Registration No. 33-17850
File No. 811-5360
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 22 [X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ X ]
Amendment No. 18 [ X ]
OPPENHEIMER MAIN STREET FUNDS, INC.
(Formerly named: MAIN STREET FUNDS, INC.)
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(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices) (Zip Code)
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303-768-3200
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
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) [ ] On _______________
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1)
[X] On December 22, 1998 pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
12
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Oppenheimer Main Street Growth & Income Fund
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Prospectus dated December 22, 1998
Oppenheimer Main Street Growth & Income Fund is a mutual fund that
seeks a high total return, which includes capital appreciation in the value of
its shares as well as current income. It invests in equity and debt securities.
This Prospectus contains important information about the Fund's
objective, its investment policies, strategies and risks. It also contains
important information about how to buy and sell shares of the Fund and other
account features. Please read this Prospectus carefully before you invest and
keep it for future reference about your account.
(OppenheimerFunds logo)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
Contents
About the Fund
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The Fund's Objective and Investment Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
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How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
Special Investor Services
AccountLink
Phone Link
OppenheimerFunds Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
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<PAGE>
About the Fund
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The Fund's Objective and Investment Strategies
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What Is the Fund's Investment Objective? The Fund's 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.
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What Does the Fund Invest In? The Fund invests mainly in equity securities, such
as common stocks, preferred stocks and convertible securities, of issuers of
different capitalization levels. It also buys debt securities, such as bonds and
debentures. The Fund may also use hedging instruments and certain derivative
investments to try to manage investment risks. These investments are more fully
explained in "About the Fund's Investments," below.
Who Is the Fund Designed For? The Fund is designed primarily for investors
seeking capital growth in their investment over the long term, with the
opportunity for some current income. Those investors should be willing to assume
the risks of short-term share price fluctuations that are typical for a
moderately aggressive fund focusing on stock investments. Since the Fund's
income level will fluctuate and will likely be small, it is not designed for
investors needing an assured level of current income. Because of its focus on
long-term growth, the Fund may be appropriate for retirement plans.
Main Risks of Investing in 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.
They include changes in general bond and stock market movements (this is
referred to as "market risk"), or the change in value of particular stocks or
bonds because of an event affecting the issuer (in the case of bonds, this is
known as "credit risk"). At times, the Fund may increase the emphasis of its
investments in a particular industry or industries compared to the weighting of
that industry (or industries) in the S&P 500 Index (which the Fund uses as a
performance bench mark). Therefore, it may be subject to the risks that
economic, political or other events can have a negative effect on the values of
issuers in those particular industries (this is referred to as "industry risk").
Changes in interest rates can also affect stock and bond prices (this is known
as "interest rate risk").
These risks collectively form the risk profile of the Fund, and can
affect the value of the Fund's investments, its investment performance and its
price per share. These risks mean that you can lose money by investing in the
Fund. When you redeem your shares, they may be worth more or less than what you
paid for them.
The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by carefully researching securities before they are purchased, and in some
cases by using hedging techniques. The Fund attempts to reduce its exposure to
market risks by diversifying its investments, that is, by not holding a
substantial amount of stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does not
concentrate 25% or more of its investments in any one industry or group of
industries. However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share price of the Fund will change
daily based on changes in market prices of securities and market conditions, and
in response to other economic events. There is no assurance that the Fund will
achieve its investment objective.
n Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund currently focuses
its investments primarily in equity securities, the value of the Fund's
portfolio will be affected by changes in the stock markets. 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. A variety of factors can affect the
price of a particular stock and the prices of individual stocks do not all move
in the same direction uniformly or at the same time. Different stock markets may
behave differently from each other. In particular, because the Fund currently
intends to focus its investments in stocks of U.S. issuers, it will be more
affected by changes in U.S. stock markets.
Additionally, stocks of issuers in a particular industry may be
affected by changes in economic conditions that affect that industry more than
others, or by changes in government regulations, availability of basic resources
or supplies, or other events. To the extent that the Fund is emphasizing
investments in a particular industry or group of industries, its share values
may fluctuate in response to events affecting those industries.
Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer.
The Fund can invest in securities of large companies and also small and
medium-size companies, which may have more volatile stock prices than large
companies.
Risks in Using Derivative Investments. The Fund may use derivatives to
seek increased returns or to try to hedge investment risks. In general terms, a
derivative investment is one whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index. Options, futures, and
forward contracts are examples of derivatives.
If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, may not perform the
way the Manager expected it to perform. If that happens, the Fund's share price
could decline or the Fund could get less income than expected. The Fund has
limits on the amount of particular types of derivatives it can hold. However,
using derivatives can cause the Fund to lose money on its investment or increase
the volatility of its share prices.
How Risky is the Fund Overall? The Fund focuses its investments on equity
securities for long-term growth. In the short term, the stock markets can be
volatile, and the price of the Fund's shares can go up and down. The Fund's
income-oriented investments may help cushion the Fund's total return to some
degree from changes in stock prices, but fixed-income securities have their own
risks and are not the primary focus of the Fund. In the Oppenheimer funds
spectrum, the Fund is generally more conservative than aggressive growth stock
funds, but more aggressive than investment grade bond funds.
An investment in the Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
The Fund's Past Performance
The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance (for its
Class A shares) from year to year for the calendar years since the Fund's
inception (2/1/88) and by showing how the average annual total returns of the
Fund's shares compare to those of a broad-based market index. The Fund's past
investment performance is not necessarily an indication of how the Fund will
perform in the future.
Annual Total Returns (Class A) (% as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
For the period from 1/1/98 through 9/30/98, the cumulative return (not
annualized) for Class A shares was ____%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown. During the period shown in the bar
chart, the highest return (not annualized) for a calendar quarter was 27.05%%
(4Q'92) and the lowest return for a calendar quarter was -9.95%% (3Q'90).
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C>
Average Annual Total
Returns for the periods Past 1 Year Past 5 Years Past 10 Years
ending December 31, 1997 (or life of class, if less) (or life of class, if less)
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Class A Shares % % %*
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Class B Shares % %* N/A
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- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Class C Shares % %* N/A
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Class Y Shares % %* N/A
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S&P 500 Index % % %*
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</TABLE>
* Inception dates of classes: Class A: 2/3/88. Class B: 10/3/94. Class C:
12/1/93. Class Y: 11/1/96. The index performance is shown from 2/28/88 compared
to the performance of Class A shares of the Fund since inception.
The Fund's average annual total returns in the table include the applicable
sales charge for Classes A, B and C shares: for Class A, the current maximum
initial sales charge of 5.75%; for Class B, the contingent deferred sales
charges of 5% (1-year) and 3% (life of class); and for Class C, the 1%
contingent deferred sales charge for the 1-year period.
The returns measure the performance of a hypothetical $10,000 account and assume
that all dividends and capital gains distributions have been reinvested in
additional shares. Because the Fund invests primarily in stocks, the Fund's
performance is compared to the S&P 500 Index, an unmanaged index of equity
securities that is a measure of the general domestic stock market. However, it
must be remembered that the index performance reflects the reinvestment of
dividends but does not consider the effects of capital gains or transaction
costs.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services. Those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
August 31, 1998.
<PAGE>
Shareholder Transaction Fees (charges paid directly from your investment):
(% of amount of transaction)
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
Class A Shares Class B Shares Class C Shares Class Y Shares
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Maximum Sales Charge (Load) on
purchases 5.57% None None None
(as % of offering price)
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Maximum Contingent Deferred
Sales Charge (Load) (as % of the
lower of the original offering None1 5%2 1%3 None
price or redemption proceeds)
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</TABLE>
1. A contingent deferred sales charge may apply to redemptions of investments
of $1 million or more ($500,00 for retirement plan accounts) of Class A
shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
Class A Shares Class B Shares Class C Shares Class Y Shares
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Management Fees % % % %
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- -------------------------------------- -------------------- ------------------ ------------------- ------------------
Distribution and/or Service (12b-1) % 1.00% 1.00% None
Fees
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Other Expenses % % % %
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- -------------------------------------- -------------------- ------------------ ------------------- ------------------
Total Annual Operating Expenses % % % %
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</TABLE>
Numbers in the chart are based on the Fund's expenses in the last fiscal year,
ended 8/31/98. Expenses may vary in future years. "Other expenses" include
transfer agent fees, custodial expenses, and accounting and legal expenses the
Fund pays.
Examples. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and distributions. The first
example assumes that you redeem all of your shares at the end of those periods.
