accrue as income each year a portion of the discount at
which the security was purchased even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year or be
subject to excise taxes, as described above. Accordingly, when the Fund holds
zero coupon securities, it may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash interest the
Fund actually received during that year. Such distributions will be made from
the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution than they would have had in the
absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either must have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities collecting income of the portfolio securities and handling
the delivery of securities to and from the Fund. The Manager has represented to
the Fund that the banking relationships with the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the Fund
and the Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking
-49-
<PAGE>
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances within the custodian in excess of $100,000 are not
protected by Federal deposit insurance. Those uninsured balances at times may be
substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
-50-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
The Board of Directors and Shareholders of Oppenheimer
Main Street California Municipal Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street California Municipal
Fund as of August 31, 1997, the related statement of operations for the year
then ended, the statements of changes in net assets for the year then ended, for
the two months ended August 31, 1996 and the year ended June 30, 1996, and the
financial highlights for the period July 1, 1992 to August 31, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1997 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Main
Street California Municipal Fund at August 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- --------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
September 22, 1997
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
=====================================================================================================
<S> <C> <C> <C>
Municipal Bonds and Notes--96.6%
- -----------------------------------------------------------------------------------------------------
California--90.8%
Alameda, CA PFAU RRB, Marina Village
Assessment District Refinancing, 6.375%, 9/2/14 NR/NR $2,100,000 $ 2,146,536
- -----------------------------------------------------------------------------------------------------
Anaheim, CA PFAU Tax Allocation RB, MBIA
Insured, 6.45%, 12/28/18 Aaa/AAA 2,000,000 2,179,920
- -----------------------------------------------------------------------------------------------------
Berkeley, CA HF RRB, Alta Bates Medical
Center, Series A, 6.50%, 12/1/11 Baa2/BBB+ 1,500,000 1,588,395
- -----------------------------------------------------------------------------------------------------
CA HFA Home Mtg. RB, Series C, 6.75%, 2/1/25 Aa2/AA- 4,910,000 5,178,577
- -----------------------------------------------------------------------------------------------------
CA HFA SFM Purchase RB, Series A-2,
6.45%, 8/1/25 Aaa/AAA 2,500,000 2,616,875
- -----------------------------------------------------------------------------------------------------
CA HFFAU RB, Episcopal Homes
Project, Series A, 7.80%, 7/1/15 NR/A+ 1,000,000 1,050,390
- -----------------------------------------------------------------------------------------------------
CA PCFAU RB, Pacific Gas & Electric Co.
Project, Series B, 6.35%, 6/1/09 A2/A 2,000,000 2,140,180
- -----------------------------------------------------------------------------------------------------
CA PWBL RB, State Prison Department of
Corrections, Series E, FSA Insured, 5.50%, 6/1/15 Aaa/AAA 2,000,000 2,072,360
- -----------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP,
Cedars-Sinai Medical Center, 5.40%, 11/1/15 A1/NR 1,000,000 961,880
- -----------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP, Inverse
Floater, 6.97%, 11/1/15(1) A1/NR 700,000 646,625
- -----------------------------------------------------------------------------------------------------
Capistrano, CA Unified School District CFD
Special Tax Bonds, No. 87-1, Prerefunded,
8.375%, 10/1/20 Aaa/NR 1,865,000 2,128,319
- -----------------------------------------------------------------------------------------------------
Castaic Lake, CA Water Agency Revenue
COP, WS Improvement Project, Prerefunded,
7.35%, 8/1/20 Aaa/NR 1,000,000 1,107,390
- -----------------------------------------------------------------------------------------------------
Central CA Joint Powers Health FAU COP,
Community Hospitals of Central California
Project, 5%, 2/1/23 Baa1/NR/A- 2,050,000 1,809,720
- -----------------------------------------------------------------------------------------------------
Corona, CA COP, Vista Hospital Project,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 3,250,000 4,151,843
- -----------------------------------------------------------------------------------------------------
Corona, CA SFM RB, Sub.-Lien, Series B, 6.30%,
11/1/28 A/NR 800,000 829,144
- -----------------------------------------------------------------------------------------------------
Duarte, CA COP, City of Hope National Medical
Center, 6.25%, 4/1/23 Baa1/NR 500,000 514,705
- -----------------------------------------------------------------------------------------------------
Escondido, CA Union High School District
CAP GOB, MBIA Insured, Zero Coupon, 6.20%,
11/1/19(2) Aaa/AAA 2,000,000 582,720
- -----------------------------------------------------------------------------------------------------
Fontana, CA RA Tax Allocation GORB, Jurupa
Hills Redevelopment Project-A, 7.10%, 10/1/23 NR/BBB 1,960,000 2,137,223
- -----------------------------------------------------------------------------------------------------
Foothill/Eastern Transportation Corridor Agency
CA Toll Road RB, Sr. Lien, Series A, 6.50%, 1/1/32 Baa/BBB-/BBB 1,400,000 1,494,724
</TABLE>
11 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California (continued)
Fresno, CA HAU MH RB, Central Valley
Coalition Projects, Series A, 5.60%, 8/1/30 NR/AAA $3,075,000 $ 3,096,125
- -----------------------------------------------------------------------------------------------------
La Quinta, CA RA Tax Allocation Refunding
Bonds, Redevelopment Project Area No. 1,
MBIA Insured, 7.30%, 9/1/09 Aaa/AAA 1,015,000 1,239,305
- -----------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RB, 5.125%, 5/15/18 Aa3/AA- 1,000,000 943,280
- -----------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RB, MBIA Insured,
9%, 5/15/02 Aaa/AAA 1,110,000 1,321,100
- -----------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA COP, Disney Parking
Project, Zero Coupon, 6.95%, 9/1/11(2) Baa1/BBB/A- 2,340,000 1,046,354
- -----------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA Transition Community
Sales Tax RB, Prerefunded, Series A,
6.90%, 7/1/21 Aaa/AA-/A+ 1,800,000 2,006,316
- -----------------------------------------------------------------------------------------------------
Los Angeles, CA Unified School District
GOB, Series A, FGIC Insured, 6%, 7/1/15 Aaa/AAA/AAA 1,000,000 1,094,030
- -----------------------------------------------------------------------------------------------------
Los Angeles, CA Wastewater System RRB,
Series D, FGIC Insured, 8.70%, 11/1/03 Aaa/AAA/AAA 5,115,000 6,297,025
- -----------------------------------------------------------------------------------------------------
Newport Mesa, CA Unified School District
Special Tax Bonds, CFD No. 90-1, 6.625%,
9/1/14 NR/NR 2,000,000 2,060,740
- -----------------------------------------------------------------------------------------------------
Orange Cnty., CA CFD Special Tax Bonds,
No. 88-1, Aliso Viejo, Prerefunded, Series A,
7.35%, 8/15/18 NR/AAA 1,750,000 2,020,865
- -----------------------------------------------------------------------------------------------------
Orange Cnty., CA Local Transition Authority
Sales Tax RB, Sec. Sr. Lien-Measure M, FGIC
Insured, 9.50%, 2/15/03 Aaa/AAA/AAA 1,125,000 1,394,033
- -----------------------------------------------------------------------------------------------------
Pittsburg, CA Improvement Bond Act of 1915
Special Assessment GOB, Assessment
District 1990-01, 7.75%, 9/2/20 NR/NR 95,000 98,848
- -----------------------------------------------------------------------------------------------------
Pittsburg, CA RA Tax Allocation Refunding
Bonds,Los Medanos Community Development
Project, Sub. Lien, 6.20%, 8/1/19 NR/BBB 1,000,000 1,031,420
- -----------------------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 Aaa/AAA 2,500,000 3,242,100
- -----------------------------------------------------------------------------------------------------
Pomona, CA Unified School District GORB,
Series A, MBIA Insured, 6.15%, 8/1/15 Aaa/AAA 500,000 551,930
- -----------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
FGIC Insured, Inverse Floater, 7.31%, 6/1/19(1) Aaa/AAA/AAA 1,150,000 1,150,000
- -----------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
MBIA Insured, Inverse Floater, 8.60%, 7/8/22(1) Aaa/AAA 500,000 625,000
- -----------------------------------------------------------------------------------------------------
Riverside Cnty., CA CFD Special Tax Bonds,
No. 88-12, 7.55%, 9/1/17 NR/NR 1,500,000 1,586,490
- -----------------------------------------------------------------------------------------------------
Riverside Cnty., CA SFM RB, Escrowed to
Maturity, Series A, 7.80%, 5/1/21 Aaa/AAA 1,000,000 1,300,070
</TABLE>
12 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California (continued)
Sacramento Cnty., CA SFM RB, Escrowed
to Maturity, 8.125%, 7/1/16(3) Aaa/AAA $2,810,000 $ 3,676,941
- -----------------------------------------------------------------------------------------------------
Sacramento, CA MUD Electric RRB, FGIC
Insured, Inverse Floater, 8.87%, 8/15/18(1) Aaa/AAA/AAA 1,500,000 1,730,625
- -----------------------------------------------------------------------------------------------------
San Diego Cnty., CA Water Authority Revenue
COP, Series 91-B, MBIA Insured, Inverse
Floater, 8.62%, 4/8/21(1) Aaa/AAA 1,000,000 1,147,500
- -----------------------------------------------------------------------------------------------------
San Francisco, CA Bay Area Rapid Transit
District Sales Tax RRB, AMBAC Insured,
6.75%, 7/1/11 Aaa/AAA/AAA 1,000,000 1,180,920
- -----------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Airport
Commission International Airport RB,
Second Series Issue 13-B, MBIA Insured,
8%, 5/1/07 Aaa/AAA 1,140,000 1,395,075
- -----------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Airport
Commission International Airport RB,
Second Series Issue 14-A, MBIA Insured,
8%, 5/1/07 Aaa/AAA 1,290,000 1,578,638
- -----------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation Corridor
Agency Toll Road RB, Sr. Lien, 6.75%, 1/1/32 NR/NR/BBB 3,500,000 3,768,975
- -----------------------------------------------------------------------------------------------------
San Ysidro, CA School District GOB, AMBAC
Insured, 6.125%, 8/1/21 Aaa/AAA 700,000 759,703
- -----------------------------------------------------------------------------------------------------
South Orange Cnty., CA PFAU Special
Tax RB, Foothill Area, Series C, FGIC Insured,
8%, 8/15/08 Aaa/AAA/AAA 1,500,000 1,914,255
- -----------------------------------------------------------------------------------------------------
Southern CA Home FAU SFM RB,
Series A, 7.35%, 9/1/24 NR/AAA 285,000 301,633
- -----------------------------------------------------------------------------------------------------
Southern CA Metropolitan Water District
Waterworks RB, 5.55%, 10/30/20 Aa/AA 2,400,000 2,369,016
- -----------------------------------------------------------------------------------------------------
Southern CA PPAU Transmission Project RB,
Inverse Floater, 7.41%, 7/1/12(1) Aa3/A+ 2,100,000 2,294,250
- -----------------------------------------------------------------------------------------------------
Stanislaus, CA Waste-To-Energy Financing
Agency Solid Waste Facilities RRB, Ogden
Martin System, Inc. Project, 7.50%, 1/1/05 NR/BBB+ 1,600,000 1,717,456
- -----------------------------------------------------------------------------------------------------
West Covina, CA COP, Queen of the Valley
Hospital, 6.50%, 8/15/19 A2/A 1,120,000 1,216,342
------------
92,493,886
- -----------------------------------------------------------------------------------------------------
U.S. Possessions--5.8%
PR Commonwealth GORB, MBIA Insured,
Inverse Floater, 8%, 7/1/08(1) Aaa/AAA 1,500,000 1,655,625
- -----------------------------------------------------------------------------------------------------
PR Commonwealth Highway Authority RB,
Prerefunded, Series P, 8.125%, 7/1/13 Aaa/AAA 2,000,000 2,111,500
</TABLE>
13 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Possessions (continued)
PR Commonwealth Public Improvement
GOB, Prerefunded, Series A, 7.75%, 7/1/17 NR/AAA $1,000,000 $ 1,081,670
- -----------------------------------------------------------------------------------------------------
PR Housing Finance Corp. SFM RB, Portfolio 1,
Series B, 7.65%, 10/15/22 Aaa/AAA 240,000 253,229
- -----------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental PC
Facilities Tourist RB, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 600,000 635,418
- -----------------------------------------------------------------------------------------------------
PR Public Buildings Authority RB,
Government Facilities, Series B, AMBAC
Insured, 5%, 7/1/27 Aaa/AAA 200,000 189,324
-----------
5,926,766
-----------
Total Municipal Bonds and Notes
(Cost $95,668,810) 98,420,652
<CAPTION>
Date Strike Contracts
=====================================================================================================
<S> <C> <C> <C> <C>
Call Options Purchased--0.0%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury, 30 yr. Futures, 12/97,
Call Opt. (Cost $51,481) 11/97 $120 88 9,625
- -----------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $95,720,291) 96.6% 98,430,277
- -----------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 3.4 3,479,521
---------- ------------
Net Assets 100.0% $101,909,798
========== ============
</TABLE>
To simplify the listings of securities abbreviations are used per the table
below:
CAP -- Capital Appreciation CFD -- Community Facilities District COP --
Certificates of Participation FAU -- Finance Authority GOB -- General Obligation
Bonds GORB -- General Obligation Refunding Bonds HAU -- Housing Authority HF --
Health Facilities HFA -- Housing Finance Agency HFFAU -- Health Facilities
Finance Authority MH -- Multifamily Housing MUD -- Municipal Utility District PC
- -- Pollution Control PCFAU -- Pollution Control Finance Authority PFAU -- Public
Finance Authority PPAU -- Public Power Authority PWBL -- Public Works Board
Lease RA -- Redevelopment Agency RB -- Revenue Bonds RRB -- Revenue Refunding
Bonds
SCDAU -- Statewide Communities Development Authority
SFM -- Single Family Mortgage
WS -- Water System
1. Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays interest at a rate that varies inversely with
short-term interest rates. As interest rates rise, inverse floaters produce less
current income. Their price may be more volatile than the price of a comparable
fixed-rate security. Inverse floaters amount to $9,249,625 or 9.08% of the
Fund's net assets at August 31, 1997.
2. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
3. Securities with an aggregate market value of $418,726 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
14 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As of August 31, 1997, securities subject to the alternative minimum tax
amounted to $23,548,494 or 23.11% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments at
value, is as follows:
Industry Market Value Percent
- --------------------------------------------------------------------------------
Single Family Housing $17,398,570 17.7%
Special Assessment 16,415,603 16.7
Hospital/Healthcare 12,575,317 12.8
Highways 9,381,515 9.5
Sewer Utilities 6,297,025 6.4
Electric Utilities 5,799,875 5.9
Marine/Aviation Facilities 5,238,092 5.3
Water Utilities 4,623,906 4.7
Education 3,982,052 4.0
General Obligation 3,871,945 3.9
Lease Rental 3,308,038 3.4
Multi-Family Housing 3,096,125 3.1
Sales Tax 2,574,953 2.6
Pollution Control 2,140,180 2.2
Resource Recovery 1,717,456 1.8
Options-Treasury 9,625 0.0
----------- -----
$98,430,277 100.0%
=========== =====
See accompanying Notes to Financial Statements.
15 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 1997
- --------------------------------------------------------------------------------
================================================================================
Assets
Investments, at value (cost $95,720,291)--see
accompanying statement $ 98,430,277
- --------------------------------------------------------------------------------
Cash 2,019,892
- --------------------------------------------------------------------------------
Receivables:
Interest 1,353,286
Shares of capital stock sold 502,261
Daily variation on futures contracts--Note 5 13,149
- --------------------------------------------------------------------------------
Other 1,807
------------
Total assets 102,320,672
================================================================================
Liabilities Payables and other liabilities:
Dividends 319,643
Shareholder reports 42,060
Shares of capital stock redeemed 20,655
Transfer and shareholder servicing agent fees 5,000
Distribution and service plan fees 4,702
Other 18,814
------------
Total liabilities 410,874
================================================================================
Net Assets $101,909,798
============
- --------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of capital stock $ 80,612
- --------------------------------------------------------------------------------
Additional paid-in capital 97,768,093
- --------------------------------------------------------------------------------
Undistributed net investment income 437,009
- --------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 920,348
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 2,703,736
Net assets $101,909,798
============
16 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$89,990,731 and 7,117,404 shares of capital stock outstanding) $12.64 Maximum
offering price per share (net asset value plus sales charge of 4.75% of offering
price) $13.27
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $11,919,067 and
943,842
shares of capital stock outstanding) $12.63
See accompanying Notes to Financial Statements.
17 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended August 31, 1997
- --------------------------------------------------------------------------------
===============================================================================
Investment Income
Interest $ 5,741,250
===============================================================================
Expenses
Management fees--Note 4 356,873
- -------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class B 81,178
- -------------------------------------------------------------------------------
Shareholder reports 69,467
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 56,033
- -------------------------------------------------------------------------------
Legal and auditing fees 12,485
- -------------------------------------------------------------------------------
Insurance expenses 3,028
- -------------------------------------------------------------------------------
Directors' fees and expenses 2,567
- -------------------------------------------------------------------------------
Custodian fees and expenses 998
- -------------------------------------------------------------------------------
Registration and filing fees:
Class A 17,669
Class B 2,723
- -------------------------------------------------------------------------------
Other 984
------------
Total expenses 604,005
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (3,737)
- -------------------------------------------------------------------------------
Net expenses 600,268
===============================================================================
Net Investment Income 5,140,982
===============================================================================
Realized and Unrealized Gain Net realized gain on:
Investments 529,768
Closing of futures contracts--Note 5 224,908
------------
Net realized gain 754,676
------------
Net change in unrealized appreciation or depreciation on
investments 2,696,390
------------
Net realized and unrealized gain 3,451,066
===============================================================================
Net Increase in Net Assets Resulting from Operations $ 8,592,048
============
See accompanying Notes to Financial Statements.
18 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Year Ended August 31, June 30,
1997 1996(1) 1996
=================================================================================================
Operations
<S> <C> <C> <C>
Net investment income $ 5,140,982 $ 839,019 $ 4,904,243
- -------------------------------------------------------------------------------------------------
Net realized gain (loss) 754,676 (42,708) 13,058
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation 2,696,390 52,839 446,150
------------- ------------ ------------
Net increase in net assets resulting from operations 8,592,048 849,150 5,363,451
=================================================================================================
Dividends and Distributions to Shareholders Dividends from net investment
income:
Class A (4,733,799) (773,949) (4,694,006)
Class B (394,165) (47,009) (189,244)
- -------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (9,642) -- (11,115)
Class B (827) -- (475)
- -------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain:
Class A -- -- (60,043)
Class B -- -- (2,568)
=================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock
transactions--Note 2:
Class A 10,035,358 (125,718) (1,651,052)
Class B 5,675,756 487,540 2,817,402
=================================================================================================
Net Assets
Total increase 19,164,729 390,014 1,572,350
- -------------------------------------------------------------------------------------------------
Beginning of period 82,745,069 82,355,055 80,782,705
------------- ------------ ------------
End of period [including undistributed
(overdistributed) net investment income of
$437,009, $598,945 and $(132,853), respectively] $ 101,909,798 $ 82,745,069 $ 82,355,055
============= ============ ============
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
See accompanying Notes to Financial Statements.
19 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
Year Ended August 31, Year Ended June 30,
1997 1996(2) 1996 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.16 $ 12.15 $ 12.09 $ 11.82 $ 12.66 $ 12.05
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .73 .12 .73 .73 .75 .80
Net realized and unrealized gain (loss) .49 .01 .07 .27 (.80) .64
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations 1.22 .13 .80 1.00 (.05) 1.44
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.74) (.12) (.73) (.69) (.73) (.81)
Dividends in excess of net investment income -- -- -- (.04) (.03) --
Distributions from net realized gain -- -- --(3) -- -- (.02)
Distributions in excess of net realized gain -- -- (.01) -- (.03) --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.74) (.12) (.74) (.73) (.79) (.83)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.64 $ 12.16 $ 12.15 $ 12.09 $ 11.82 $ 12.66
======= ======= ======= ======= ======= =======
======================================================================================================================
Total Return, at Net Asset Value(4) 10.24% 1.12% 6.73% 8.93% (0.60)% 12.53%
======================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $89,991 $76,817 $76,913 $78,134 $79,555 $72,387
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $80,311 $77,584 $78,676 $76,148 $81,741 $54,840
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.91% 6.00%(5) 5.99% 6.27% 6.09% 6.46%
Expenses(6) 0.59% 0.57%(5) 0.58% 0.57% 0.53% 0.39%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 46.4% 1.4% 33.1% 14.2% 20.2% 5.8%
</TABLE>
1. For the period from October 29, 1993 (inception of offering) to June 30,
1994.
2. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
3. Less than $.005 per share.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
20 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------
Year Ended August 31, Year Ended June 30,
1997 1996(2) 1996 1995 1994(1)
======================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.14 $12.14 $12.08 $11.80 $12.90
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .60 .10 .61 .62 .38
Net realized and unrealized gain (loss) .50 -- .07 .27 (1.07)
------ ------ ------ ------ ------
Total income (loss) from investment operations 1.10 .10 .68 .89 (.69)
- -----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.61) (.10) (.61) (.57) (.37)
Dividends in excess of net investment income -- -- -- (.04) (.01)
Distributions from net realized gain -- -- --(3) -- --
Distributions in excess of net realized gain -- -- (.01) -- (.03)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.61) (.10) (.62) (.61) (.41)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.63 $12.14 $12.14 $12.08 $11.80
======= ====== ====== ====== ======
======================================================================================================
Total Return, at Net Asset Value(4) 9.24% 0.85% 5.66% 7.90% (5.42)%
======================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $11,919 $5,928 $5,442 $2,648 $1,203
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 8,129 $5,767 $3,848 $1,904 $ 649
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.85% 4.92%(5) 4.94% 5.17% 4.91%(5)
Expenses(6) 1.60% 1.62%(5) 1.60% 1.55% 1.62%(5)
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 46.4% 1.4% 33.1% 14.2% 20.2%
</TABLE>
5. Annualized.
6. Beginning in fiscal 1995, the expense ratios reflect the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $53,752,001 and $40,699,816, respectively.
21 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Main Street California Municipal Fund (the Fund) is a separate
series of Oppenheimer Main Street Funds, Inc., an open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek as high a level of current income which
is exempt from federal and California personal income taxes for individual
investors as is available from municipal securities and consistent with
preservation of capital. The Fund's investment adviser is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A and Class B shares. Class A shares are
sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares have identical rights
to earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to that class
and exclusive voting rights with respect to matters affecting that class. Class
B shares will automatically convert to Class A shares six years after the date
of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
22 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A and Class B shares from net investment income each day the New York
Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of premium amortization for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
During the period ended August 31, 1997, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1997, amounts have been reclassified to reflect a decrease in undistributed net
investment income of $174,954. Accumulated net realized gain on investments was
increased by the same amount.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Original issue discount on securities purchased
is amortized over the life of the respective securities, in accordance with
federal income tax requirements. For bonds acquired after April 30, 1993, on
disposition or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market discount that would have accrued over the holding
period. Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. The Fund concentrates its investments in
California and, therefore, may have more credit risks related to the economic
conditions of California than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
23 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
2. Capital Stock
The Fund has authorized 16,250,000 shares of $.01 par value capital stock of
each class. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended Year Ended
August 31, 1997 August 31, 1996(1) June 30, 1996
------------------------ -------------------- ---------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 1,377,422 $ 17,228,574 67,135 $ 819,316 387,788 $ 4,767,548
Dividends and
distributions reinvested 233,721 2,900,249 39,490 483,642 243,712 2,993,646
Redeemed (811,980) (10,093,465) (116,433) (1,428,676) (765,193) (9,412,246)
--------- ------------ ------- ----------- ------- -----------
Net increase (decrease) 799,163 $ 10,035,358 (9,808) $ (125,718) (133,693) $(1,651,052)
========= ============ ======= =========== ======= ===========
- -----------------------------------------------------------------------------------------------------
Class B:
Sold 467,166 $ 5,821,078 44,022 $ 538,404 247,941 $ 3,048,438
Dividends and
distributions reinvested 20,557 255,214 2,450 29,980 9,629 117,946
Redeemed (32,007) (400,536) (6,620) (80,844) (28,549) (348,982)
--------- ------------ ------- ----------- ------- -----------
Net increase 455,716 $ 5,675,756 39,852 $ 487,540 229,021 $ 2,817,402
========= ============ ======= =========== ======= ===========
</TABLE>
1. The Fund changed its fiscal year end from June 30 to August 31.
================================================================================
3. Unrealized Gains and Losses on Investments
At August 31, 1997, net unrealized appreciation on investments of $2,709,986 was
composed of gross appreciation of $3,854,592, and gross depreciation of
$1,144,606.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.55% of average
annual net assets, with a contractual waiver when net assets are less than $100
million. Annual fees, reflecting this waiver, are 0.40% of net assets of $75
million or more but less than $100 million, 0.25% of net assets of $50 million
or more but less than $75 million, 0.15% of net assets of $25 million or more
but less than $50 million, and 0% of net assets less than $25 million. In
addition, the Manager has voluntarily undertaken to waive a portion of its
management fee, whereby the Fund shall pay an annual management fee of 0.40% of
its average annual net assets in excess of $100 million.
For the year ended August 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $293,130, of which $46,207 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares
totaled $213,863. During the year ended August 31, 1997, OFDI received
contingent deferred sales charges of $5,160 upon redemption of Class B shares.
24 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and for other registered investment
companies. OFS's total costs of providing such services are allocated ratably to
these companies.
The Fund has adopted a Distribution and Service Plan for Class B shares to
reimburse OFDI for its services and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class B shares. OFDI also receives a service
fee of 0.25% per year to reimburse dealers for providing personal services for
accounts that hold Class B shares. Both fees are computed on the average annual
net assets of Class B shares, determined as of the close of each regular
business day. During the year ended August 31, 1997, OFDI retained $69,604 as
reimbursement for Class B sales commissions and service fee advances, as well as
financing costs. If the Plan is terminated by the Fund, the Board of Directors
may allow the Fund to continue payments of the asset-based sales charge to OFDI
for distributing shares before the Plan was terminated. As of August 31, 1997,
OFDI had incurred unreimbursed expenses of $384,028 for Class B.
================================================================================
5. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
25 Oppenheimer Main Street California Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Futures Contracts (continued)
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At August 31, 1997, the Fund had outstanding futures contracts to sell
debt securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Contracts to Sell Expiration Date Contracts August 31, 1997 Depreciation
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 30 yr. 12/97 20 $2,255,000 $6,250
</TABLE>
<PAGE>
APPENDIX A
Description of Ratings Categories
Municipal Bonds
o Moody's Investor Services, Inc. The ratings of Moody's Investors Service, Inc.
("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
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 in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as 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. Bonds
which are 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. Bonds which are 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. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
o Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of the highest
quality." The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues." The rating
of A describes "the third strongest capacity for payment of debt service."
Principal and interest payments on bonds in this category are regarded as safe.
It differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic base, in
debt burden, in the balance
A-1
<PAGE>
between revenues and expenditures, or in quality of management. Under certain
adverse circumstances, any one such weakness might impair the ability of the
issuer to meet debt obligations at some future date. With respect to revenue
bonds, debt service coverage is good, but not exceptional. Stability of the
pledged revenues could show some variations because of increased competition or
economic influences on revenues. Basic security provisions, while satisfactory,
are less stringent. Management performance appears adequate. The BBB rating is
the lowest "investment grade" security rating. The difference between A and BBB
ratings is that the latter shows more than one fundamental weakness, or one very
substantial fundamental weakness, whereas the former shows only one deficiency
among the factors considered. With respect to revenue bonds, debt coverage is
only fair. Stability of the pledged revenues could show variations, with the
revenue flow possibly being subject to erosion over time. Basic security
provisions are no more than adequate. Management performance could be stronger.
Bonds rated "BB" have less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which would lead to
inadequate capacity to meet timely interest and principal payments. Bonds rated
"B" have a greater vulnerability to default, but currently has the capacity to
meet interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. Bonds rated "CCC" have a current identifiable vulnerability
to default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. Bonds noted "CC"
typically are debt subordinated to senior debt which is assigned on actual or
implied "CCC" debt ratingBonds rated "C" typically are debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. Bonds rated "D" are in payment
default. The "D" rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has
not expired, unless S&P believes that such payments will be made during the
grace period. The "D" rating also will be used upon the filing of a bankruptcy
petition if debt service payments 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.
o Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated AAA, AA, A and BBB are considered to be of
investment grade quality. Bonds rated below BBB are considered to be of
speculative quality. The ratings of "BB" is assigned to bonds considered by
Fitch to be "speculative." The rating of "B" is assigned to bonds considered by
Fitch to be "highly speculative." Bonds rated "CCC" have certain identifiable
characteristics which, if not remedied, may lead to default. Bonds rated "CC"
are minimally protected. Default in payment of interest and/or principal seems
probable over time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in default on
interest and/or principal payments. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for recovery.
o Duff & Phelps' The ratings of Duff & Phelps are as follows: AAA which are
judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest
A-2
<PAGE>
but may vary slightly from time to time because of economic conditions. A+, A &
A- Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress. BBB+, BBB & BBB- Below
average protection factors but still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles. BB+, BB &
BB- Below investment grade but deemed to meet obligations when due. Present or
prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within the category. B+, B & B- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher of lower rating grade. CCC Well below investment
grade securities. Considerable uncertainty exists as to timely payment of
principal interest or preferred dividends. Protection factors are narrow and
risk can be substantial with unfavorable economic industry conditions, and/or
with unfavorable company developments. DD Defaulted debt obligations issuer
failed to meet scheduled principal and/or interest payments. DP Preferred stock
with dividend arreages.
Municipal Notes
o Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG"). Notes bearing the designation
MIG-1 are of the best quality, enjoying strong protection from established cash
flows of funds for their servicing or from established and broad-based access to
the market for financing. Notes bearing the designation "MIG-2" are of high
quality with ample margins of protection, although not as large as notes rated
"MIG." Such short-term notes which have demand features may also carry a rating
using the symbol VMIG as described above, with the designation MIG-1/VMIG 1
denoting best quality, with superior liquidity support in addition to those
characteristics attributable to the designation MIG-1.
o S&P's rating for Municipal Notes due in three years or less are SP-1,
SP-2, and SP-3. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes issues
with a satisfactory capacity to pay principal and interest, and compares with
bonds rated BBB by S&P. SP-3 describes issues that have a speculative capacity
to pay principal and interest.
o Fitch's rating for Municipal Notes due in three years or less are F-1+,
F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment. F-1
describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ materially
from those set forth above for Municipal Bonds.
A-3
<PAGE>
Commercial Paper
o Moody's The ratings of commercial paper by Moody's are Prime-1, Prime-2,
Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
o S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C, and
D. A-1 indicates that the degree of safety regarding timely payment is strong.
A-2 indicates capacity for timely payment is satisfactory. However, the relative
degree of safety is not as high as for issues designated A-1. A-3 indicates an
adequate capacity for timely payments. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. B indicates only speculative capacity for timely payment. C
indicates a doubtful capacity for payment. D is assigned to issues in default.
o Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
A-4
<PAGE>
APPENDIX B
Tax-Equivalent Yields
The equivalent yield tables below compare tax-free income with taxable income
under Federal individual income tax rates, and California state individual
income tax rates effective January 1, 1997. "Combined Taxable Income" refers to
the net amount subject to Federal and California income taxes after deductions
and exemptions. The tables assume that an investor's highest tax bracket applies
to the change in taxable income resulting from a switch between taxable and
non-taxable investments, and that state tax payments are currently deductible
for Federal tax purposes and that the investor is not subject to Federal or
state alternative minimum tax. The income tax brackets are subject to indexing
in future years to reflect changes in the Consumer Price Index. The brackets do
not reflect the phaseout of itemized deductions and personal exemptions at
higher income levels, resulting in higher effective tax rates (and tax
equivalent yields). For years beginning after January 1, 1996 the top marginal
California personal tax rate was reduced to 9.3% and the top combined marginal
tax rate is 45.22%.
Combined Taxable Income
<TABLE>
<CAPTION>
Joint Return Effective Tax BracketOppenheimer Main Street California Tax-Exempt Fund Yield of:
But Cali- 2.00% 2.50% 3.00% 3.50% 3.74% 4.00% 4.50%
Over Not Over Federal fornia Combined Is Approximately Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 23,264 $ 36,714 15.00% 4.00% 18.40% 2.45% 3.06% 3.68% 4.29% 4.58% 4.90% 5.51%
$ 36,174 $ 41,200 15.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 4.68% 5.01% 5.63%
$ 41,200 $ 50,968 28.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.53% 5.91% 6.65%
$ 50,968 $ 64,414 28.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 5.65% 6.04% 6.79%
$ 64,414 $ 99,600 28.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 5.73% 6.13% 6.89%
$ 99,600 $151,750 31.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 5.98% 6.39% 7.19%
$151,750 $271,050 36.00% 9.30% 41.95% 3.45% 4.31% 5.17% 6.03% 6.44% 6.89% 7.75%
$271,050 and above39.60% 9.30% 45.22% 3.65% 4.56% 5.48% 6.39% 6.83% 7.30% 8.21%
4.53% 5.00% 5.50% 6.00% 6.50% 7.00% Is
Approximately Equivalent to a Taxable
Yield of:
5.55% 6.13% 6.74% 7.35% 7.97% 8.58%
5.67% 6.26% 6.88% 7.51% 8.14% 8.76%
6.69% 7.39% 8.13% 8.87% 9.60% 10.34%
6.84% 7.55% 8.30% 9.06% 9.81% 10.57%
6.94% 7.66% 8.42% 9.19% 9.95% 10.72%
7.24% 7.99% 8.79% 9.59% 10.39% 11.19%
7.80% 8.61% 9.47% 10.34% 11.20% 12.06%
8.27% 9.13% 10.04% 10.95% 11.87% 12.78%
8.28% 9.20% 10.12% 11.04% 11.96% 12.88%
8.37% 9.30% 10.23% 11.16% 12.09% 13.02%
</TABLE>
B-1
<PAGE>
Combined Taxable Income
<TABLE>
<CAPTION>
Single Return Effective Tax BrackeOppenheimer Main Street California Tax-Exempt Fund Yield of:
But Cali- 2.00% 2.50% 3.00% 3.50% 3.74% 4.00% 4.50%
Over Not Over Federal fornia Combined Is Approximately Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 18,357 $ 24,650 15.00% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 4.68% 5.01% 5.63%
$ 24,650 $ 25,484 28.00% 6.00% 32.32% 2.96% 3.69% 4.43% 5.17% 5.53% 5.91% 6.65%
$ 25,484 $ 32,207 28.00% 8.00% 33.76% 3.02% 3.77% 4.53% 5.28% 5.65% 6.04% 6.79%
$ 32,207 $ 59,750 28.00% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 5.73% 6.13% 6.89%
$ 59,750 $124,650 31.00% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 5.98% 6.39% 7.19%
$124,650 $271,050 36.00% 9.30% 41.95% 3.45% 4.31% 5.17% 6.03% 6.44% 6.89% 7.75%
$271,050 and above39.60% 9.30% 45.22% 3.65% 4.56% 5.48% 6.39% 6.83% 7.30% 8.21%
4.53% 5.00% 5.50% 6.00% 6.50% 7.00% Is
Approximately Equivalent to a Taxable
Yield of:
5.67% 6.26% 6.88% 7.51% 8.14% 8.76%
6.69% 7.39% 8.13% 8.87% 9.60% 10.34%
6.84% 7.55% 8.30% 9.06% 9.81% 10.57%
6.94% 7.66% 8.42% 9.19% 9.95% 10.72%
7.24% 7.99% 8.79% 9.59% 10.39% 11.19%
7.80% 8.61% 9.47% 10.34% 11.20% 12.06%
8.27% 9.13% 10.04% 10.94% 11.87% 12.78%
</TABLE>
B-2
<PAGE>
APPENDIX C
Municipal Bond Industry Classifications
Electric
Gas
Water
Sewer
Telephone
Adult Living Facilities
Hospital
General Obligation
Special Assessment
Sales Tax
Manufacturing, Non Durables
Manufacturing, Durables
Pollution Control
Resource Recovery
Higher Education
Education
Lease Rental
Non Profit Organization
Highways
Marine/Aviation Facilities
Multi Family Housing
Single Family Housing
C-1
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights (See Part A, Prospectus): Filed herewith.
(2) Independent Auditors' Report (See Part B, Statement of Additional
Information): Filed herewith.
(3) Statements of Investments 8/31/97 (See Part B, Statement of
Additional Information): Filed herewith.
(4) Statements of Assets and Liabilities 8/31/97 (See Part B, Statement
of Additional Information):Filed herewith.
(5) Statements of Operations for the year ended 8/31/97 (See Part B,
Statement of Additional Information): Filed herewith.
(6) Statements of Changes in Net Assets for the year ended 8/31/97 (See
Part B, Statement of Additional Information): Filed herewith.
(7) Notes to Financial Statements (See Part B, Statement of Additional
Information): Filed herewith.
(b) Exhibits
(1) (i) Articles of Incorporation dated 10/2/87: Filed with Registrant's
Post-Effective Amendment No. 12, 10/25/93, and incorporated herein by reference.
(ii)Amended Articles of Incorporation dated 12/9/87: Filed with
Registrant's Post-Effective Amendment No. 12, 10/25/93, and incorporated herein
by reference.
(iii) Articles Supplementary to the Articles of Incorporation dated
8/18/88: Filed with Registrant's Post-Effective Amendment No. 12, 10/25/93, and
incorporated herein by reference.
(iv) Articles Supplementary to the Articles of Incorporation dated 1/20/89:
Filed with Registrant's Post- Effective Amendment No. 12, 10/25/93, and
incorporated herein by reference.
(v) Articles Supplementary to the Articles of Incorporation dated 4/16/90:
Filed with Registrant's Post- Effective Amendment No. 12, 10/25/93, and
incorporated herein by reference.
(vi) Amendment to the Articles of Incorporation dated 8/27/93: Filed with
Registrant's Post-Effective Amendment No. 12, 10/25/93, and incorporated herein
by reference.
(vii) Amendment to the Articles of Incorporation dated 10/20/93: Filed with
Registrant's Post-Effective Amendment No. 12, 10/25/93, and incorporated herein
by reference.
(viii) Articles Supplementary to the Articles of Incorporation dated
10/27/93: Filed with Registrant's Post- Effective Amendment No. 14, 9/30/94, and
incorporated herein by reference.
(ix) Articles Supplementary to the Articles of Incorporation dated
11/29/93: Filed with Registrant's Post- Effective Amendment No. 14, 9/30/94, and
incorporated herein by reference.
(x) Articles Supplementary to the Articles of Incorporation dated 4/28/94:
Filed with Registrant's Post-Effective Amendment No. 14, 9/30/94, and
incorporated herein by reference.
(xi) Articles Supplementary to the Articles of Incorporation dated 9/30/94:
Filed with Registrant's Post-Effective Amendment No. 14, 9/30/94, and
incorporated herein by reference.
(xii) Articles Supplementary to the Articles of Incorporation
dated 8/30/96: Previously filed with Registrant's Post-Effective Amendment No.
18, 11/1/96, and incorporated herein by reference.
(xiii) Articles Supplementary to the Articles of Incorporation
dated 9/30/96: Previously filed with Registrant's Post-Effective Amendment No.
18, 11/1/96, and incorporated herein by reference.
(2) By-Laws as amended through 6/26/90: Previously filed with
Post-Effective Amendment No. 8, 10/22/91, to Registrant's Registration Statement
and refiled with Post-Effective Amendment No. 14, 9/30/94, pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Stock Certificate -Oppenheimer Main Street Income
& Growth Fund: Previously filed with Registrant's Post-Effective Amendment No.
18, 11/1/96, and incorporated herein by reference.
(ii) Specimen Class B Stock Certificate -Oppenheimer Main Street Income &
Growth: Previously filed with Registrant's Post-Effective Amendment No. 18,
11/1/96, and incorporated herein by reference. (iii) Specimen Class C Stock
Certificate -Oppenheimer Main Street Income & Growth Fund: Previously filed with
Registrant's Post-Effective Amendment No. 18, 11/1/96, and incorporated herein
by reference.
(iv) Specimen Class Y Stock Certificate -Oppenheimer Main Street Income &
Growth Fund: Previously filed with Registrant's Post-Effective Amendment No. 18,
11/1/96, and incorporated herein by reference.
(v) Specimen Class A Stock Certificate -Oppenheimer Main Street California
Municipal Fund: Previously filed with Registrant's Post-Effective Amendment No.
18, 11/1/96, and incorporated herein by reference.
(vi) Specimen Class B Stock Certificate -Oppenheimer Main Street California
Municipal Fund: Previously filed
with Registrant's Post-Effective Amendment No. 18, 11/1/96, and
incorporated herein by reference.
(5) (i) Investment Advisory Agreement dated 10/22/90 for Oppenheimer
Main Street Income & Growth Fund: Filed with Registrant's Post-Effective
Amendment No. 6, 11/1/90, and refiled with Post-Effective Amendment No. 14,
9/30/94, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(ii) Investment Advisory Agreement dated 10/22/90 for Oppenheimer Main
Street California Municipal Fund: Filed with Registrant's Post-Effective
Amendment No. 2 of Main Street Funds, Inc./California Municipal Fund (Reg. No.
33-34270), 11/1/90, and refiled with Post-Effective Amendment No. 14, 9/30/94,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference.
(6) (i) General Distributor's Agreement dated 10/13/92: Filed with
Post-Effective Amendment No. 11 to Registrant's Registration Statement, 8/25/93,
and incorporated herein by reference.
(ii) Form of OppenheimerFunds Distributor, Inc. Dealer Agreement: Filed
with Registrant's Post-Effective Amendment No. 14, 9/30/94, and incorporated
herein by reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed
with Registrant's Post-Effective Amendment No. 14, 9/30/94, and incorporated
herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed
with Registrant's Post-Effective Amendment No. 14, 9/30/94, and incorporated
herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management, Inc. and
Newbridge Securities, Inc. dated 10/1/86: Filed with Post-Effective Amendment
No. 25 of Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86, and 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.
(7) Not applicable.