The second example assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the class's operating
expenses remain the same. Your actual costs may be higher or lower because
expenses will vary over time. Based on these assumptions your expenses would be
as follows:
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class B Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class C Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class Y Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
If shares are not redeemed: 1 Year 3 Years 5 Years 10 Years1
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class A Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class B Shares $ $ $ $
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class C Shares $ $ $ $
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- ---------------------------------- --------------------- -------------------- ------------------- -------------------
Class Y Shares $ $ $ $
- ---------------------------------- --------------------- -------------------- ------------------- -------------------
</TABLE>
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses, since Class B
shares automatically
convert to Class A after 6 years.
About the Fund's Investments
The Fund's Principal Investment Policies. The Fund's goal is to seek high total
return, which includes capital appreciation in the value of its shares and
current income, from equity and debt securities. The composition of the Fund's
portfolio among the different types of permitted investments will vary over time
based upon the evaluation of economic and market trends by the Manager. The
Statement of Additional Information contains more detailed information about the
Fund's investment policies and risks.
n Stock Investments. The Fund invests primarily in a diversified
portfolio of equity securities of issuers that may be of small, medium or large
size, to seek capital growth. Equity securities include common stocks, preferred
stocks and securities convertible into common stock. They can include securities
issued by domestic or foreign companies. However, the Manager currently intends
to focus the Fund's investments primarily on stocks of U.S. issuers.
At times, the Fund may emphasize the securities of issuers in a
particular industry or group of industries, or of a particular capitalization or
a range of capitalizations, depending on the Manager's judgment about market and
economic conditions. The Manager considers convertible securities to be "equity
equivalents" because of the conversion feature and because their rating has less
impact on the investment decision than in the case of debt securities.
n Debt Securities. The Fund can also invest in debt securities, such as
U.S. government securities, foreign government securities, and foreign and
domestic corporate bonds and debentures, primarily for their income
possibilities. The debt securities the Fund buys may be rated by nationally
recognized rating organizations or they may be unrated securities assigned an
equivalent rating by the Manager. The Fund's investments may be above or below
investment grade in credit quality.
o Interest Rate Risks. The values of debt securities are
subject to change when prevailing interest rates change. When interest rates
fall, the value of already-issued debt securities generally rise. When interest
rates rise, the values of already-issued debt securities generally decline. The
magnitude of these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. The Fund's share prices can go up
or down when interest rates change because of the effect of the changes on the
value of the Fund's investments in debt securities.
o Special Credit Risks of Lower-Grade Securities. 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. The Fund can
invest up to 25% of its assets in "lower-grade" securities are commonly known as
"junk bonds." However, the Fund currently does not intend to invest more than
15% of its assets in lower-grade securities, and no more than 10% in lower-grade
securities that are not convertible.
While investment grade securities are subject to risks of non-payment
of interest and principal, generally, higher yielding lower-grade bonds, whether
rated or unrated, have greater risks than investment grade securities. They may
be subject to greater market fluctuations and risk of loss of income and
principal than investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest and principal due on the bonds. 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.
n How Does the Manager Decide What Securities to Buy or Sell? In selecting
securities for purchase or sale by the Fund, the Fund's portfolio managers use
an investment process that combines quantitative models, fundamental research
about particular securities and individual judgment. While this process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases, in general the selection process
involves the use of: Multi-factor quantitative models: These include a group of
"top-down" models that analyze data such as relative valuations, relative price
trends, interest rates and the shape of the yield curve. These help direct
portfolio emphasis by market capitalization (small, midcap or large),
industries, and value or growth styles. A group of "bottom up" models help to
rank stocks in a universe of typically 2000 stocks, selecting stocks for
relative attractiveness by analyzing fundamental stock and company
characteristics. Fundamental research: The portfolio managers use internal
research and analysis by other market analysts, with emphasis on current company
news and industry-related events. Judgment: The portfolio is then continuously
rebalanced by the portfolio managers, using all of the tools described above.
n Can the Fund's Investment Objective and Policies Change? The Fund's
Board of Directors may change non-fundamental investment policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Fund's outstanding voting
shares. The Fund's objective is a fundamental policy. Investment restrictions
that are fundamental policies are listed in the Statement of Additional
Information. 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.
n Portfolio Turnover. The Fund may engage frequently in short-term
trading to try to achieve its objective. Portfolio turnover affects brokerage
costs the Fund pays. If the Fund realizes capital gains when it sells its
portfolio investments, it must generally pay those gains out to shareholders,
increasing their taxable distributions. The Financial Highlights table below
shows the Fund's portfolio turnover rates during prior fiscal years.
Investment Strategies. To seek its objective, the Fund may also use the
investment techniques and strategies described below. These techniques involve
certain risks, although some are designed to help reduce investment or market
risks.
nRisks of Foreign Investing. The Fund may buy securities of companies
or governments in any country, developed or underdeveloped. While there is no
limit on the amount of the Fund's assets that may be invested in foreign
securities, the Manager currently does not plan to invest significant amounts of
the funds assets in foreign securities over the next year. While foreign
securities offer special investment opportunities, there are also special risks,
such as the effects of a change in value of a foreign currency against the U.S.
dollar, which will result in a change in the U.S. dollar value of securities
denominated in that foreign currency.
n Borrowing for Leverage. The Fund can borrow money from banks on an
unsecured basis and invest the borrowed funds to increase its securities
holdings. The Fund will pay interest on those borrowings, so that it may have
less 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, and that is a fundamental policy.
n "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.
n Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Directors, 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 limit to 15%). Certain restricted securities that
are eligible for resale to qualified institutional purchasers are not subject to
that limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate liquidity.
n Derivative Investments. The Fund can invest in a number of different
kinds of "derivative" investments. In the broadest sense, exchange-traded
options, futures contracts, and other hedging instruments the Fund might use may
be considered "derivative investments." In addition to using hedging
instruments, the Fund may use other derivative investments because they offer
the potential for increased income and principal value.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of derivatives. As a result of
these risks the Fund could realize less principal or income from the investment
than expected.
Certain derivative investments held by the Fund may be illiquid.
n 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 limits its use of them.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its exposure to
changing interest rates.
Some of these strategies 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.
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.
If the Manager uses a hedging instrument at the wrong time or judges
market conditions incorrectly, the strategy could reduce the Fund's return. The
Fund could also experience losses if the price 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.
Temporary Defensive Investments. In times of adverse market or economic
conditions, the Fund may invest up to 100% of its assets in temporary defensive
investments. Generally they would be U.S. government securities, highly-rated
commercial paper, bank deposits or repurchase agreements. The Fund may also hold
these types of securities pending the investment of proceeds from the sale of
Fund shares or portfolio securities or to meet anticipated redemptions of Fund
shares. To the extent the Fund invests defensively in these securities, it may
not achieve its investment objective of high total return.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working
on necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative affect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Fund Is Managed
The Manager. The Fund's investment adviser is the Manager, OppenheimerFunds,
Inc., 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
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 $85 billion as of
September 30, 1998, and with more than 4 million shareholder accounts. The
Manager is located at Two World Trade Center, 34th Floor, New York, New York
1048-0203.
n Portfolio Managers. The portfolio managers of the Fund are Charles
Albers and Nikolaos Monoyios, who are also Vice Presidents of the Fund. Mr.
Albers is the lead manager. Mr. Albers is a Senior Vice President of the Manager
and Mr. Monoyios is a Vice President of the Manager. Prior to joining the
Manager and assuming responsibility for the day-to-day management of the Fund's
portfolio on April 20, 1998, they were portfolio managers at Guardian Investor
Services (from 1972 and 1979, respectively), the investment management
subsidiary of The Guardian Life Insurance Company.
n Advisory Fees. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional assets
as the Fund grows: 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 last fiscal year ended August 31, 1998 was 0.__% of average annual net
assets for each class of shares.
- --------------------------------------------------------------------------------
About Your Account
- --------------------------------------------------------------------------------
How to Buy Shares
How Are Shares Purchased? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, directly through the Distributor, or automatically through an Asset
Builder Plan under the OppenheimerFunds AccountLink service. The Distributor may
appoint certain servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
|X| Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
|X| Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
with a financial advisor before your make a purchase to be sure that the Fund is
appropriate for you.
|X| Buying Shares by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.
|X| Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the Automated Clearing House
transfer to buy the shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink,"
below for more details.
|X| Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
|_| With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans
and military allotment plans, you can make initial and subsequent investments
for as little as $25. Subsequent purchases of at least $25 can be made by
telephone through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing
plans and 401(k) plans, you can start your account with as little as $250. If
your IRA is started under an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be as little as $25.
|_| The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them appears in
the Statement of Additional Information, or you can ask your dealer or call the
Transfer Agent), or reinvesting distributions from unit investment trusts that
have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their public offering price
(the net asset value per share plus any initial sales charge that applies). The
public offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Denver, Colorado, or after any
agent appointed by the Distributor receives the order and sends it to the
Distributor.
|_| The net asset value of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. (All references to time in this Prospectus mean "New York time").