(8) Custody Agreement dated 8/5/92: Filed with Registrant's
Post-Effective Amendment No. 10, 10/19/92, and refiled with Post-Effective
Amendment No. 14, 9/30/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(9) (i) Agreement and Plan of Reorganization dated 4/28/92 between Main
Street Funds, Inc. - Asset Allocation Fund, and Main Street Funds, Inc. - Income
& Growth Fund: Filed with Post-Effective Amendment No. 11 to Registrant's
Registration Statement, 8/25/93, and incorporated herein by reference.
(ii) Agreement and Plan of Reorganization dated 6/18/92 between Main Street
Funds, Inc. - Tax-Free Income Fund and Oppenheimer Tax-Free Bond Fund: Filed
with Post-Effective Amendment No. 11 to Registrant's Registration Statement,
8/25/93, and incorporated herein by reference.
(iii) Agreement and Plan of Reorganization dated 4/28/93 between Main
Street Funds, Inc. - Government Securities Fund and Oppenheimer Government
Securities Fund: Filed with Post- Effective Amendment No. 11 to Registrant's
Registration Statement, 8/25/93, and incorporated herein by reference.
(10) (i) Opinion and Consent of Counsel dated 2/1/88: Filed with
Registrant's Post-Effective Amendment No. 1, 6/28/88, and refiled with
Post-Effective Amendment No. 14, 9/30/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(ii) Opinion and Consent of Counsel dated 1/20/89: Filed with
Registrant's Post-Effective Amendment No. 4, 10/30/89, and refiled with
Post-Effective Amendment No. 14, 9/30/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(iii) Opinion and Consent of Counsel dated 4/23/90: Filed with
Pre-Effective Amendment No. 1 of Main Street Funds, Inc./California Municipal
Fund (Reg. No. 33-34270), 4/26/90 and refiled with Post-Effective Amendment No.
14, 9/30/94, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) (i) Investment Letter dated 12/22/88 from OppenheimerFunds, Inc. to
Registrant: Filed with Registrant's Post-Effective Amendment No. 3, 1/17/89, and
refiled with Post- Effective Amendment No. 14, 9/30/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(14) (i) Form of prototype Standardized and NonStandardized Profit-Sharing
Plans and Money Purchase Plans for self-employed persons and corporations: Filed
with Post-Effective Amendment No. 15 to the Registration Statement of
Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), 1/19/96, and incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust Agreement: Filed with
Post-Effective Amendment No. 21 of Oppenheimer U.S. Government Trust (Reg. No.
2-76645), 8/25/93 and incorporated herein by reference.
(iii) Form of Tax Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations: Previously filed with
Post-Effective Amendment No. 47 of the Registration Statement of Oppenheimer
Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Previously filed with
Post-Effective Amendment No. 15 to the Registration Statement of Oppenheimer
Mortgage Income Fund (Reg. No. 33-6614), 1/19/95, and incorporated herein by
reference.
(v) Form of prototype 401(k) plan: Previously filed with Post-Effective
Amendment No. 7 to the Registration Statement of Oppenheimer Strategic Income &
Growth Fund (Reg. No. 33-47378), 9/28/95, and incorporated herein by reference.
(15) (i) Amended and Restated Service Plan and Agreement dated 10/25/93
for Class A shares of Oppenheimer Main Street Income & Growth Fund: Filed with
Registrant's Post- Effective Amendment No. 14, 9/30/94, and incorporated herein
by reference.
(ii) Distribution and Service Plan and Agreement for Class B
shares of Oppenheimer Main Street Income & Growth Fund dated 10/1/94: Filed
herewith.
(iii) Distribution and Service Plan and Agreement for Class C
shares of Oppenheimer Main Street Income & Growth Fund dated 12/1/93: Filed
herewith.
(iv) Distribution and Service Plan and Agreement for Class B
shares of Oppenheimer Main Street California Municipal Fund dated 2/23/94: Filed
herewith.
(16) (i) Performance Computation Schedule for Oppenheimer Main Street
Income & Growth Fund: Filed herewith.
(ii) Performance Computation Schedule for
Oppenheimer Main Street California Municipal Fund: Filed herewith.
(17) (i) Financial Data Schedule for Class A Shares of Oppenheimer Main
Street Income & Growth Fund: Filed herewith.
(ii) Financial Data Schedule for Class B Shares of Oppenheimer
Main Street Income & Growth Fund: Filed herewith.
(iii) Financial Data Schedule for Class C Shares of Oppenheimer
Main Street Income & Growth Fund: Filed herewith.
(iv) Financial Data Schedule for Class Y Shares of Oppenheimer
Main Street Income & Growth Fund: Filed herewith.
(v) Financial Data Schedule for Class A Shares of Oppenheimer Main
Street California Municipal Fund: Filed herewith.
(vi) Financial Data Schedule for Class B Shares of Oppenheimer
Main Street California Municipal Fund: Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan dated 10/24/95 pursuant to Rule
18f-3 under the Investment Company Act of 1940: Filed with Post-Effective
Amendment No. 12 to the Registration Statement of Oppenheimer California
Municipal Fund (Reg. No. 33- 23566), 11/1/95, and incorporated herein by
reference.
-- Powers of Attorney (including Certified Board resolutions): Previously
filed (all Directors except Bridget A. Macaskill and Sam Freedman) with
Post-Effective Amendment No. 11 to Registrant's Registration Statement, 8/25/93,
and incorporated herein by reference. For Bridget A. Macaskill and Sam Freedman
filed with Post-Effective Amendment No. 18 to Registrant's Registration
Statement, 11/1/96, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
Number of Record
Holders as of
November 21, 1997
Oppenheimer Main Street Income & 331,041
Growth Fund Class A Shares
Oppenheimer Main Street Income & 268,660
Growth Fund Class B Shares
Oppenheimer Main Street Income & 58,386
Growth Fund Class C Shares
Oppenheimer Main Street Income & 1
Growth Fund Class Y Shares
Oppenheimer Main Street California2,022
Municipal Fund Class A Shares
Oppenheimer Main Street California384
Municipal Fund Class B Shares
Item 27. Indemnification
Reference is made to paragraph (b) of Section 7 of Article SEVENTH of
Registrant's Articles of Incorporation filed as Exhibit 24(b)(1) hereto.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, 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 Director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant;
it and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(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
with OppenheimerFunds, Inc. Other Business and Connections During
("OFI") the Past Two Years
- --------------------------- --------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc.("ORAMI"); formerly Vice
President of Equity Derivatives
at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Senior Vice President of HarbourView
Asset Management Corporation ("HarbourView");
prior to March, 1996 he was the
senior equity portfolio manager
for the Panorama Series Fund,
Inc. (the "Company") and other
mutual funds and pension funds
managed by G.R. Phelps & Co.
Inc. ("G.R. Phelps"), the
Company's former investment
adviser, which was a subsidiary
of Connecticut Mutual Life
Insurance Company; was also
responsible for managing the
common stock department and
common stock investments of
Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly a Vice
President and Senior Portfolio
Manager at First of America
Investment Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Vice President Formerly Vice President (January 1992 -
February, 1996) of Asian Equities for Barclays
de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since
May 1996); an officer of other Oppenheimer
funds; formerly an Assistant
Vice President of OFI/Mutual
Fund Accounting (April 1994-May
1996), and a Fund Controller
for OFI.
George C. Bowen,
Senior Vice President & TreasureVice President (since
June 1983) and Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since October
1989) and Treasurer (since April 1986) of
HarbourView; Senior Vice President (since
February 1992), Treasurer (since July 1991)and a
director (since December 1991) of Centennial;
President, Treasurer and a director of
Centennial Capital Corporation (since June
1989); Vice President and Treasurer (since
August 1978) and Secretary (since April 1981) of
Shareholder Services, Inc.
("SSI"); Vice President,
Treasurer and Secretary of
Shareholder Financial Services,
Inc. ("SFSI") (since November
1989); Treasurer of Oppenheimer
Acquisition Corp. ("OAC")
(since June 1990); Treasurer of
Oppenheimer Partnership
Holdings, Inc. (since November
1989); Vice President and
Treasurer of ORAMI (since July
1996); Chief Executive
Officer, Treasurer and a
director of MultiSource
Services, Inc., a broker-dealer
(since December 1995); an
officer of other Oppenheimer
funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of Rochester
Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia College -
Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio manager of certain
Oppenheimer funds.
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
and a director of HarbourView,
SSI, SFSI and Oppenheimer
Partnership Holdings, Inc.
since (September 1995) and
MultiSource Services, Inc. (a
broker-dealer) (since December
1995); President and a
director of Centennial (since
September 1995); President and
a director of ORAMI (since
July 1996); General Counsel
(since May 1996) and Secretary
(since April 1997) of OAC;
Vice President of
OppenheimerFunds International,
Ltd. ("OFIL") and Oppenheimer
Millennium Funds plc (since
October 1997); an officer of
other Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium
Funds plc (since October 1997); an
officer of other Oppenheimer
funds; formerly an Assistant
Vice President of OFI/Mutual
Fund Accounting (April 1994-May
1996), and a Fund Controller
for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the Distributor;
Secretary ofHarbourView, MultiSource and
Centennial; Secretary, Vice
President and Director of
Centennial Capital Corporation;
Vice President and Secretary of
ORAMI.
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; Director (since 1986) of
GeVa Theatre. Formerly he held
the following positions:
formerly, Chairman of the Board
and Director of Rochester Fund
Distributors, Inc. ("RFD");
President and Director of
Fielding Management Company,
Inc. ("FMC"); President and
Director of Rochester Capital
Advisors, Inc. ("RCAI");
Managing Partner of Rochester
Capital Advisors, L.P.,
President and Director of
Rochester Fund Services, Inc.
("RFS"); President and Director of Rochester Tax
Managed Fund, Inc.; Director (1993 - 1997) of
VehiCare Corp.; Director (1993
- 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions: An
officer of certain Oppenheimer funds (May,
1993 - January, 1996);
Secretary of Rochester Capital
Advisors, Inc. and General
Counsel (June, 1993 - January
1996) of Rochester Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996) for
Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds. Formerly
Vice President and General
Counsel of Oppenheimer
Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for Schroder Capital
Management International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the Institute
of Chartered Accountants; formerly an
accountant for Arthur Young
(London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for
Bankers Trust Company (1993-1996); Steering
Committee Member, Subcommittee Chairman for
American Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Vice
President of Fixed Income Portfolio
Management at Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989 -
January, 1997) of Bankers Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-
1997) of Retirement Plans
Services for OppenheimerFunds
Services.
Thomas B. Hayes,
Assistant Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director
of SFSI; President and Chief executive Officer
of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and Portfolio
Manager for Warburg, Pincus
Counsellors, Inc. (1993-1997),
Co-manager of Warburg, Pincus
Emerging Markets Fund (12/94 -10/97), Co-manager
Warburg, Pincus Institutional Emerging
Markets Fund - Emerging Markets
Portfolio (8/96 - 10/97),
Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of
Warburg Pincus International
Equity Fund, Warburg Pincus
Institutional Fund -Intermediate Equity
Portfolio, and Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate General
Counsel at Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly, a Managing
Director of Global Equities at
Paine Webber's Mitchell
Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994 - 1996)
of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Securities Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96), Chinese Finance
Society; formerly, Chairman (11/94-
2/96), Chinese Finance Society;
and Director (6/94-6/95),
Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of
HarbourView; prior to March
1996, the senior bond portfolio
manager for Panorama Series
Fund Inc., other mutual funds
and pension accounts managed by
G.R. Phelps; also responsible
for managing the public fixed-
income securities department at
Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995);
President and director (since June 1991) of
HarbourView; Chairman and a
director of SSI (since August
1994), and SFSI (September
1995); President (since
September 1995) and a director
(since October 1990) of OAC;
President (since September
1995) and a director (since
November 1989) of Oppenheimer
Partnership Holdings, Inc., a
holding company subsidiary of
OFI; a director of ORAMI (since
July 1996) ; President and a
director (since October 1997)
of OFIL, an offshore fund
manager subsidiary of OFI and
Oppenheimer Millennium Funds
plc (since October 1997);
President and a director of
other Oppenheimer funds; a
director of the NASDAQ Stock
Market, Inc. and of Hillsdown
Holdings plc (a U.K. food
company); formerly an Executive
Vice President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 - June,
1996) of Manufacturers Life Insurance
Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -present) for the
Martin Luther King Multi-Purpose Center (non-
profit community organization); Formerly Vice
President (January, 1995 - April, 1996) for
Lockheed Martin IMS.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly a Portfolio
Manager (August, 1989 - August,
1995) with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November
1996) for Chase Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with CohaRafferty
Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the Distributor.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Russell Read,
Senior Vice President Formerly a consultant for Prudential Insurance
on behalf of the General Motors Pension Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of certain
Oppenheimer funds; Formerly, Vice President
(June, 1983 - January, 1996) of
RFS, President and Director of
RFD; Vice President and
Director of FMC; Vice President
and director of RCAI; General
Partner of RCA; Vice President
and Director of Rochester Tax
Managed Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly Vice President
and Portfolio Manager/Security
Analyst for Oppenheimer Capital
Corp., an investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of CiticorpInvestment
Services
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based
Oppenheimer Funds; formerly Chairman of the
Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester DivisiAssistant 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.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group Pension
Strategy and Marketing for Manulife
Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of
HarbourView; prior to March
1996, an equity portfolio
manager for Panorama Series
Fund, Inc. and other mutual
funds and pension accounts
managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing
Partner of the Denver-based Oppenheimer
Funds; President and a Director
of Centennial; formerly
President and Director of OAMC,
and Chairman of the Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Managing
Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant TreasureAssistant Treasurer of the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based tax-
exempt fixed income Oppenheimer
funds; Formerly, Managing
Director and Chief Fixed Income
Strategist at Prudential Mutual
Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Vice President of
HarbourView; prior to March
1996, an equity portfolio
manager for Panorama Series
Fund, Inc. and other mutual
funds and pension funds managed
by G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial; Vice President, Finance and
Accounting and member of the Board of Directors
of the Junior League of Denver, Inc.; Point of
Contact: Finance Supporters of Children; Member
of the Oncology Advisory Board of the Childrens
Hospital; Member of the Board of Directors of
the Colorado Museum of Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985), and
SFSI (since November 1989);
Assistant Secretary of
Oppenheimer Millennium Funds
plc (since October 1997); an
officer of other Oppenheimer
funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
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 Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise 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 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 U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
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 Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income 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 MultiSource Services,
Inc. is 1700 Lincoln Street, Denver,
Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625-2807.