The net asset value per share is determined by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. To determine net asset value, the Fund's Board of
Directors has established procedures to value the Fund's securities, in general
based on market value. The Board has adopted special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained.
|_| To receive the offering price for a particular day, in most cases
the Distributor or its designated agent must receive your order by the time of
day The New York Stock Exchange closes that day. If your order is received on a
day when the Exchange is closed or after it has closed, the order will receive
the next offering price that is determined after your order is received.
|_| If you buy shares through a dealer, your dealer must receive the
order by the close of The New York Stock Exchange and transmit it to the
Distributor so that it is received before the Distributor's close of business on
a regular business day (normally 5:00 P.M.) to receive that day's offering
price. Otherwise, the order will receive the next offering price that is
determined.
- --------------------------------------------------------------------------------
What Classes of Shares Does the Fund Offer? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose a class, your investment will be made in Class A shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|X| Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million for regular accounts or $500,000 for
certain retirement plans). The amount of that sales charge will vary depending
on the amount you invest. The sales charge rates are listed in "How Can I Buy
Class A Shares?" below.
|X| Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but you will pay an annual asset-based sales charge and 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 "How Can I Buy Class B Shares?" below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|X| Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but you will pay an annual asset-based sales charge and
if you sell your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1%, as described in "How Can I Buy Class C
Shares?" below.
n Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements with the Distributor.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
|X| How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment, compared to the
effect over time of higher class-based expenses on shares of Class B or Class C
.
|_| Investing for the Short Term. If you have a relatively short-term
investment horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares rather
than Class B shares. That is because of the effect of the Class B contingent
deferred sales charge if you redeem within six years, as well as the effect of
the Class B asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C shares might
not be as advantageous as Class A shares. That is because the annual asset-based
sales charge on Class C shares will have a greater impact on your account over
the longer term than the reduced front-end sales charge available for larger
purchases of Class A shares.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
|_| Investing for the Longer Term. If you are investing less than
$100,000 for the longer-term, for example for retirement, and do not expect to
need access to your money for seven years or more, Class B shares may be
appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
|X| Are There Differences in Account Features That Matter to You? Some
account features may not be available to Class B or Class C shareholders. Other
features (such as Automatic Withdrawal Plans) may not be advisable (because of
the effect of the contingent deferred sales charge) for Class B or Class C
shareholders. Therefore, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are not
borne by Class A shares, such as the Class B and Class C asset-based sales
charge described below and in the Statement of Additional Information. Share
certificates are not available for Class B and Class C shares, and if you are
considering using your shares as collateral for a loan, that may be a factor to
consider.
|X| How Does It Affect Payments to My Broker? A salesperson, such as a
broker, may receive different compensation for selling one class of shares than
for selling another class. It is important to remember that Class B and Class C
contingent deferred sales charges and asset-based sales charges have the same
purpose as the front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial institutions
for selling shares. The Distributor may pay additional compensation from its own
resources to securities dealers or financial institutions based upon the value
of shares of the Fund owned by the dealer or financial institution for its own
account or for its customers.
Special Sales Charge Arrangements and Waivers. The Statement of Additional
Information details the conditions for the waiver of sales charges that apply in
certain cases, and the special sales charge rates that apply to purchases of
shares of the Fund by certain groups, or under specified retirement plan
arrangements or in other special types of transactions.
How Can I Buy Class A Shares? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net
asset value to invest for your account.
<PAGE>
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Offering Net Amount Offering
Amount of Purchase Price Invested Price
- ---------------------------------------------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
- ---------------------------------------------------------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
- ---------------------------------------------------------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
|X| Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in the Appendix to the Statement of
Additional Information. The Distributor pays dealers of record commissions in an
amount equal to 1.0% of purchases of $1 million or more other than by those
retirement accounts. For those retirement plan accounts, the commission is 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million, calculated on a calendar year basis. In either case,
the commission will be paid only on purchases that were not previously subject
to a front-end sales charge and dealer commission.1
If you redeem any of those shares 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. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (excluding 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.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable
when shares are redeemed, the Fund will first redeem shares that are not subject
to the sales charge, including shares purchased by reinvestment of dividends and
capital gains. Then the Fund will redeem other shares in the order in which you
purchased them. The Class A contingent deferred sales charge is waived in
certain cases described in "Waivers of Class A Sales Charges" in the Statement
of Additional Information.
The Class A contingent deferred sales charge is not charged on
exchanges of shares under the Fund's Exchange Privilege (described below).
However, if the shares acquired by exchange are redeemed within 18 calendar
months of the end of the calendar month in which the exchanged shares were
originally purchased, then the sales charge will apply.
How Can I Reduce Sales Charges for Class A Share Purchases? You may be eligible
to buy Class A shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information:
|X| Waivers of Class A Sales Charges. The initial and contingent Class
A sales charges are not imposed in the circumstances described 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 when purchasing shares whether any of the special conditions
apply.
How Can I Buy Class B Shares? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
The 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 an increase in net
asset value over the initial purchase price or |_| shares purchased by
the reinvestment of dividends or capital gains distributions. |_|
shares redeemed in the special circumstances described in "Waivers of
Class B and Class C Sales Charges" in the Statement of Additional
Information.
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 amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
- --------------------------------------------------------------------------------
Years Since Beginning of Contingent Deferred Sales Charge
Month in which Purchase On Redemptions in That Year
Order Was Accepted (As % of Amount Subject to Charge)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
0-1 5.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1-2 4.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2-3 3.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3-4 3.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4-5 2.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5-6 1.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6 and following None
- --------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
|X| 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 the Statement of Additional
Information.
How Can I Buy Class C Shares? Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
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, or |_| shares purchased by
the reinvestment of dividends or capital gains distributions.
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.
Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit plans,
for example. Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds advised by MassMutual) for asset allocation
programs, investment companies or separate investment accounts it sponsors and
offers to its customers. Individual investors are not able to buy Class Y shares
directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares and the
special account features available to investors buying those other classes of
shares do not apply to Class Y shares. An exception is that the time those
orders must be received by the Distributor or its agents or by the Transfer
Agent is the same for Class Y as for other share classes. However, those
instructions must be submitted by the institutional investor, not by its
customers for whose benefit the shares are held.
Distribution and Service (12b-1) Plans.
|X| Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares. It reimburses the Distributor for a portion of its
costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Fund. The Distributor currently 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.
|X| 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 Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class B
shares and on Class C shares. The Distributor also receives a service fee of
0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the respective
class. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
The Distributor pays the 0.25% service fees to dealers in advance for the first
year after the shares were sold by the dealer. After the shares have been held
for a year, the Distributor pays the service fees to dealers on a quarterly
basis.
The Distributor currently pays sales commission of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
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 therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
|_| transmit funds electronically to purchase shares by telephone
(through a service representative or by PhoneLink) or automatically
under Asset Builder Plans, or |_| have the Transfer Agent send
redemption proceeds or to transmit dividends and distributions directly
to your bank account. Please call the Transfer Agent for more
information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.
|_| Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund to pay for these
purchases.
|_| Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number.
|_| Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
Can I Submit Transaction Requests by Fax? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.
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. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C or Class Y shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
Retirement Plans. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
|_| Individual Retirement Accounts (IRAs), including regular IRAs, Roth
IRAs, rollover and Education IRAs.
|_| SEP-IRAs, which are Simplified Employee Pensions Plan IRAs for
small business owners or self-employed individuals.
|_| 403(b)(7) Custodial Plans, that are tax deferred plans for
employees of eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
|_| 401(k) Plans, which are special retirement plans for businesses.
|_| Pension and Profit-Sharing Plans, designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular
business day. Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter or by telephone. You can also set up
Automatic Withdrawal Plans to redeem shares on a regular basis. If you have
questions about any of these procedures, and especially if you are redeeming
shares in a special situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent first, at
1-800-525-7048, for assistance.
|X| Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, the following redemption requests must be in writing and
must include a signature guarantee (although there may be other situations that
require a signature guarantee):
|_| You wish to redeem $50,000 or more and receive a check
|_| The redemption check is not payable to all shareholders listed on
the account statement |_| The redemption check is not sent to the
address of record on your account statement |_| Shares are being
transferred to a Fund account with a different owner or name |_| Shares
are being redeemed by someone (such as an Executor) other than the
owners
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association, or
by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered
dealer or broker in securities, municipal securities or government securities,
or by a U.S. national securities exchange, a registered securities association
or a clearing agency. If you are signing on behalf of a corporation, partnership
or other business or as a fiduciary, you must also include your title in the
signature.
|X| Retirement Plan Accounts. There are special procedures to sell
shares in an OppenheimerFunds retirement plan account. Call the Transfer Agent
for a distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a withholding form
with your redemption request to avoid delay in getting your money and if you do
not want tax withheld. If your employer holds your retirement plan account for
you in the name of the plan, you must ask the plan trustee or administrator to
request the sale of the Fund shares in your plan account.
|X| Sending Redemption Proceeds by Wire. While the Fund normally sends
your money by check, you can arrange to have the proceeds of the shares you sell
sent by Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The minimum
redemption you can have sent by wire is $2,500. There is a $10 fee for each
wire. To find out how to set up this feature on your account or to arrange a
wire, call the Transfer Agent at 1-800-852-8457.
How Do I Sell Shares by Mail? Write a letter of instructions that includes:
|_| Your name |_| The Fund's name |_| Your Fund account number (from
your account statement) |_| The dollar amount or number of shares to be
redeemed |_| Any special payment instructions |_| Any share
certificates for the shares you are selling |_| The signatures of all
registered owners exactly as the account is registered, and
|_| Any special documents requested by the Transfer Agent to assure
proper authorization of the person asking to sell the shares.
- --------------------------------------------------------------------------------
Use the following address for requests by mail:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OppenheimerFunds Services
- --------------------------------------------------------------------------------
P.O. Box 5270, Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------
Send courier or express mail requests to:
- --------------------------------------------------------------------------------
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
How Do I Sell Shares by Telephone? You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price on a
regular business day, your call must be received by the Transfer Agent by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan account or under a share certificate by
telephone.
|_| To redeem shares through a service representative, call
1-800-852-8457
|_| To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
|X| Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account statement.
This service is not available within 30 days of changing the address on an
account.
|X| Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is initiated
on the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Can I Sell Shares Through My Dealer? The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How 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:
|_| Shares of the fund selected for exchange must be available for
sale in your state of residence.
|_| The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege.
|_| 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.
|_| You must meet the minimum purchase requirements for the fund you
purchase by exchange.
|_| Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. In
some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you own
and a purchase of the shares of the other fund, which may result in a capital
gain or loss. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
How Do I Submit Exchange Requests? Exchanges may be requested in writing or by
telephone:
|X| Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
address on the Back Cover.
|X| 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.
Are There Limitations on Exchanges? There are certain exchange policies you
should be aware of:
|_| Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form. It must be
received by the close of The New York Stock Exchange that day, which is normally
4:00 P.M. but may be earlier on some days. However, either fund may delay the
purchase of shares of the fund you are exchanging into up to seven days if it
determines it would be disadvantaged by a same-day exchange.
|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.
|_| 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.
|_| 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
|X| 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.
|X| Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from an owner of the account.
|X| The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund will
not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
|X| 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.
|X| 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.
|X| The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less than
their original cost.
|X| Payment for redeemed shares ordinarily is made in cash. It is
forwarded by check or through AccountLink or by Federal Funds wire (as elected
by the shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual circumstances
determined by the Securities and Exchange Commission, payment may be delayed or
suspended. For accounts registered in the name of a broker-dealer, payment will
normally be forwarded within three business days after redemption.
|X| The Transfer Agent may delay forwarding a check or processing a
payment via AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase shares by
federal funds wire or certified check, or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase payment
has cleared.
|X| Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact that
the market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
|X| Shares may be "redeemed in kind" under unusual circumstances (such
as a lack of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with securities from the Fund's
portfolio.
|X| "Backup Withholding" of Federal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
|X| 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 and Tax Information
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income on a quarterly basis. The Fund intends to pay
dividends to shareholders in March, June, September and December on a date
selected by the Board of Directors. Dividends and distributions paid on Class A
and Class Y shares will generally be higher than dividends for Class B and Class
C shares, which normally have higher expenses than Class A and Class Y. The Fund
has no fixed dividend rate and cannot guarantee that it will pay any dividends
or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
|X| 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.
|X| Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains distributions in the Fund while receiving dividends by
check or having them sent to your bank account through AccountLink.
|X| 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.
|X| Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in the same class of shares of another
Oppenheimer fund account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders, and may be taxable at
different rates depending on how long the Fund holds the asset. It does not
matter how long you have held your shares. Whether you reinvest your
distributions in additional shares or take them in cash, the tax treatment is
the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year as well as
the amount of your tax-exempt income. Any long-term capital gains will be
separately identified in the tax information the Fund sends you after the end of
the calendar year.
|X| Avoid "Buying a Dividend". If you buy shares on or just before the
ex-dividend date or just before the Fund declares a capital gain distribution,
you will pay the full price for the shares and then receive a portion of the
price back as a taxable dividend or capital gain.
|X| Remember There May be Taxes on Transactions. Because the Fund's
share price fluctuates, you may have a capital gain or loss when you sell or
exchange your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
|X| What Are 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.
This information is only a summary of certain federal tax information
about your investment. You should consult with your tax adviser about the effect
of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share.
The total returns in the table represent the rate that an investor would have
earned [or lost] on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.
- --------------------------------------------------------------------------------
<PAGE>
Oppenheimer Main Street Growth & Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEC File No. 811-5360
- --------------------------------------------------------------------------------
For More Information:
The following additional information about the Fund is available without charge
upon request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
- --------------------------------------------------------------------------------
How to Get More Information:
- --------------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Report, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1-800-SEC-0330) or the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
PR0700.001.1298 Printed on recycled paper.
- --------
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
Appendix to Prospectus of
Oppenheimer Main Street Income & Growth Fund
Graphic material included in the Prospectus of Oppenheimer Main Street
Income & Growth Fund: "Annual Total Returns (Class A)(% as of 12/31 each year)":
A bar chart will be included in the Prospectus of Oppenheimer Main
Street Income & Growth Fund (the "Fund") depicting the annual total returns of a
hypothetical $10,000 investment in Class A shares of the Fund for each of the
eight most recent calendar years, without deducting sales charges. Set forth
below are the relevant data points that will appear in the bar chart:
Calendar Oppenheimer Main Street
Year Income & Growth Fund
Ended Class A Shares
12/31/90 -6.15%
12/31/91 66.37%
12/31/92 31.08%
12/31/93 35.39%
12/31/94 -1.53%
12/31/95 30.77%
12/31/96 15.70%
12/31/97 26.59%
1
- --------------------------------------------------------------------------------
Oppenheimer Main Street California Municipal Fund
- --------------------------------------------------------------------------------
Prospectus Dated December 22, 1998
Oppenheimer Main Street California Municipal Fund is a mutual fund. It
seeks current income exempt from Federal and California income taxes by
investing in municipal securities, while attempting to preserve capital.
This Prospectus contains important information about the Fund's
objective, its investment policies, strategies and risks. It also contains
important information about how to buy and sell shares of the Fund and other
account features. Please read this Prospectus carefully before you invest and
keep it for future reference about your account.
67890
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
18
Contents
About The Fund
- --------------------------------------------------------------------------------
The Fund's Objective and Investment Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
- --------------------------------------------------------------------------------
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Web Site
How to Sell Shares
By Mail
By Telephone
By Wire
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends and Tax Information
Financial Highlights
<PAGE>
About the Fund
The Fund's Objective and Investment Strategies
What Is the Fund's Investment Objective? The Fund's investment objective is to
seek as high a level of current income exempt from federal and California
personal income taxes as is available from investing in municipal securities
while attempting to preserve capital.
What Does the Fund Invest In? The Fund invests mainly in California municipal
securities that pay interest exempt from federal and California individual
income taxes. The Fund may also use hedging instruments and certain derivative
investments to try to manage investment risks. These investments are more fully
explained in "About the Fund's Investments," below.
Who Is the Fund Designed For? The Fund is designed for investors who are seeking
income exempt from federal and California income taxes. It does not seek capital
gains or growth. Because it invests in tax-exempt securities, the Fund is not
appropriate for retirement plan accounts or for investors who want to pursue
capital growth.
Main Risks of Investing in the Fund
All investments carry risks to some degree. For bond funds one risk is
that the market prices of the fund's investments will fluctuate when general
interest rates change (this is known as "interest rate risk"). Another risk is
that the issuer of the bond will experience financial difficulties and may
default on its obligation 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.
These risks collectively form the risk profile of the Fund and can
affect the value of the Fund's investments, its investment performance, and the
prices of its shares. These risks mean that you can lose money by investing in
the Fund. When you redeem your shares, they may be worth more or less than what
you paid for them.