Item 29. 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 28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
- ---------------- ------------------- -----------------
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the Oppenheimer
funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice PresidentNone
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President
None
Rhonda Dixon-Gunner(1) Assistant Vice President
None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the Oppenheimer funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice PresidentNone
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National
None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President
None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President
None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne a. LeBlang Senior Vice President
None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President
None
Laura Mulhall(2) Senior Vice PresidentNone
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
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III(2Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1)Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
rules promulgated thereunder are in the possession of OppenheimerFunds, Inc. at
its offices at 6803 South Tucson Way, Englewood, CO 80112.
Item 31. Management Services
Not applicable.
Item 32. Undertaking
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
C-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 8th day of December, 1997.
OPPENHEIMER MAIN STREET FUNDS, INC.
By: /s/ James C. Swain*
----------------------------------
James C. Swain, Chairman
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/ James C. Swain* Chairman of the
- ------------------ Board of Directors December 8, 1997
James C. Swain and Chief Executive
Officer
/s/ Bridget a. Macaskill* President and
- -------------------- Director December 8, 1997
Bridget a. Macaskill
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting December 8, 1997
George C. Bowen Officer
/s/ Robert G. Avis* Director December 8, 1997
- ------------------
Robert G. Avis
/s/ William a. Baker* Director December 8, 1997
- --------------------
William a. Baker
/s/ Charles Conrad, Jr.* Director December 8, 1997
- -----------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Director December 8, 1997
- --------------------
Jon S. Fossel
/s/ Sam Freedman* Director December 8, 1997
- --------------------
Sam Freedman
/s/ Raymond J. Kalinowski*Director December 8, 1997
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director December 8, 1997
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director December 8, 1997
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Director December 8, 1997
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
EXHIBIT INDEX
-------------
Form N-1A
Item No. Description
- ---------- -----------
15(ii) Amended Distribution and Service Plan and Agreement
for Main Street Income & Growth Fund Class B
15(iii) Amended Distribution and Service Plan and Agreement
for Main Street Income & Growth Fund Class C
15(iv) Amended Distribution and Service Plan and Agreement
for Main Street California Municipal Fund Class B
24(b)(11) Independent Auditors' Consent
24(b)(16)(i) Performance Data Computation Schedule for Main Street
Income & Growth Fund 8/31/97
24(b)(16)(ii) Performance Data Computation Schedule for Oppenheimer
Main Street California Municipal Fund 8/31/97
24(b)(17)(i) Financial Data Schedule for Class A Shares Oppenheimer
Main Street Income & Growth Fund 8/31/97
24(b)(17)(ii) Financial Data Schedule for Class B Shares Oppenheimer
Main Street Income & Growth Fund 8/31/97
24(b)(17)(iii) Financial Data Schedule for Class C Shares Oppenheimer
Main Street Income & Growth Fund 8/31/97
24(b)(17)(iv) Financial Data Schedule for Class Y Shares Oppenheimer
Main Street Income & Growth Fund 8/31/97
24(b)(17)(v) Financial Data Schedule for Class A Shares Oppenheimer
Main Street California Municipal Fund 8/31/97
24(b)(17)(vi) Financial Data Schedule for Class B Shares Oppenheimer
Main Street California Municipal Fund 8/31/97
C-3
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
Oppenheimer Main Street Funds, Inc.:
We consent to the use in this Post-Effective Amendment No. 21 to Registration
Statement No. 33-17850 of our reports dated and September on the financial
statements of Oppenheimer Main Street Income & Growth Fund and Oppenheimer Main
Street California Municipal Fund appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
reference to us under the caption "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche
Denver, Colorado
December 3, 1997
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 1st day of
October, 1994, by and between OPPENHEIMER MAIN STREET FUNDS, INC. (the
"Corporation") on behalf of OPPENHEIMER MAIN STREET INCOME & GROWTH FUND (the
"Fund"), a series of the Corporation, and OPPENHEIMER FUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Fund will compensate the Distributor for a portion of its costs
incurred in connection with the distribution of Shares, and the personal service
and maintenance of shareholder accounts that hold Shares ("Accounts"). The Fund
may act as distributor of securities of which it is the issuer, pursuant to the
Rule, according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (a)
distribution assistance in connection with the sale of Shares and/or (b)
administrative support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under this Plan.
The terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the 1940
Act, (ii) the Rule, (iii) Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., or any applicable amendment or
successor to such rule (the "NASD Conduct Rules"), and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of distribution,
to which the Fund is subject under any order on which the Fund relies, issued at
any time by the United States Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative
or both) in the distribution of Shares or has provided administrative
support service with respect to Shares held by Customers (defined below)
of the Recipient;
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(ii) shall furnish the Distributor (on behalf of the Fund)
with such information as the Distributor shall reasonably request to
answer such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments under the
Plan. Notwithstanding the foregoing, a majority of the Trust's Board of
Directors (the "Board") who are not "interested persons" (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Directors") may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such brokerage
or other customers or investment advisory or other clients of such
Recipient and/or accounts as to which such Recipient is a fiduciary or
custodian or co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the Recipient which
is the dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) The Fund will make payments to the Distributor, (i) within forty-five
(45) days of the end of each calendar quarter, in the aggregate amount of
0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day (the "Service Fee"), plus (ii) within ten (10)
days of the end of each month, in the aggregate amount of 0.0625% (0.75%
on an annual basis) of the average during the month of the aggregate net
asset value of Shares computed as of the close of each business day (the
"Asset-Based Sales Charge") outstanding for six years or less (the
"Maximum Holding Period"). Such Service Fee payments received from the
Fund will compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board with
respect to Accounts. Such Asset-Based Sales Charge payments received from
the Fund will compensate the Distributor and Recipients for providing
distribution assistance in connection with the sale of Shares.
The administrative support services in connection with the Accounts to be
rendered by Recipients may include, but shall not be limited to, the
following: answering routine inquires concerning the Fund, assisting in
the establishment and maintenance of accounts or sub-accounts in the Fund
and processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and providing
such other information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the Distributor
or the Fund may reasonably request. The distribution assistance in
connection with the sale of Shares to be rendered by the Distributor and
Recipients may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished
to current holders of the Fund's Shares ("Shareholders"), and providing
such other information and services in connection with the distribution of
Shares as the Distributor of the Fund may reasonably request. It may be
presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if
it has Qualified Holdings or Shares to entitle it to payments under the
Plan.
In the event that either the Distributor or the Board should have reason
to believe that, notwithstanding the level of Qualified Holdings, a
Recipient may not be rendering appropriate distribution assistance in
connection with the sale of Shares or administrative support services for
the Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If either the Distributor or
the Board still is not satisfied, it may take appropriate steps to
terminate the Recipient's status as such under the Plan, whereupon such
entity's rights as a third-party beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of
Shares, computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient or by
its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, to be set from time to time by a majority of the
Independent Directors.
Alternatively, the Distributor may, at its sole option, make Service Fee
payments ("Advance Service Fee Payments") to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (i) 0.25% of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of business
on the day such Shares are sold, constituting Qualified Holdings sold by
the Recipient during that quarter and owned beneficially or of record by
the Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate net
asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than one (1) year,
subject to reduction or chargeback so that the Advance Service Fee
Payments do not exceed the limits on payments to Recipients that are, or
may be, imposed by Rule 2830 of the Conduct Rules. However, no such
payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Directors. The Advance Service
Fee Payments described in part (i) of the preceding sentence may, at the
Distributor's sole option, be made more often than quarterly, and sooner
than the end of the calendar quarter. In the event Shares are redeemed
less than one year after the date such Shares were sold, the Recipient is
obligated and will repay to the Distributor on demand a pro rata portion
of such Advance Service Fee Payments, based on the ratio of the time such
shares were held to one (1) year.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease and thereafter adjust the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the rates
set forth above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period or Minimum Holding
Period, if any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus
shall constitute sufficient notice. The Distributor may make Plan payments
to any "affiliated person" (as defined in the 1940 Act) of the Distributor
if such affiliated person qualifies as a Recipient.
(d) The Distributor is entitled to retain from the payments described in
Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period, plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or elimination of
such amounts under the limits to which the Distributor is, or may become,
subject under Rule 2830 of the Conduct Rules. Such amount is collectively
referred to as the "Quarterly Limitation."
The distribution assistance and administrative support services in
connection with the sale of Shares to be rendered by the Distributor may
include, but shall not be limited to,
the following: (i) paying sales commissions to any broker, dealer, bank or
other person or entity that sells Shares, and/or paying such persons
Advance Service Fee Payments in advance of, and/or greater than, the
amount provided for in Section 3 (b) of this Plan; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) paying of or reimbursing the
Distributor for interest and other borrowing costs on unreimbursed Carry
Forward Expenses (as hereafter defined) at the rate paid by the
Distributor or, if such amounts are financed by the Distributor from its
own resources or by an affiliate, at the rate of 1% per annum above the
prime rate (which shall mean the most preferential interest rate on
corporate loans at large U.S. money center commercial banks) then being
reported in the Eastern edition of the Wall Street Journal (or if such
prime rate is no longer so reported, such other rate as may be designated
from time to time by the Distributor with the approval of the Independent
Directors); (iv) other direct distribution costs of the type approved by
the Board, including without limitation the costs of sales literature,
advertising and prospectuses (other than those furnished to current
Shareholders) and state "blue sky" registration expenses; and (v) any
service rendered by the Distributor that a Recipient may render pursuant
to part (a) of this Section 3.
The Distributor's costs of providing the above-mentioned services are
hereinafter collectively referred to as "Distribution and Service Costs."
"Carry Forward Expenses" are Distribution and Service Costs that are not
paid in the fiscal quarter in which they arise because they exceed the
Quarterly Limitation. In the event that the Board should have reason to
believe that the Distributor may not be rendering appropriate distribution
assistance or administrative support services in connection with the sale
of Shares, then the Distributor, at the request of the Board, shall
provide the Board with a written report or other information to verify
that the Distributor is providing appropriate services in this regard.
(e) The excess in any fiscal quarter of (i) the Quarterly Limitation plus
any contingent deferred sales charge ("CDSC") payments recovered by the
Distributor on the proceeds of redemption of Shares over (ii) Distribution
and Service Costs during that quarter, shall be applied in the following
order of priority: first to interest on unreimbursed Carry Forward
Expenses, second to reduce any unreimbursed Carry Forward Expenses, third
to reduce Distribution and Service Costs during that quarter, and fourth
to reduce the Asset-Based Sales Charge payments by the Fund to the
Distributor in that quarter. Carry Forward Expenses shall be carried
forward by the Fund until payment can be made under the Quarterly
Limitation.
(f) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund), or (ii)
by the Distributor (a subsidiary of OFI), from its own resources, from
Asset-Based Sales Charge payments or from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those persons to be Directors of the Fund who are
not "interested persons" of the Fund ("Disinterested Directors") shall be
committed to the discretion of such Disinterested Directors. Nothing herein
shall prevent the Disinterested Directors from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing
distribution expenditures properly attributable to the Shares, including the
amount of all payments made pursuant to this Plan, the identity of the Recipient
of each such payment, the amount paid to the Distributor, and the Distribution
and Service Costs and Carry Forward Expenses for that period. The report shall
state whether all provisions of Section 3 of this Plan have been complied with.
The Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years and
not previously recovered with respect to the distribution of Shares in
conjunction with the Board's annual review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Directors cast in person at a meeting called
for the purpose of voting on such agreement; and (iv) it shall, unless
terminated as herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by a vote of the
Board and its Independent Directors cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Directors cast in person at
a meeting called on June 28, 1994 for the purpose of voting on this Plan, and
takes effect as of October 1, 1994. Unless terminated as hereinafter provided,
it shall continue in effect year to year thereafter or as the Board may
otherwise determine only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Directors cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may not be amended to increase materially the amount of payments to be made
without approval of the Class B Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Directors. This Plan may be terminated at any time by vote of a
majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities of the Class. In the event of such termination, the Board and its
Independent Directors shall determine whether the Distributor is entitled to
payment from the Fund of all Carry Forward Expenses and related costs properly
incurred in respect of Shares sold prior to the effective date of such
termination, and whether the Fund shall continue to make payment to the
Distributor in the amount the Distributor is entitled to retain under part (d)
of Section 3 hereof, until such time as the Distributor has been reimbursed for
all such amounts by the Fund, by retaining CDSC payments, or by a combination of
both.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of OPPENHEIMER MAIN STREET
INCOME & GROWTH FUND
By:_________________________________
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:__________________________________
2
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 1st day of
December, 1993, by and between OPPENHEIMER MAIN STREET FUNDS, INC. (the
"Corporation") on behalf of OPPENHEIMER MAIN STREET INCOME & GROWTH FUND (the
"Fund"), a series of the Corporation, and OPPENHEIMER FUNDS DISTRIBUTOR, INC.
(the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Fund will compensate the Distributor for a portion of its costs
incurred in connection with the distribution of Shares, and the personal service
and maintenance of shareholder accounts that hold Shares ("Accounts"). The Fund
may act as distributor of securities of which it is the issuer, pursuant to the
Rule, according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (a)
distribution assistance in connection with the sale of Shares and/or (b)
administrative support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under this Plan.
The terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the 1940
Act, (ii) the Rule, (iii) Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., or any applicable amendment or
successor to such rule (the "NASD Conduct Rules"), and (iv) any conditions
pertaining either to distribution related expenses or to a plan of distribution,
to which the Fund is subject under any order on which the Fund relies, issued at
any time by the United States Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative
or both) in the distribution of Shares or has provided administrative
support service with respect to Shares held by Customers (defined below)
of the Recipient;
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(ii) shall furnish the Distributor (on behalf of the Fund)
with such information as the Distributor shall reasonably request to
answer such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments under the
Plan. Notwithstanding the foregoing, a majority of the Fund's Board of
Directors (the "Board") who are not "interested persons" (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Directors") may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such brokerage
or other customers or investment advisory or other clients of such
Recipient and/or accounts as to which such Recipient is a fiduciary or
custodian or co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the Recipient which
is the dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) The Fund will make payments to the Distributor, within forty-five (45)
days of the end of each calendar quarter, (i) in the aggregate amount of
0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day (the "Service Fee"), plus (ii) 0.1875% (0.75%
on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of the Shares computed as of the close of each
business day (the "Asset-Based Sales Charge"). Such Service Fee payments
received from the Fund will compensate the Distributor and Recipients for
providing administrative support services of the type approved by the
Board with respect to Accounts. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor and Recipients for
providing distribution assistance in connection with the sale of Shares.