The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by selecting a wide variety of municipal investments, by carefully
researching securities before they are purchased and in some cases by using
hedging techniques. However, changes in the overall market prices of municipal
securities and the income they pay can occur at any time. The share price of the
Fund will change daily based on changes in interest rates and market conditions,
and in response to other economic events. There is no assurance that the Fund
will achieve its investment objective.
How Risky Is the Fund Overall? The value of the Fund's investments in
municipal securities will change over time due to a number of factors. They
include 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 overall. The Fund focuses its
investments in California municipal securities and is non-diversified. It will
therefore be vulnerable to the effects of economic changes that affect
California governmental issuers. These changes can affect the value of the
Fund's investments and its price per share. The Fund may invest in derivative
investments. These have additional risks and can cause fluctuations in the
Fund's share prices. In the OppenheimerFunds spectrum, the Fund is more
conservative than some types of taxable bond funds, such as high yield bond
funds, but more aggressive than money market funds.
An investment in the Fund is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
|X| Credit Risk. Municipal securities are subject to credit risk.
Credit risk relates to the ability of the issuer of a municipal security to make
interest and principal payments on the security as they become due. If the
issuer fails to pay interest, the Fund's income may be reduced and if the issuer
fails to repay principal, the value of that bond and of the Fund's shares may be
reduced.
|_| Special Risks of Lower-Grade Securities. Because the Fund can
invest as much as 25% of its assets in municipal securities below investment
grade to seek higher income, the Fund's credit risks are greater than those of
funds that buy only investment grade bonds. Lower-grade municipal securities may
be subject to greater market fluctuations and greater risks of loss of income
and principal than higher-rated municipal securities. Securities that are (or
that have fallen) below investment grade entail a greater risk that the issuers
of such securities may not meet their debt obligations. However, by limiting its
investments in non-investment grade municipal securities, the Fund may reduce
the effect of some of these risks on its share price and income.
|X| Interest Rate Risks. In addition to credit risks, municipal
securities are subject to changes in value when prevailing interest rates
change. When interest rates fall, the values of outstanding municipal securities
generally rise, and the bonds may sell for more than their face amount. When
interest rates rise, the values of outstanding municipal securities generally
decline, and the bonds may sell at a discount from their face amount. The
magnitude of these price changes is generally greater for bonds with longer
maturities. The Fund focuses on longer term securities to seek higher income.
When the average maturity of the Fund's portfolio is longer, its share price may
fluctuate more when interest rates change.
|X| Risks of Non-Diversification -- Investments in California Municipal
Securities. The Fund is "non-diversified." That means that compared to funds
that are diversified, it can invest a greater portion of its assets in the
securities of one issuer, such as bonds issued by the State of California.
Having a higher percentage of its assets invested in the securities of fewer
issuers, particularly obligations of government issuers of a single state, could
result in greater fluctuations of the Fund's share prices due to economic,
regulatory or political problems in California.
|X| There are Special Risks in Using Derivative Investments. The Fund
may use derivatives to seek increased returns or to try to hedge investment
risks. In general terms, a derivative investment is an investment contract whose
value depends on (or is derived from) the value of an underlying assets,
interest rate or index. Options, futures, "inverse floaters" and variable rate
obligations are examples of derivatives.
If the issuer of the derivative investment does not pay the amount due,
the Fund can lose money on its investment. Also, the underlying security or
investment on which the derivative is based, and the derivative itself, may not
perform the way the Manager expected it to perform. If that happens, the Fund
will get less income than expected or its share price could decline. To try to
preserve capital, the Fund has limits on the amount of particular types of
derivatives it can hold. However, using derivatives can cause the Fund to lose
money on its investments or increase the volatility of its share prices.
<PAGE>
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the calendar years since the Fund's inception (5/18/90) and by
showing how the average annual total returns of the Fund's shares compare to
those of a broad-based market index. The Fund's past investment performance is
not necessarily an indication of how the Fund will perform in the future.
[See Bar Chart in Appendix to the Prospectus]
For the period from 1/1/98 through 9/30/98, the cumulative return (not
annualized) for Class A shares was ___%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown. During the period shown in the bar
chart, the highest return (not annualized) for a calendar quarter was ____%
(____) and the lowest return for a calendar quarter was ____% (____).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual Total
Returns for the periods Past 5 Years Past 10 Years
ending December 31, 1997 Past 1 Year (or life of class, if (or life of class, if less)
less)
Oppenheimer Main Street
California Municipal Fund ____% ____% ____%*
(Class A Shares)
Oppenheimer Main Street
California Municipal Fund ____% ____%* NA
(Class B Shares)
Lehman Brothers Municipal 9.19% 7.36% ____%*
Bond Index
</TABLE>
* Inception dates of classes: Class A: 5/18/90; Class B 10/29/93. The index
performance is shown from 5/30/90. The Fund's average annual total returns in
the table include the applicable sales charge: for Class A, the current maximum
initial sales charge of 4.75%; for Class B, the applicable contingent deferred
sales charges of 5% (1-year) and 2% (life of class).
The returns measure the performance of a hypothetical $10,000 account and assume
that all dividends and capital gains distributions have been reinvested in
additional shares. Because the Fund invests in municipal securities, the Fund's
performance is compared to the Lehman Brothers Municipal Bond Index, an
unmanaged index of a broad range of investment grade municipal bonds that is a
measure of the performance of the general municipal bond market. However, it
must be remembered that the index includes municipal securities from many states
while the Fund focuses on California municipal securities, and the index
performance does not consider the effects of capital gains or transaction costs.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services. Those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during the fiscal year ended
August 31, 1998.
Shareholder Transaction Fees (charges paid directly from your investment):
(% of amount of transaction)
<TABLE>
<CAPTION>
<S> <C> <C>
Class A Shares Class B Shares
Maximum Sales Charge (Load) on purchases (as a 4.75% None
% of offering price)
Maximum Contingent Deferred Sales Charge None1 5%2
(Load) (as % of the lower of the original
offering price or redemption proceeds)
1. A 1% contingent deferred sales charge may apply to redemptions of
investments of $1 million or more of Class A shares. See "How to Buy
Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Class B
Shares Shares
Management Fees 0 .55 % 0.55 %
Distribution and/or Service (12b-1) Fees None 1.00%
Other Expenses 0. % 0. %
Total Annual Operating Expenses 0. % %
</TABLE>
Numbers in the table are based on the Fund's expenses in the last fiscal year,
ended 8/31/98. Expenses may vary in future years. "Other expenses" include
transfer agent fees, custodial fees, and accounting and legal expenses the Fund
pays. The Management Fees shown above are shown at the maximum rate under the
investment advisory agreement and do not reflect a voluntary waiver undertaken
by the Manager to reduce its management fees to an annual rate of 0.40% if the
net assets of the Fund exceed $100 million. With that waiver the actual
Management Fee rate for both classes during the fiscal years was 0.40%. The
Manager may withdraw that waiver at any time.
Examples. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a class of shares of the Fund for
the time periods indicated, and reinvest your dividends and distributions. The
first example assumes that you redeem all of your shares at the end of those
periods. The second example assumes you keep your shares. Both examples also
assume that your investment has a 5% return each year and that the class's
operating expenses remain the same. Your actual costs may be higher or lower
because expenses will vary over time. Based on these assumptions your expenses
would be as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
If shares are redeemed: 1 year 3 years 5 years 10 years1
Class A Shares $ $ $ $
Class B Shares $ $ $ $
If shares are not redeemed: 1 year 3 years 5 years 10 years1
Class A Shares $ $ $ $
Class B Shares $ $ $ $
</TABLE>
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B contingent deferred sales charges. In the second example,
the Class A expenses include the sales charge, but Class B expenses do not
include contingent deferred sales charges. 1. Class B expense for years 7
through 10 are based on Class A expenses, since Class B shares automatically
convert to Class A after 6 years.
About the Fund's Investments
The Fund's Principal Investment Policies. The Fund's goal is to seek a high
level of current income that is exempt from federal and California income taxes
by investing in municipal securities, while trying to preserve capital. Under
normal market conditions, the Fund, as a fundamental policy, invests at least
80% of its total assets in California municipal securities.
The Statement of Additional Information contains more detailed information
about the Fund's investment policies and risks.
|X| What Municipal Securities Does the Fund Invest In? The Fund buys
municipal bonds and notes, tax-exempt commercial paper, certificates of
participation and other debt obligations.
California municipal securities, on which the Fund focuses its
investments, are municipal securities that are not subject (at the time they are
issued) to California individual income tax, in the opinion of bond counsel to
the issuer. They may include debt obligations issued by the State of California
and its political subdivisions (such as cities, towns counties, agencies and
authorities). The term California municipal securities may also include debt
securities of the governments of certain possessions, territories and
commonwealths of the United States if the interest is not subject to California
individual income tax.
<PAGE>
The Fund may also buy other municipal securities, issued by the
governments of the District of Columbia and of other states as well as their
political subdivisions, authorities and agencies, and securities issued by any
commonwealths, territories or possessions of the United States, or their
respective agencies, instrumentalities or authorities, if the interest paid on
the security is not subject to federal individual income tax (in the opinion of
bond counsel to the issuer at the time the security is issued).
The Fund can buy both long-term and short-term municipal securities.
Long-term securities have a maturity of more than one year. The Fund generally
focuses on longer-term securities, to seek higher income. The values of
longer-term bonds are more affected by changes in interest rates than short-term
bonds. Therefore, the longer the average maturity of the Fund's portfolio, the
more its share prices will be affected by changes in interest rates.
Municipal securities are issued to raise money for a variety of public
or private purposes, including financing state or local governments, financing
specific projects or public facilities. The Fund can invest in municipal
securities that are "general obligations," secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal and interest.
It also can buy "revenue obligations," payable only from the revenues derived
from a particular facility or class of facilities, or a specific excise tax or
other revenue source.
|X| Ratings of Municipal Securities the Fund Buys. Most of the
municipal securities the Fund buys are "investment grade" at the time of
purchase. The Fund limits its investments in municipal securities that at the
time of purchase are not "investment-grade" to no more than 25% of its total
assets. "Investment grade" securities are those rated within the four highest
rating categories of Moody's, Standard & Poor's, Fitch or Duff & Phelps or
another nationally recognized rating organization, or (if unrated) judged by the
Manager to be investment grade. Rating categories are described in the Statement
of Additional Information. If the securities are not rated, the Manager will use
its judgment to assign a rating category equivalent to that of a rating agency.
The Fund limits its investments in unrated securities to 20% of total assets. A
reduction in the rating of a security after its purchase by the Fund will not
automatically require the Fund to dispose of that security.
The Manager may rely to some extent on credit ratings by nationally
recognized rating agencies in evaluating the credit risk of securities selected
for the Fund's portfolio. It may also use its own research and analysis. Many
factors affect an issuer's ability to make timely payments, and the credit risks
of a particular security may change over time.
|X| Municipal Lease Obligations. Municipal leases are used by state and
local government authorities to obtain funds to acquire land, equipment or
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in payments made under municipal lease obligations. If
the government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable.
|X| Can the Fund's Investment Objective and Policies Change? The Fund's
Board of Directors may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies are those that cannot be changed without the
approval of a majority of the Fund's outstanding voting shares. The Fund's
investment objective is a fundamental policy. 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.
|X| How Does the Manager Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Manager currently looks primarily
throughout California for municipal securities using a variety of factors which
may change over time and may vary in particular cases: Securities that provide
high income The goal of spreading risk among a wide range of securities
|_| Issues with favorable credit characteristics
|_| Special situations among issuers that provide
opportunities for value
Investment Strategies. To seek its objective, the Fund may also use the
investment techniques and strategies described below. These techniques involve
certain risks or are designed to help reduce some of the risks.
|X| Floating Rate/Variable Rate Obligations. Some of the municipal
securities the Fund can purchase have variable or floating interest rates.
Variable rates are adjustable 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. These obligations may be secured by bank letters of
credit or other credit support arrangements.
Certain types of variable rate bonds known as "inverse floaters" pay
interest rates that vary as the yields generally available on short-term
tax-exempt bonds change. However, the yields on inverse floaters move in the
opposite direction of yields on short-term bonds in response to market changes.
As interest rates rise, inverse floaters produce less current income, and their
market value can become volatile. Inverse floaters are a type of "derivative
security." Some have a "cap," so that 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 anticipates that it will invest no more than 10% of its
total assets in inverse floaters.
|X| Other Derivatives. The Fund may also invest in municipal derivative
securities that pay interest that depends on an external pricing mechanism.
Examples of securities having external pricing mechanisms are interest rate
swaps, municipal bond indices or swap indices.
|X|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. These terms 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 is a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
|X| Puts and Stand-By Commitments. The Fund may acquire "stand-by
commitments" or "puts" with respect to municipal securities. The Fund would have
the right to sell specified securities at a set price on demand to the issuing
broker-dealer or bank. However, this feature may result in a lower interest rate
on the security. The Fund will acquire stand-by commitments or puts solely to
enhance portfolio liquidity.
|X| Illiquid and Restricted Securities. 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 Manager monitors holdings of
illiquid securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity. The Fund cannot buy securities that
have a restriction on resale.
|X| Hedging. The Fund may purchase 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
all referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them.
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 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.
If the Manager uses a hedging instrument at the wrong time or judges
market conditions incorrectly, the strategy 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, 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. The Fund may not enter into
swaps with respect to more than 25% of its total assets.
Temporary Defensive Investments. The Fund may invest up to 100% of its total
assets in temporary defensive investments from time to time. This may happen
during periods of unusual market conditions. Generally, they would be short-term
municipal securities but could be U.S. Government securities or highly-rated
corporate debt securities. The income from some of those temporary defensive
investments may not be tax-exempt, and therefore when making those investments
the Fund may not achieve its objective. The Fund may also hold these types of
temporary investments pending the investment of proceeds from the sale of Fund
shares or portfolio securities, or to meet anticipated redemptions of Fund
shares.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working
on necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative affect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Fund is Managed
The Manager. The Fund's investment adviser is the Manager, OppenheimerFunds,
Inc., which is responsible for selecting the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Board of 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 advisor since 1959. The
Manager (including subsidiaries) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $85 billion as of
September 30, 1998, and with more than 4 million shareholder accounts. The
Manager is located at Two World Trade Center, 34th Floor, New York, New York
10048-0203.
|X| Portfolio Manager. The Portfolio manager of the Fund is Jerry Webman, a
Senior Vice President of the Manager. Mr. Webman is the person principally
responsible for the day-to-day management of the Fund's portfolio, and has had
this responsibility since April 20, 1996. Mr. Webman also serves as an officer
and portfolio manager for other Oppenheimer funds. Prior to joining
OppenheimerFunds, Mr. Webman was an officer and portfolio manager with
Prudential Mutual Funds Investment Management, Inc.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at a maximum annual rate of 0.55% of average annual
net assets if the Fund's net assets exceed $100 (it is reduced if assets are
less). The Manager has voluntarily undertaken to limit its fees to 0.40% if the
Fund's assets exceed $100 million. That waiver can be modified or removed at any
time by the Manager. The Fund's management fee for its last fiscal year ended
August 31, 1998, was 0.40% of average annual net assets for Class A and Class B
shares, after giving affect to the waiver.
- --------------------------------------------------------------------------------
About Your Account
- --------------------------------------------------------------------------------
How to Buy Shares
How Are Shares Purchased? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, directly through the Distributor, or automatically through an Asset
Builder Plan under the OppenheimerFunds AccountLink service. The Distributor may
appoint certain servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the
Fund's shares.
|X| Buying Shares Through Your Dealer. Your dealer will place your order
with the Distributor on your behalf.
|X| Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
with a financial advisor before your make a purchase to be sure that the Fund is
appropriate for you.
|X| Buying Shares by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.
|X| Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the Automated Clearing House
transfer to buy the shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink,"
below for more details.
|X| Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
|_| With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as little
as $25. Subsequent purchases of at least $25 can be made by telephone through
AccountLink.
|_| The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them appears in
the Statement of Additional Information, or you can ask your dealer or call the
Transfer Agent), or reinvesting distributions from unit investment trusts that
have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their public offering price
(the net asset value per share plus any initial sales charge that applies). The
public offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Denver, Colorado, or after any
agent appointed by the Distributor receives the order and sends it to the
Distributor.
|_| The net asset value of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. (All references to time in this Prospectus mean "New York time").
The net asset value per share is determined by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. To determine net asset value, the Fund's Board of
Directors has established procedures to value the Fund's securities, in general
based on market value. The Board has adopted special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained.
|_| To receive the offering price for a particular day, in most cases
the Distributor or its designated agent must receive your order by the time of
day The New York Stock Exchange closes that day. If your order is received on a
day when the Exchange is closed or after it has closed, the order will receive
the next offering price that is determined after your order is received.
|_| If you buy shares through a dealer, your dealer must receive the
order by the close of The New York Stock Exchange and transmit it to the
Distributor so that it is received before the Distributor's close of business on
a regular business day (normally 5:00 P.M.) to receive that day's offering
price. Otherwise, the order will receive the next offering price that is
determined.