The administrative support services in connection with the Accounts to be
rendered by Recipients may include, but shall not be limited to, the
following: answering routine inquires concerning the Fund, assisting in
establishing and maintaining accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment
plans and dividend payment options available, and providing such other
information and services in connection with the
rendering of personal services and/or the maintenance of Accounts, as the
Distributor of the Fund may reasonably request. The distribution
assistance in connection with the sale of Shares to be rendered by
Recipients may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished
to current holders of the Fund's Shares ("Shareholders"), and providing
such other information and services in connection with the distribution of
Shares as the Distributor of the Fund may reasonably request. It may be
presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if
it has Qualified Holdings or Shares to entitle it to payments under the
Plan.
In the event that either the Distributor or the Board should have reason
to believe that, notwithstanding the level of Qualified Holdings, a
Recipient may not be rendering appropriate distribution assistance in
connection with the sale of Shares or administrative support services for
the Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If either the Distributor or
the Board still is not satisfied, it may take appropriate steps to
terminate the Recipient's status as such under the Plan, whereupon such
entity's rights as a third-party beneficiary hereunder shall terminate.
(b) (i) Service Fees. The Distributor shall make service fee payments to
any Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period
(the "Minimum Holding Period"), if any, to be set from time to time by a
majority of the Independent Directors.
Alternatively, the Distributor may, at its sole option, make service fee
payments ("Advance Service Fee Payments") to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (A) 0.25% of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of business
on the day such Shares are sold, constituting Qualified Holdings sold by
the Recipient during that quarter and owned beneficially or of record by
the Recipient or by its Customers, plus (B) 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate net
asset value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than one (1) year,
subject to reduction or chargeback so that the Advance Service Fee
Payments do not exceed the limits on payments to Recipients that are, or
may be, imposed by Rule 2830 of the NASD Conduct Rules. The Advance
Service Fee Payments described in part (A) of the preceding sentence may,
at the Distributor's sole option, be made more often than quarterly, and
sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the
Recipient is obligated and will repay to the Distributor on demand a pro
rata portion of such Advance Service Fee Payments, based on the ratio of
the time such shares were held to one (1) year.
(ii) Asset-Based Sales Charge Payments. Irrespective of which alternative
method of service fee payment is selected by the Distributor, the
Distributor shall make asset-based sales charge payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.1875% (0.75% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of
Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers for a period of more than one (1) year. However, no such service
fee or asset-based sales charge payments (collectively, the "Recipient
Payments") shall be made to any Recipient for any such quarter in which
its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, to be set from
time to time by a majority of the Independent Directors.
(c) A majority of the Independent Directors may at any time or from time
to time increase or decrease and thereafter adjust the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the rates
set forth above, and/or direct the Distributor to increase or decrease the
Minimum Holding Period or the Minimum Qualified Holdings. The Distributor
shall notify all Recipients of the Minimum Qualified Holdings or Minimum
Holding Period, if any, and the rates of Recipient Payments hereunder
applicable to Recipients, and shall provide each Recipient with written
notice within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a revised
current prospectus shall constitute sufficient notice. The Distributor may
make Plan payments to any "affiliated person" (as defined in the 1940 Act)
of the Distributor if such affiliated person qualifies as a Recipient.
(d) The Distributor is entitled to retain from the payments described in
Section 3(a) the aggregate amount of (i) the
Service Fee on Shares outstanding for less than the Minimum Holding
Period, (ii) the Asset-Based Sales Charge on Shares outstanding for not
more than the one (1) year, plus (iii) any additional Asset-Based Sales
Charge payment which no Recipient qualifies to receive, in each case
computed as of the close of each business day during that period and
subject to reduction or elimination of such amounts under the limits to
which the Distributor is, or may become, subject under Rule 2830 of the
NASD Conduct Rules. Such amount is collectively referred to as the
"Quarterly Limitation."
The distribution assistance and administrative support services in
connection with the sale of Shares to be rendered by the Distributor may
include, but shall not be limited to, the following: (i) paying sales
commissions to any broker, dealer, bank or other person or entity that
sells Shares, and/or paying such persons Advance Service Fee Payments in
advance of, and/or greater than, the amount provided for in Section 3(b)
of this Plan; (ii) paying compensation to and expenses of personnel of the
Distributor who support distribution of Shares by Recipients; (iii) paying
of or reimbursing the Distributor for interest and other borrowing costs
on unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of 1%
per annum above the prime rate (which shall mean the most preferential
interest rate on corporate loans at large U.S. money center commercial
banks) then being reported in the Eastern edition of the Wall Street
Journal (or if such prime rate is no longer so reported, such other rate
as may be designated from time to time by the Distributor with the
approval of the Independent Directors); (iv) other direct distribution
costs of the type approved by the Board, including without limitation the
costs of sales literature, advertising and prospectuses (other than those
furnished to current Shareholders) and state "blue sky" registration
expenses; and (v) any service rendered by the Distributor that a Recipient
may render pursuant to part (a) of this Section 3.
The Distributor's costs of providing the above-mentioned services are
hereinafter collectively referred to as "Distribution and Service Costs."
"Carry Forward Expenses" are Distribution and Service Costs that are not
paid in the quarter in which they arise because they exceed the Quarterly
Limitation. In the event that the Board should have reason to believe that
the Distributor may not be rendering appropriate distribution assistance
or administrative support services in connection with the sale of Shares,
then the Distributor, at the request of the Board, shall provide the Board
with a written report or other information to verify that the Distributor
is providing appropriate services in this regard.
(e) The excess in any quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered by
the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied in
the following order of priority: first to interest on unreimbursed Carry
Forward Expenses, second to reduce any unreimbursed Carry Forward
Expenses, third to reduce Distribution and Service Costs during that
quarter, and fourth, to reduce the Asset Based Sales Charge payments by
the Fund to the Distributor in that quarter. Carry Forward Expenses shall
be carried forward by the Fund until payment can be made under the
Quarterly Limitation.
(f) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund), or (ii)
by the Distributor (a subsidiary of OFI), from its own resources, from
Asset-Based Sales Charge payments or from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those persons to be Directors of the Fund who are
not "interested persons" of the Fund ("Disinterested Directors") shall be
committed to the discretion of such Disinterested Directors. Nothing herein
shall prevent the Disinterested Directors from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing
distribution expenditures properly attributable to the Shares, including the
amount of all payments made pursuant to this Plan, the identity of the Recipient
of each such payment, the amount paid to the Distributor, and the Distribution
and Service Costs and Carry Forward Expenses for that period. The report shall
state whether all provisions of Section 3 of this Plan have been complied with.
The Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years and
not previously recovered with respect to the distribution of Shares in
conjunction with the Board's annual review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Directors cast in person at a meeting called
for the purpose of
voting on such agreement; and (iv) it shall, unless terminated as herein
provided, continue in effect from year to year only so long as such continuance
is specifically approved at least annually by a vote of the Board and its
Independent Directors cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Directors cast in person at
a meeting called on October 26, 1993 for the purpose of voting on this Plan, and
takes effect as of the date first set forth above. Unless terminated as
hereinafter provided, it shall continue in effect from year to year from the
date first set forth above or as the Board may otherwise determine only so long
as such continuance is specifically approved at least annually by a vote of the
Board and its Independent Directors cast in person at a meeting called for the
purpose of voting on such continuance. This Plan may not be amended to increase
materially the amount of payments to be made without approval of the Class C
Shareholders, in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Directors. This Plan may
be terminated at any time by vote of a majority of the Independent Directors or
by the vote of the holders of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities of the Class. In the event of such
termination, the Board and its Independent Directors shall determine whether the
Distributor is entitled to payment from the Fund of all Carry Forward Expenses
and related costs properly incurred in respect of Shares sold prior to the
effective date of such termination, and whether the Fund shall continue to make
payment to the Distributor in the amount the Distributor is entitled to retain
under part (d) of Section 3 hereof, until such time as the Distributor has been
reimbursed for all such amounts by the Fund, by retaining CDSC payments, or by a
combination of both.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of OPPENHEIMER MAIN STREET
INCOME & GROWTH FUND
By:_________________________________
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:__________________________________
2
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER MAIN STREET CALIFORNIA MUNICIPAL FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 23rd day of
February, 1994, by and between OPPENHEIMER MAIN STREET FUNDS, INC. (the
"Corporation") on behalf of OPPENHEIMER MAIN STREET CALIFORNIA MUNICIPAL FUND
(the "Fund"), a series of the Corporation, and OPPENHEIMER FUNDS DISTRIBUTOR,
INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940 (the "1940 Act"), pursuant to
which the Fund will compensate the Distributor for a portion of its costs
incurred in connection with the distribution of Shares, and the personal service
and maintenance of shareholder accounts that hold Shares ("Accounts"). The Fund
may act as distributor of securities of which it is the issuer, pursuant to the
Rule, according to the terms of this Plan. The Distributor is authorized under
the Plan to pay "Recipients," as hereinafter defined, for rendering (a)
distribution assistance in connection with the sale of Shares and/or (b)
administrative support services with respect to Accounts. Such Recipients are
intended to have certain rights as third-party beneficiaries under this Plan.
The terms and provisions of this Plan shall be interpreted and defined in a
manner consistent with the provisions and definitions contained in (i) the 1940
Act, (ii) the Rule, (iii) Rule 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc., or any applicable amendment or
successor to such rule (the "NASD Conduct Rules"), and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of distribution,
to which the Fund is subject under any order on which the Fund relies, issued at
any time by the United States Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative
or both) in the distribution of Shares or has provided administrative
support service with respect to Shares held by Customers (defined below)
of the Recipient;
1
<PAGE>
(ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such
questions as may arise concerning the sale of Shares; and (iii) has been
selected by the Distributor to receive payments under the Plan.
Notwithstanding the foregoing, a majority of the Trust's Board of
Directors (the "Board") who are not "interested persons" (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan (the
"Independent Directors") may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such brokerage
or other customers or investment advisory or other clients of such
Recipient and/or accounts as to which such Recipient is a fiduciary or
custodian or co-fiduciary or co-custodian (collectively, the "Customers"),
but in no event shall any such Shares be deemed owned by more than one
Recipient for purposes of this Plan. In the event that two entities would
otherwise qualify as Recipients as to the same Shares, the Recipient which
is the dealer of record on the Fund's books shall be deemed the Recipient
as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) The Fund will make payments to the Distributor, (i) within forty-five
(45) days of the end of each calendar quarter, in the aggregate amount of
0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares computed as of the
close of each business day (the "Service Fee"), plus (ii) within ten (10)
days of the end of each month, in the aggregate amount of 0.0625% (0.75%
on an annual basis) of the average during the month of the aggregate net
asset value of Shares computed as of the close of each business day (the
"Asset-Based Sales Charge") outstanding for six years or less (the
"Maximum Holding Period"). Such Service Fee payments received from the
Fund will compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board with
respect to Accounts. Such Asset-Based Sales Charge payments received from
the Fund will compensate the Distributor and Recipients for providing
distribution assistance in connection with the sale of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall
not be limited to, the following: answering routine inquires
2
<PAGE>
concerning the Fund, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services in
connection with the rendering of personal services and/or the maintenance
of Accounts, as the Distributor or the Fund may reasonably request. The
distribution assistance in connection with the sale of Shares to be
rendered by the Distributor and Recipients may include, but shall not be
limited to, the following: distributing sales literature and prospectuses
other than those furnished to current holders of the Fund's Shares
("Shareholders"), and providing such other information and services in
connection with the distribution of Shares as the Distributor of the Fund
may reasonably request. It may be presumed that a Recipient has provided
distribution assistance or administrative support services qualifying for
payment under the Plan if it has Qualified Holdings or Shares to entitle
it to payments under the Plan.
In the event that either the Distributor or the Board should have reason
to believe that, notwithstanding the level of Qualified Holdings, a
Recipient may not be rendering appropriate distribution assistance in
connection with the sale of Shares or administrative support services for
the Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If either the Distributor or
the Board still is not satisfied, it may take appropriate steps to
terminate the Recipient's status as such under the Plan, whereupon such
entity's rights as a third-party beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of
Shares, computed as of the close of each business day, constituting
Qualified Holdings owned beneficially or of record by the Recipient or by
its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, to be set from time to time by a majority of the
Independent Directors.
Alternatively, the Distributor may, at its sole option, make Service Fee
payments ("Advance Service Fee Payments") to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at a rate
not to exceed (i) 0.25% of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of business
on
3
<PAGE>
the day such Shares are sold, constituting Qualified Holdings sold by the
Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate net
asset value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than one (1) year,
subject to reduction or chargeback so that the Advance Service Fee
Payments do not exceed the limits on payments to Recipients that are, or
may be, imposed by Rule 2830 of the Conduct Rules. However, no such
payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Directors. The Advance Service
Fee Payments described in part (i) of the preceding sentence may, at the
Distributor's sole option, be made more often than quarterly, and sooner
than the end of the calendar quarter. In the event Shares are redeemed
less than one year after the date such Shares were sold, the Recipient is
obligated and will repay to the Distributor on demand a pro rata portion
of such Advance Service Fee Payments, based on the ratio of the time such
shares were held to one (1) year.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease and thereafter adjust the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the rates
set forth above, and/or direct the Distributor to increase or decrease the
Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period or Minimum Holding
Period, if any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within
thirty (30) days after any change in these provisions. Inclusion of such
provisions or a change in such provisions in a revised current prospectus
shall constitute sufficient notice. The Distributor may make Plan payments
to any "affiliated person" (as defined in the 1940 Act) of the Distributor
if such affiliated person qualifies as a Recipient.
(d) The Distributor is entitled to retain from the payments described in
Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period, plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or elimination of
such amounts under the limits to which the Distributor is,
4
<PAGE>
or may become, subject under Rule 2830 of the NASD Conduct
Rules. Such amount is collectively referred to as the
"Quarterly Limitation."