- --------------------------------------------------------------------------------
What Classes of Shares Does the Fund Offer? The Fund offers investors two
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify Class A or Class B shares. If you do not choose a
class, your investment will be made in Class A shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|X| Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). The amount of that sales charge will
vary depending on the amount you invest. The sales charge rates are listed in
"How Can I Buy Class A Shares?" below.
|X| Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but you will pay an annual asset-based sales charge,
and 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 "How Can I Buy Class B 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 that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
|X| How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you expect
to hold your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will also
depend on how much you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset the
effect of paying an initial sales charge on your investment, compared to the
effect over time of higher class-based expenses on shares of Class B.
|_| Investing for the Short Term. If you have a relatively short-term
investment horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A shares rather than Class
B shares. That is because of the effect of the Class B contingent deferred sales
charge if you redeem within six years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term
And for investors who invest $500,000 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.
|_| Investing for the Longer Term. If you are investing less than
$100,000 for the longer-term, for example for retirement, and do not expect to
need access to your money for seven years or more, Class B shares may be
appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
|X| Are There Differences in Account Features That Matter to You? Some
account features (such as checkwriting) may not be available to Class B
shareholders. Other features (such as Automatic Withdrawal Plans) may not be
advisable (because of the effect of the contingent deferred sales charge) for
Class B shareholders. Therefore, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B shareholders will be reduced by
the additional expenses borne by that class that are not borne by Class A
shares, such as the Class B asset-based sales charge described below and in the
Statement of Additional Information. 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.
|X| How Does It Affect Payments to My Broker? A salesperson, such as a
broker, may receive different compensation for selling one class of shares than
for selling another class. It is important to remember that Class B contingent
deferred sales charges and asset-based sales charges have the same purpose as
the front-end sales charge on sales of Class A shares: to compensate the
Distributor for commissions it pays to dealers and financial institutions for
selling shares. The Distributor may pay additional compensation from its own
resources to securities dealers or financial institutions based upon the value
of shares of the Fund owned by the dealer or financial institution for its own
account or for its customers.
Special Sales Charge Arrangements and Waivers. The Statement of Additional
Information details the conditions for the waiver of sales charges that apply in
certain cases, and the special sales charge rates that apply to purchases of
shares of the Fund by certain groups, or under specified retirement plan
arrangements or in other special types of transactions.
How Can I Buy Class A Shares? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net
asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Offering Net Amount Offering
Amount of Purchase Price Invested Price
- ---------------------------------------------------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ---------------------------------------------------------------------------------------------------------------------
$50,000 or more but 4.50% 4.71% 4.00%
less than $100,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$100,000 or more but 3.50% 3.63% 3.00%
less than $250,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.25%
less than $500,000
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.80%
less than $1 million
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
|X| Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more. The Distributor pays dealers of record
commissions in an amount equal to 1.0% of purchases of $1 million or more other
than by retirement accounts. That commission will be paid only on purchases that
were not previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares 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. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (excluding 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.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable
when shares are redeemed, the Fund will first redeem shares that are not subject
to the sales charge, including shares purchased by reinvestment of dividends and
capital gains. Then the Fund will redeem other shares in the order in which you
purchased them. The Class A contingent deferred sales charge is waived in
certain cases described in "Waivers of Class A Sales Charges" in the Statement
of Additional Information.
The Class A contingent deferred sales charge is not charged on
exchanges of shares under the Fund's Exchange Privilege (described below).
However, if the shares acquired by exchange are redeemed within 18 calendar
months of the end of the calendar month in which the exchanged shares were
originally purchased, then the sales charge will apply.
How Can I Reduce Sales Charges for Class A Share Purchases? You may be eligible
to buy Class A shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information:
|X| Waivers of Class A Sales Charges. The initial and contingent Class
A sales charges are not imposed in the circumstances described 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 when purchasing shares whether any of the special conditions
apply.
How Can I Buy Class B Shares? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
The 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 an increase in net
asset value over the initial purchase price or
|_| shares purchased by the reinvestment of dividends or capital gains
distributions.
|_| shares redeemed in the special circumstances described in "Waivers
of Class B Sales Charges" in the Statement of Additional Information.
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 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:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Years Since Beginning of Contingent Deferred Sales Charge
Month in which Purchase On Redemptions in That Year
Order Was Accepted (As % of Amount Subject to 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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
|X| 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 the Statement of Additional
Information.
Distribution and Service (12b-1) Plans for Class B Shares. The Fund has adopted
Distribution and Service Plans for Class B shares to reimburse the Distributor
for its services and costs in distributing Class B shares and servicing
accounts. Under the distribution plan, the Fund pays the Distributor an annual
"asset-based sales charge" of 0.75% per year on Class B shares. The Distributor
also receives a service fee of 0.25% per year under the service plan.
The asset-based sales charge and service fees increase Class B expenses
by up to 1.00% of the net assets per year. Because these fees are paid out of
the Fund's assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B shares. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after the shares were sold by the dealer. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commission of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you: transmit funds
electronically to purchase shares by telephone (through a service representative
or by PhoneLink) or automatically under Asset Builder Plans, or have the
Transfer Agent send redemption proceeds or to transmit dividends and
distributions directly to your bank account. Please call the Transfer Agent for
more information.
You can purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.
|_| Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund to pay for these
purchases.
|_| Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number.
|_| Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
Can I Submit Transaction Requests by Fax? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.
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. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. You must be sure to ask the Distributor for this privilege when you send
your payment.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular
business day. Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter, by using the Fund's checkwriting
privilege or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner, please call the Transfer Agent first, at
1-800-525-7048, for assistance.
|X| Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, the following redemption requests must be in writing and
must include a signature guarantee (although there may be other situations that
also require a signature guarantee):
|_| You wish to redeem $50,000 or more and receive a check
|_| The redemption check is not payable to all shareholders listed on
the account statement |_| The redemption check is not sent to the
address of record on your account statement |_| Shares are being
transferred to a Fund account with a different owner or name |_| Shares
are being redeemed by someone (such as an Executor) other than the
owners
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association, or
by a foreign bank that has a U.S. correspondent bank, or by a U.S. registered
dealer or broker in securities, municipal securities or government securities,
or by a U.S. national securities exchange, a registered securities association
or a clearing agency. If you are signing on behalf of a corporation, partnership
or other business or as a fiduciary, you must also include your title in the
signature.
|X| Sending Redemption Proceeds by Wire. While the Fund normally sends your
money by check, you can arrange to have the proceeds of the shares you sell sent
by Federal Funds wire to a bank account you designate. It must be a commercial
bank that is a member of the Federal Reserve wire system. The minimum redemption
you can have sent by wire is $2,500. There is a $10 fee for each wire. To find
out how to set up this feature on your account or to arrange a wire, call the
Transfer Agent at 1-800-852-8457.
How Do I Sell Shares by Mail? Write a letter of instructions that includes:
|_| Your name
|_| The Fund's name
|_| Your Fund account number (from your account statement)
|_| The dollar amount or number of shares to be redeemed
|_| Any special payment instructions
|_| Any share certificates for the shares you are selling
|_| The signatures of all registered owners exactly as the account is
registered, and
|_| Any special documents requested by the Transfer Agent to assure
proper authorization of the person asking to sell the shares.
- --------------------------------------------------------------------------------
Use the following address for requests by mail:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OppenheimerFunds Services
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P.O. Box 5270, Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Send courier or express mail requests to:
- --------------------------------------------------------------------------------
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
How Do I Sell Shares by Telephone? You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price on a
regular business day, your call must be received by the Transfer Agent by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. You may not redeem shares held under a share
certificate by telephone.
|_| To redeem shares through a service representative, call
1-800-852-8457
|_| To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
|X| Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone in any 7-day period. The check must be payable to all owners of
record of the shares and must be sent to the address on the account statement.
This service is not available within 30 days of changing the address on an
account.
|X| Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is initiated
on the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
Checkwriting Against Your Account. To write checks against your Fund account,
request that privilege on your account Application, or contact the Transfer
Agent for signature cards. They 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 other account.
|_| Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or Custodian.
|_| Checkwriting privileges are not available for accounts holding Class B
or Class A shares that are subject to a contingent deferred sales charge.
|_| Checks must be written for at least $100.
|_| 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.
|_| 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.
|_| Don't use your checks if you changed your Fund account number, until
you receive new checks.