The distribution assistance and administrative support services in
connection with the sale of Shares to be rendered by the Distributor may
include, but shall not be limited to, the following: (i) paying sales
commissions to any broker, dealer, bank or other person or entity that
sells Shares, and/or paying such persons Advance Service Fee Payments in
advance of, and/or greater than, the amount provided for in Section 3 (b)
of this Plan; (ii) paying compensation to and expenses of personnel of the
Distributor who support distribution of Shares by Recipients; (iii) paying
of or reimbursing the Distributor for interest and other borrowing costs
on unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of 1%
per annum above the prime rate (which shall mean the most preferential
interest rate on corporate loans at large U.S. money center commercial
banks) then being reported in the Eastern edition of the Wall Street
Journal (or if such prime rate is no longer so reported, such other rate
as may be designated from time to time by the Distributor with the
approval of the Independent Directors); (iv) other direct distribution
costs of the type approved by the Board, including without limitation the
costs of sales literature, advertising and prospectuses (other than those
furnished to current Shareholders) and state "blue sky" registration
expenses; and (v) any service rendered by the Distributor that a Recipient
may render pursuant to part (a) of this Section 3.
The Distributor's costs of providing the above-mentioned services are
hereinafter collectively referred to as "Distribution and Service Costs."
"Carry Forward Expenses" are Distribution and Service Costs that are not
paid in the quarter in which they arise because they exceed the Quarterly
Limitation. In the event that the Board should have reason to believe that
the Distributor may not be rendering appropriate distribution assistance
or administrative support services in connection with the sale of Shares,
then the Distributor, at the request of the Board, shall provide the Board
with a written report or other information to verify that the Distributor
is providing appropriate services in this regard.
(e) The excess in any quarter of (i) the Quarterly Limitation plus any
contingent deferred sales charge ("CDSC") payments recovered by the
Distributor on the proceeds of redemption of Shares over (ii) Distribution
and Service Costs during that quarter, shall be applied in the following
order of priority: first to interest on unreimbursed Carry Forward
Expenses,
5
<PAGE>
second to reduce any unreimbursed Carry Forward Expenses, third to reduce
Distribution and Service Costs during that quarter, and fourth to reduce
the Asset-Based Sales Charge payments by the Fund to the Distributor in
that quarter. Carry Forward Expenses shall be carried forward by the Fund
until payment can be made under the Quarterly Limitation.
(f) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include
profits derived from the advisory fee it receives from the Fund), or (ii)
by the Distributor (a subsidiary of OFI), from its own resources, from
Asset-Based Sales Charge payments or from its borrowings.
4. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those persons to be Directors of the Fund who are
not "interested persons" of the Fund ("Disinterested Directors") shall be
committed to the discretion of such Disinterested Directors. Nothing herein
shall prevent the Disinterested Directors from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Disinterested Directors.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing
distribution expenditures properly attributable to the Shares, including the
amount of all payments made pursuant to this Plan, the identity of the Recipient
of each such payment, the amount paid to the Distributor, and the Distribution
and Service Costs and Carry Forward Expenses for that period. The report shall
state whether all provisions of Section 3 of this Plan have been complied with.
The Distributor shall annually certify to the Board the amount of its total
expenses incurred that year and its total expenses incurred in prior years and
not previously recovered with respect to the distribution of Shares in
conjunction with the Board's annual review of the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Directors or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act); (iii) it shall go into effect when approved by a vote
of the Board and its Independent Directors cast in person at a meeting called
for the purpose of voting on such agreement; and (iv) it shall, unless
terminated as herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by
6
<PAGE>
a vote of the Board and its Independent Directors cast in person at a meeting
called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Directors cast in person at
a meeting called on February 23, 1994 for the purpose of voting on this Plan,
and replaces the Fund's Distribution and Service Plan and Agreement dated
October 25, 1993. Unless terminated as hereinafter provided, it shall continue
in effect year to year thereafter or as the Board may otherwise determine only
so long as such continuance is specifically approved at least annually by a vote
of the Board and its Independent Directors cast in person at a meeting called
for the purpose of voting on such continuance. This Plan may not be amended to
increase materially the amount of payments to be made without approval of the
Class B Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Directors. This
Plan may be terminated at any time by vote of a majority of the Independent
Directors or by the vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities of the Class. In the event of
such termination, the Board and its Independent Directors shall determine
whether the Distributor is entitled to payment from the Fund of all Carry
Forward Expenses and related costs properly incurred in respect of Shares sold
prior to the effective date of such termination, and whether the Fund shall
continue to make payment to the Distributor in the amount the Distributor is
entitled to retain under part (d) of Section 3 hereof, until such time as the
Distributor has been reimbursed for all such amounts by the Fund, by retaining
CDSC payments, or by a combination of both.
OPPENHEIMER MAIN STREET FUNDS, INC.
on behalf of OPPENHEIMER MAIN STREET
CALIFORNIA MUNICIPAL FUND
By:_________________________________
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:__________________________________
7
Oppenheimer Main Street Income & Growth Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
06/23/88 0.0400000 0.0000000 10.100
09/22/88 0.0400000 0.0000000 9.970
12/22/88 0.0450000 0.1330000 10.030
03/22/89 0.0500000 0.0000000 10.690
06/22/89 0.0500000 0.0000000 11.860
09/21/89 0.0500000 0.0000000 12.410
12/21/89 0.0500000 0.1500000 12.080
03/22/90 0.0400000 0.0000000 12.270
06/21/90 0.0500000 0.0000000 12.330
09/20/90 0.0500000 0.0000000 11.410
12/20/90 0.2600000 0.0000000 11.120
03/21/91 0.0500000 0.0000000 12.860
06/20/91 0.0500000 0.0000000 13.480
09/19/91 0.0500000 0.0000000 15.860
12/19/91 0.0700000 2.5100000 14.220
03/26/92 0.0500000 0.0000000 16.540
06/25/92 0.0500000 0.0000000 15.020
09/25/92 0.0500000 0.0000000 15.790
12/29/92 0.0420000 2.2020000 17.410
03/26/93 0.0500000 0.0000000 19.000
06/25/93 0.0500000 0.0000000 19.480
09/24/93 0.0800000 0.0000000 22.250
11/29/93 0.0960000 1.9890000 20.670
03/25/94 0.0800000 0.0000000 22.680
06/24/94 0.1000000 0.0000000 20.170
09/23/94 0.1000000 0.0000000 21.330
12/20/94 0.1612000 0.0024000 20.550
03/24/95 0.1000000 0.0000000 22.580
06/27/95 0.1000000 0.0000000 23.880
09/26/95 0.1000000 0.0000000 25.860
12/22/95 0.1251500 0.0784200 26.620
03/25/96 0.1000000 0.0000000 28.270
06/14/96 0.1000000 0.0000000 28.890
09/12/96 0.1000000 0.0000000 28.460
12/10/96 0.1007100 1.9771500 29.170
03/11/97 0.1000000 0.0000000 30.970
06/12/97 0.1000000 0.0000000 32.730
Class B Shares
12/20/94 0.1442000 0.0024000 20.530
03/24/95 0.0740000 0.0000000 22.530
06/27/95 0.0640000 0.0000000 23.810
09/26/95 0.0590000 0.0000000 25.780
12/22/95 0.8234000 0.0784200 26.530
03/25/96 0.0540000 0.0000000 28.160
06/14/96 0.0550000 0.0000000 28.780
09/12/96 0.0520000 0.0000000 28.340
12/10/96 0.0348800 1.9771500 29.050
03/11/97 0.0470000 0.0000000 30.840
06/12/97 0.0440000 0.0000000 32.580
<PAGE>
Oppenheimer Main Street Income & Growth Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class C Shares
03/25/94 0.0640000 0.0000000 22.610
06/24/94 0.0720000 0.0000000 20.100
09/23/94 0.0670000 0.0000000 21.250
12/20/94 0.1212000 0.0024000 20.480
03/24/95 0.0660000 0.0000000 22.490
06/27/95 0.0570000 0.0000000 23.780
09/26/95 0.0540000 0.0000000 25.750
12/22/95 0.0798100 0.0784200 26.500
03/25/96 0.0510000 0.0000000 28.140
06/14/96 0.0530000 0.0000000 28.760
09/12/96 0.0500000 0.0000000 28.330
12/10/96 0.0333700 1.9771500 29.030
03/11/97 0.0450000 0.0000000 30.820
06/12/97 0.0430000 0.0000000 32.560
Class Y Shares
12/10/96 0.0940900 1.9771500 29.190
03/11/97 0.1300000 0.0000000 31.020
06/12/97 0.1210000 0.0000000 32.770
<PAGE>
Oppenheimer Main Street Income & Growth Fund
Page 3
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
{($1,235.48/$1,000)^ 1} - 1 = 23.55% {($1,310.90/$1,000)^ 1} - 1 = 31.09%
Five Year Five Year
{($2,923.12/$1,000)^.2} - 1 = 23.93% {($3,101.58/$1,000)^.2} - 1 = 25.41%
Inception Inception
{($6,240.11/$1,000)^.1044}-1 = 21.07% {($6,620.87/$1,000)^.1044}-1 = 21.82%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year and
3.00% for the inception year:
One Year One Year
{($1,251.24/$1,000)^ 1} - 1 = 25.12% {($1,301.23/$1,000)^ 1} - 1 = 30.12%
Inception Inception
{($1,695.69/$1,000)^.3429}-1 = 19.85% {($1,725.68/$1,000)^.3429}-1 = 20.57%
Class C Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
{($1,290.70/$1,000)^ 1} - 1 = 29.07% {($1,300.69/$1000)^ 1 } - 1 = 30.07%
Inception Inception
{($1,798.29/$1,000)^.2667}-1 = 16.94% {($1,798.29/$1,000)^.2667}-1 = 16.94%
<PAGE>
Oppenheimer Main Street Income & Growth Fund
Page 4
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97: (Continued)
Class Y Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 0.00% for the inception year:
Inception Inception
{($1,239.76/$1,000)^ 1.2} - 1 = 29.42% {($1,239.76/$1,000)^ 1.2} - 1 = 29.42%
<PAGE>
Oppenheimer Main Street Income & Growth Fund
Page 5
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating cumulative total return is as follows:
( ERV - P ) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 5.75%:
One Year One Year
$1,235.48 - $1,000/$1,000 = 23.55% $1,310.90 - $1,000/$1,000 = 31.09%
Five Year Five Year
$2,923.12 - $1,000/$1,000 = 192.31% $3,101.58 - $1,000/$1,000 = 210.16%
Inception Inception
$6,240.11 - $1,000/$1,000 = 524.01% $6,620.87 - $1,000/$1,000 = 562.09%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
3.00% for the inception year:
One Year One Year
$1,251.24 - $1,000/$1,000 = 25.12% $1,301.23 - $1,000/$1,000 = 30.12%
Inception Inception
$1,695.69 - $1,000/$1,000 = 69.57% $1,725.68 - $1,000/$1,000 = 72.57%
Class C Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year and
0.00% for the inception year:
One Year One Year
$1,290.70 - $1,000/$1,000 = 29.07% $1,300.69 - $1,000/$1,000 = 30.07%
Inception Inception
$1,798.29 - $1,000/$1,000 = 79.83% $1,798.29 - $1,000/$1,000 = 79.83%
<PAGE>
Oppenheimer Main Street Income & Growth Fund
Page 6
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97 (Continued):
Class Y Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 0.00% for the inception year:
Inception Inception
$1,239.76 - $1,000/$1,000 = 23.98% $1,239.76 - $1,000/$1,000 = 23.98%
Oppenheimer Main Street California Municipal Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
06/14/90 0.0600000 0.0000000 11.570
07/12/90 0.0620000 0.0000000 11.580
08/09/90 0.0620000 0.0000000 11.570
09/06/90 0.0620000 0.0000000 11.380
10/04/90 0.0620000 0.0000000 11.350
11/01/90 0.0620000 0.0000000 11.460
11/29/90 0.0620000 0.0000000 11.580
12/31/90 0.0709000 0.0000000 11.580
01/24/91 0.0639000 0.0000000 11.610
02/21/91 0.0650000 0.0000000 11.680
03/21/91 0.0637000 0.0000000 11.580
04/18/91 0.0635000 0.0000000 11.680
05/16/91 0.0661000 0.0000000 11.670
06/13/91 0.0639000 0.0000000 11.560
07/11/91 0.0646000 0.0000000 11.650
08/08/91 0.0624000 0.0000000 11.750
09/05/91 0.0629000 0.0000000 11.770
10/03/91 0.0629000 0.0000000 11.840
10/31/91 0.0613000 0.0000000 11.830
11/27/91 0.0646000 0.0000000 11.820
12/31/91 0.0751000 0.0053000 12.000
01/23/92 0.0530000 0.0000000 12.010
02/20/92 0.0608000 0.0000000 11.880
03/19/92 0.0589000 0.0000000 11.840
04/16/92 0.0686000 0.0000000 11.940
05/14/92 0.0564000 0.0000000 11.940
06/11/92 0.0624000 0.0000000 11.960
07/09/92 0.0621000 0.0000000 12.180
08/06/92 0.0584000 0.0000000 12.310
09/03/92 0.0606000 0.0000000 12.190
10/01/92 0.0643000 0.0000000 12.160
10/29/92 0.0647000 0.0000000 11.920
11/25/92 0.0622000 0.0000000 12.090
12/31/92 0.0777000 0.0181000 12.140
01/28/93 0.0621000 0.0000000 12.200
02/25/93 0.0624000 0.0000000 12.560
03/25/93 0.0623000 0.0000000 12.480
04/22/93 0.0610000 0.0000000 12.530
05/20/93 0.0612000 0.0000000 12.500
06/17/93 0.0604000 0.0000000 12.560
07/09/93 0.0655000 0.0000000 12.670
08/10/93 0.0655000 0.0000000 12.700
09/10/93 0.0655000 0.0000000 12.960
10/08/93 0.0655000 0.0000000 12.950
11/10/93 0.0631000 0.0000000 12.720
12/10/93 0.0611000 0.0281000 12.820
01/10/94 0.0611000 0.0000000 12.860
02/10/94 0.0611000 0.0000000 12.830
03/10/94 0.0611000 0.0000000 12.230
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (continued)
04/08/94 0.0611000 0.0000000 11.850
05/10/94 0.0611000 0.0000000 11.790
06/10/94 0.0611000 0.0000000 12.120
07/08/94 0.0611000 0.0000000 11.790
08/10/94 0.0611000 0.0000000 11.880
09/09/94 0.0611000 0.0000000 11.830
10/10/94 0.0611000 0.0000000 11.530
11/10/94 0.0611000 0.0000000 11.000
12/09/94 0.0611000 0.0000000 11.010
01/10/95 0.0611000 0.0000000 11.240
02/10/95 0.0611000 0.0000000 11.730
03/10/95 0.0611000 0.0000000 11.890
04/10/95 0.0611000 0.0000000 12.060
05/10/95 0.0611000 0.0000000 12.140
06/09/95 0.0611000 0.0000000 12.290
07/10/95 0.0611000 0.0000000 12.250
08/10/95 0.0611000 0.0000000 12.040
09/08/95 0.0611000 0.0000000 12.230
10/10/95 0.0611000 0.0000000 12.280
11/10/95 0.0611000 0.0000000 12.370
12/08/95 0.0611000 0.0111000 12.580
01/10/96 0.0611000 0.0000000 12.500
02/09/96 0.0611000 0.0000000 12.660
03/08/96 0.0611000 0.0000000 12.290
04/10/96 0.0611000 0.0000000 12.110
05/10/96 0.0611000 0.0000000 12.110
06/10/96 0.0611000 0.0000000 11.970
07/10/96 0.0611000 0.0000000 12.070
08/09/96 0.0611000 0.0000000 12.430
09/10/96 0.0611000 0.0000000 12.140
10/10/96 0.0611000 0.0000000 12.280
11/08/96 0.0611000 0.0000000 12.390
12/10/96 0.0611000 0.0015100 12.480
01/10/97 0.0611000 0.0000000 12.340
02/10/97 0.0611000 0.0000000 12.480
03/10/97 0.0611000 0.0000000 12.420
04/10/97 0.0611000 0.0000000 12.240
05/09/97 0.0611000 0.0000000 12.330
06/10/97 0.0611000 0.0000000 12.480
07/10/97 0.0611000 0.0000000 12.670
08/08/97 0.0611000 0.0000000 12.660
Class B Shares
12/10/93 0.0573000 0.0281000 12.810
01/10/94 0.0488486 0.0000000 12.850
02/10/94 0.0479377 0.0000000 12.810
03/10/94 0.0495422 0.0000000 12.220
04/08/94 0.0479887 0.0000000 11.830
05/10/94 0.0504556 0.0000000 11.770
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
06/10/94 0.0496091 0.0000000 12.100
07/08/94 0.0509988 0.0000000 11.770
08/10/94 0.0506377 0.0000000 11.860
09/09/94 0.0498498 0.0000000 11.810
10/10/94 0.0512778 0.0000000 11.520
11/10/94 0.0512019 0.0000000 10.990
12/09/94 0.0516338 0.0000000 11.000
01/10/95 0.0519430 0.0000000 11.230
02/10/95 0.0503350 0.0000000 11.720
03/10/95 0.0515960 0.0000000 11.880
04/10/95 0.0511343 0.0000000 12.050
05/10/95 0.0505078 0.0000000 12.130
06/09/95 0.0502839 0.0000000 12.270
07/10/95 0.0511255 0.0000000 12.230
08/10/95 0.0504613 0.0000000 12.030
09/08/95 0.0505781 0.0000000 12.220
10/10/95 0.0509490 0.0000000 12.270
11/10/95 0.0498063 0.0000000 12.360
12/08/95 0.0513745 0.0111000 12.560
01/10/96 0.0503478 0.0000000 12.490
02/09/96 0.0493203 0.0000000 12.650
03/08/96 0.0511751 0.0000000 12.280
04/10/96 0.0510163 0.0000000 12.090
05/10/96 0.0503280 0.0000000 12.100
06/10/96 0.0514233 0.0000000 11.960
07/10/96 0.0496023 0.0000000 12.050
08/09/96 0.0498519 0.0000000 12.420
09/10/96 0.0509705 0.0000000 12.130
10/10/96 0.0506728 0.0000000 12.260
11/08/96 0.0505945 0.0000000 12.380
12/10/96 0.0508261 0.0015100 12.460
01/10/97 0.0496767 0.0000000 12.330
02/10/97 0.0511821 0.0000000 12.460
03/10/97 0.0512245 0.0000000 12.410
04/10/97 0.0505115 0.0000000 12.220
05/09/97 0.0504186 0.0000000 12.320
06/10/97 0.0506899 0.0000000 12.470
07/10/97 0.0506683 0.0000000 12.660
08/08/97 0.0500580 0.0000000 12.650
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 4
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
{($1,050.09/$1,000)^ 1} - 1 = 5.01% {($1,102.41/$1,000)^ 1} - 1 = 10.24%
Five Year Five Year
{($1,349.53/$1,000)^.2} - 1 = 6.18% {($1,416.80/$1,000)^.2} - 1 = 7.22%
Inception Inception
{($1,687.12/$1,000)^.1372}-1 = 7.44% {($1,771.27/$1,000)^.1372}-1 = 8.16%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year and
3.00% for the inception year:
One Year One Year
{($1,042.33/$1,000)^ 1} - 1 = 4.23% {($1,092.33/$1,000)^ 1} - 1 = 9.23%
Inception Inception
{($1,158.42/$1,000)^.2605}-1 = 3.91% {($1,187.79/$1,000)^.2605}-1 = 4.58%
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 5
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 08/31/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
$1,050.09 - $1,000/$1,000 = 5.01% $1,102.41 - $1,000/$1,000 = 10.24%
Five Year Five Year
$1,349.53 - $1,000/$1,000 = 34.95% $1,416.80 - $1,000/$1,000 = 41.68%
Inception Inception
$1,687.12 - $1,000/$1,000 = 68.71% $1,771.27 - $1,000/$1,000 = 77.13%
Class B Shares
Example assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
3.00% for the inception year:
One Year One Year
$1,042.33 - $1,000/$1,000 = 4.23% $1,092.33 - $1,000/$1,000 = 9.23%
Inception Inception
$1,158.42 - $1,000/$1,000 = 15.84% $1,187.79 - $1,000/$1,000 = 18.78%
<PAGE>
Oppenheimer Main Street California Tax-Exempt Fund
Page 6
3. STANDARDIZED YIELD FOR THE 30-DAY PERIOD ENDED 08/31/97:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during the 30-day
period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge) per share
on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred sales
charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$386,450.85 - $ 43,215.65 6
2{(------------------------- + 1) - 1} = 4.53%
6,922,027 x $13.27
Class B Shares
Example at NAV:
$ 50,122.89 - $ 15,035.24 6
2{(------------------------- + 1) - 1} = 3.74%
898,902 x $12.63
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 7
4. DIVIDEND YIELDS FOR THE PERIOD ENDED 08/31/97:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = { (a X 12} / b or c
The symbols above represent the following factors:
a = The last dividend earned during the period. b = The Fund's maximum
offering price (including sales charge)
per share on dividend payble date.
c = The Fund's net asset value (excluding sales charge) per share on
dividend payable date.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0611000 * 12 / $13.29 = 5.52%
Dividend Yield
at Net Asset Value $.0611000 * 12 / $12.66 = 5.79%
Class B Shares
Dividend Yield
at Net Asset Value $.0500580 * 12 / $12.65 = 4.75%
<PAGE>
Oppenheimer Main Street California Municipal Fund
Page 8
5. TAX-EQUIVALENT YIELDS FOR THE 30-DAY PERIOD ENDED 08/31/97:
The Fund's tax-equivalent yields are calculated using the following formula:
a / (1 - c) + b = Tax-Equivalent Yield
The symbols above represent the following factors:
a = 30-day SEC yield of tax-exempt security positions in the portfolio. b =
30-day SEC yield of taxable security positions in the portfolio. c = Combined
stated tax rate (e.g., federal and state income tax rates
for an individual in the 39.6% federal tax bracket filing singly).
Examples:
Class A Shares .0453 / (1 - .4522) + 0 = 8.27%
Class B Shares .0374 / (1 - .4522) + 0 = 6.83%
Combined Stated Tax Rate Formula:
1 - {(1-d)(1-e)} = Combined Stated Tax Rate
The symbols above represent the following factors:
d = Stated federal tax rate (e.g., federal income tax rate for an individual
in the 39.6% federal tax bracket filing singly).
e = Stated California State tax rate (e.g., for an individual in the 39.6%
federal and 9.30% state tax bracket filing singly).
Example: 1 - {(1 - .3960)(1 - 0.0930)} = 45.22%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 823483
<NAME> Oppenheimer Main Street Income & Growth Fund - A
<SERIES>
<NUMBER> 2
<NAME> Oppenheimer Main Street Funds, Inc
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 6,961,469,165
<INVESTMENTS-AT-VALUE> 8,785,363,486
<RECEIVABLES> 76,738,430
<ASSETS-OTHER> 167,921
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,862,269,837
<PAYABLE-FOR-SECURITIES> 32,709,961
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,976,731
<TOTAL-LIABILITIES> 50,686,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,571,228,681
<SHARES-COMMON-STOCK> 131,610,122
<SHARES-COMMON-PRIOR> 112,443,525
<ACCUMULATED-NII-CURRENT> 17,874,940
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 399,302,803
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,823,176,721
<NET-ASSETS> 4,457,349,230
<DIVIDEND-INCOME> 89,719,895
<INTEREST-INCOME> 75,478,119
<OTHER-INCOME> 0
<EXPENSES-NET> 96,160,881
<NET-INVESTMENT-INCOME> 69,037,133
<REALIZED-GAINS-CURRENT> 436,466,588
<APPREC-INCREASE-CURRENT> 1,410,723,467
<NET-CHANGE-FROM-OPS> 1,916,227,188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 48,672,471
<DISTRIBUTIONS-OF-GAINS> 230,404,395
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,556,681
<NUMBER-OF-SHARES-REDEEMED> 23,475,410
<SHARES-REINVESTED> 9,085,326
<NET-CHANGE-IN-ASSETS> 3,016,214,673
<ACCUMULATED-NII-PRIOR> 17,097,695
<ACCUMULATED-GAINS-PRIOR> 399,260,271
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,036,569
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<GROSS-EXPENSE> 96,160,881
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<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 823483
<NAME> Oppenheimer Main Street Income & Growth Fund - B
<SERIES>
<NUMBER> 2
<NAME> Oppenheimer Main Street Funds, Inc
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 6,961,469,165
<INVESTMENTS-AT-VALUE> 8,785,363,486
<RECEIVABLES> 76,738,430
<ASSETS-OTHER> 167,921
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,862,269,837
<PAYABLE-FOR-SECURITIES> 32,709,961
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,976,731
<TOTAL-LIABILITIES> 50,686,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,571,228,681
<SHARES-COMMON-STOCK> 98,285,988
<SHARES-COMMON-PRIOR> 68,668,350
<ACCUMULATED-NII-CURRENT> 17,874,940
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 399,302,803
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,823,176,721
<NET-ASSETS> 3,307,851,818
<DIVIDEND-INCOME> 89,719,895
<INTEREST-INCOME> 75,478,119
<OTHER-INCOME> 0
<EXPENSES-NET> 96,160,881
<NET-INVESTMENT-INCOME> 69,037,133
<REALIZED-GAINS-CURRENT> 436,466,588
<APPREC-INCREASE-CURRENT> 1,410,723,467
<NET-CHANGE-FROM-OPS> 1,916,227,188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,534,654
<DISTRIBUTIONS-OF-GAINS> 151,242,446
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,495,825
<NUMBER-OF-SHARES-REDEEMED> 10,274,858
<SHARES-REINVESTED> 5,396,671
<NET-CHANGE-IN-ASSETS> 3,016,214,673
<ACCUMULATED-NII-PRIOR> 17,097,695
<ACCUMULATED-GAINS-PRIOR> 399,260,271
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,036,569
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,160,881
<AVERAGE-NET-ASSETS> 2,641,513,000
<PER-SHARE-NAV-BEGIN> 27.79
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 7.86
<PER-SHARE-DIVIDEND> 0.18
<PER-SHARE-DISTRIBUTIONS> 1.98
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 33.66
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 823483
<NAME> Oppenheimer Main Street Income & Growth Fund -C
<SERIES>
<NUMBER> 2
<NAME> Oppenheimer Main Street Funds, Inc
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 6,961,469,165
<INVESTMENTS-AT-VALUE> 8,785,363,486
<RECEIVABLES> 76,738,430
<ASSETS-OTHER> 167,921
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,862,269,837
<PAYABLE-FOR-SECURITIES> 32,709,961
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,976,731
<TOTAL-LIABILITIES> 50,686,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,571,228,681
<SHARES-COMMON-STOCK> 30,618,749
<SHARES-COMMON-PRIOR> 26,786,091
<ACCUMULATED-NII-CURRENT> 17,874,940
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 399,302,803
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,823,176,721
<NET-ASSETS> 1,030,131,940
<DIVIDEND-INCOME> 89,719,895
<INTEREST-INCOME> 75,478,119
<OTHER-INCOME> 0
<EXPENSES-NET> 96,160,881
<NET-INVESTMENT-INCOME> 69,037,133
<REALIZED-GAINS-CURRENT> 436,466,588
<APPREC-INCREASE-CURRENT> 1,410,723,467
<NET-CHANGE-FROM-OPS> 1,916,227,188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,918,987
<DISTRIBUTIONS-OF-GAINS> 54,897,836
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,368,632
<NUMBER-OF-SHARES-REDEEMED> 5,469,271
<SHARES-REINVESTED> 1,933,297
<NET-CHANGE-IN-ASSETS> 3,016,214,673
<ACCUMULATED-NII-PRIOR> 17,097,695
<ACCUMULATED-GAINS-PRIOR> 399,260,271
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,036,569
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,160,881
<AVERAGE-NET-ASSETS> 904,396,000
<PER-SHARE-NAV-BEGIN> 27.78
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> 7.85
<PER-SHARE-DIVIDEND> 0.17
<PER-SHARE-DISTRIBUTIONS> 1.98
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 33.64
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> OPP. MAIN STREET CALIFORNIA MUNICIPAL FUND-A
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<NAME> OPPENHEIMER MAIN STREET FUNDS, INC.
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