Can I Sell Shares Through My Dealer? The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How 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:
|_| Shares of the fund selected for exchange must be available for sale in
your state of residence.
|_| The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.
|_| 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.
|_| You must meet the minimum purchase requirements for the fund you
purchase by exchange.
|_| Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. In
some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you own
and a purchase of the shares of the other fund, which may result in a capital
gain or loss. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
How Do I Submit Exchange Requests? Exchanges may be requested in writing or by
telephone:
|X| Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
address on the Back Cover.
|X| 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.
Are There Limitations on Exchanges? There are certain exchange policies you
should be aware of:
|_| Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form. It must be
received by the close of The New York Stock Exchange that day, which is normally
4:00 P.M. but may be earlier on some days. However, either fund may delay the
purchase of shares of the fund you are exchanging into up to seven days if it
determines it would be disadvantaged by a same-day exchange.
|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.
|_| 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.
|_| 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
|X| 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.
|X| Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from an owner of the account.
|X| The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund will
not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
|X| 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.
|X| 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.
|X| The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for Class A
and Class B shares. The redemption value of your shares may be more or less than
their original cost.
|X| Payment for redeemed shares ordinarily is made in cash. It is
forwarded by check or through AccountLink or by Federal Funds wire (as elected
by the shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual circumstances
determined by the Securities and Exchange Commission, payment may be delayed or
suspended. For accounts registered in the name of a broker-dealer, payment will
normally be forwarded within three business days after redemption.
|X| The Transfer Agent may delay forwarding a check or processing a
payment via AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase shares by
federal funds wire or certified check, or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase payment
has cleared.
|X| Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact that
the market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
|X| Shares may be "redeemed in kind" under unusual circumstances (such
as a lack of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with securities from the Fund's
portfolio.
|X| "Backup Withholding" of Federal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
|X| 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 and Tax Information
Dividends. The Fund intends to declare dividends separately for Class A and
Class B shares from net tax-exempt income and/or net investment income each
regular business day and to pay 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 are available to the Fund
from the purchase payment for such shares.
The Fund attempts to pay dividends on Class A shares at a constant
level. There is no assurance that it will be able to do so. The Board of
Directors may change the targeted dividend level at any time, without prior
notice to shareholders. Additionally, the amount of those dividends and the
distributions paid on Class B shares may vary over time, depending on market
conditions, the composition of the Fund's portfolio, and expenses borne by the
particular class of shares. Dividends and distributions paid on Class A shares
will generally be higher than for Class B shares, which normally have higher
expenses than Class A. The Fund cannot guarantee that it will pay any dividends
or distributions.
Capital Gains. Although the Fund does not seek capital gains, it may realize
capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital gains in December
of each year. The Fund may make supplemental distributions of dividends and
capital gains following the end of its fiscal year. 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.
There can be no assurance that the Fund will pay any capital gains distributions
in a particular year.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
|X| 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.
|X| Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains distributions in the Fund while receiving dividends by
check or having them sent to your bank account through AccountLink.
|X| 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.
|X| Reinvest Your Distributions in Another OppenheimerFunds Account. You
can reinvest all distributions in the same class of shares of another
Oppenheimer fund account you have established.
Taxes. Dividends paid from net investment income earned by the Fund on municipal
securities will be excludable from gross income for Federal income tax purposes.
A portion of a dividend that is derived from interest paid on certain "private
activity bonds" may be an item of tax preference if you are subject to the
alternative minimum tax. If the Fund earns interest on taxable investments, any
dividends derived from those earnings will be taxable as ordinary income to
shareholders.
Dividends paid by the Fund from interest on California municipal
securities will be exempt from California individual income taxes, if at the
close of each quarter at least 50% of the value of the Fund's assets are
invested in debt obligations that pay interest exempt from California individual
income taxes. Dividends paid from income from municipal securities of issuers
outside California will normally be subject to California individual income
taxes.
Dividends and capital gains distributions may be subject to state or
local taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders, and may be taxable at different rates depending on
how long the Fund holds the asset. 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. 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.
|X| Avoid "Buying a Dividend". If you buy shares just before the Fund
declares a capital gain distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable capital gain.
|X| Remember There May be Taxes on Transactions. Even though the Fund
seeks to distribute tax-exempt income 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.
|X| What Are 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.
This information is only a summary of certain federal tax information
about your investment. You should consult with your tax adviser about the effect
of an investment in the Fund on your particular tax situation.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share.
The total returns in the table represent the rate that an investor would have
earned [or lost] on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.
- --------------------------------------------------------------------------------
<PAGE>
Oppenheimer Main Street California Municipal Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEC File No. 811-5360
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For More Information:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following additional information about the Fund is available without charge
upon request:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Additional Information
- --------------------------------------------------------------------------------
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annual and Semi-Annual Reports
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
How to Get More Information:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Report, and other information about the Fund or your account:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By Telephone:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Call OppenheimerFunds Services toll-free:
- --------------------------------------------------------------------------------
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------
On the Internet:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You can read or down-load documents on the OppenheimerFunds web site:
- --------------------------------------------------------------------------------
http://www.oppenheimerfunds.com
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1-800-SEC-0330) or the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained upon payment of a duplicating fee by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
^&*I)
PR0725.001.1298 Printed on recycled
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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: "Annual Total Returns (Class A)(% as of 12/31 each
year)":
A bar chart will be included in the Prospectus of Oppenheimer Main
Street California Municipal Fund (the "Fund") depicting the annual total returns
of a hypothetical $10,000 investment in Class A shares of the Fund for each of
the eight most recent calendar years, without deducting sales charges. Set forth
below are the relevant data points that will appear in the bar chart:
Calendar Oppenheimer Main Street
Year California Municipal Fund
Ended Class A Shares
12/31/90 5.82%
12/31/91 11.35%
12/31/92 8.35%
12/31/93 13.13%
12/31/94 -7.64%
12/31/95 19.72%
12/31/96 5.28%
12/31/97 10.38%
<PAGE>
Robert ZackncrwdOppenheimerFunds, INC.
Oppenheimer Main Street Growth & Income Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated December 22, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December 22, 1998. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, or by calling the Transfer Agent at the toll-free number shown above, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
<TABLE>
<CAPTION>
<S> <C>
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks...................................
The Fund's Principal Investment Policies...........................................................
Other Investment Techniques and Strategies.........................................................
Investment Restrictions............................................................................
How the Fund is Managed ................................................................................
Organization and History...........................................................................
Directors and Officers.............................................................................
The Manager........................................................................................
Brokerage Policies of the Fund..........................................................................
Distribution and Service Plans..........................................................................
Performance of the Fund.................................................................................
About Your Account
How To Buy Shares.......................................................................................
How To Sell Shares......................................................................................
How To Exchange Shares..................................................................................
Dividends, Capital Gains and Taxes......................................................................
Additional Information About the Fund...................................................................
Financial Information About the Fund
Independent Auditors' Report............................................................................
Financial Statements....................................................................................
Appendix A: Description of Debt Security Ratings........................................................ A-1
Appendix B: Corporate Industry Classifications.......................................................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers C-1
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ABOUT THE FUND
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's investment Manager,
OppenheimerFunds, Inc., will select for the Fund. Additional information is also
provided about the strategies that the Fund may use to try to achieve its
objective.
The Fund's Principal Investment Policies.
n Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of a
specified size or range, and therefore may invest in securities of small-, mid-
and large-capitalization issuers. At times, the Fund may focus its equity
investments in securities of one or more capitalization ranges, based upon the
Manager's judgment of where are the best market opportunities to seek the Fund's
objective. At times, the market may favor or disfavor securities of issuers of a
particular capitalization range, and securities of small capitalization issuers
may be subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund is focusing on or has substantial investments
in smaller capitalization companies at times of market volatility, the Fund's
share price may fluctuate more than that of funds focusing on larger
capitalization issuers.
o Rights and Warrants. 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. 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.
n Investments in Bonds, Other Debt Securities and Convertible
Securities. The Fund can invest in bonds, debentures and other debt securities
to seek current income as part of its investment objective. Because the Fund
currently emphasizes investments in equity securities, such as stocks, it is not
anticipated that significant amounts of the Fund's assets will be invested in
debt securities in the coming year. However, if market conditions suggest that
debt securities may offer better total return opportunities than stocks, or if
the Manager determines to seek a higher amount of current income to distribute
to shareholders, the Manager may shift more of the Fund's investments into debt
securities.
The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., at least "BBB" by Standard & Poor's Corporation or Duff & Phelps,
Inc., or have comparable ratings by another nationally recognized statistical
rating organization. In making investments in debt securities, the Manager may
rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness. If the securities are
unrated, to be considered part of the Fund's holdings of investment-grade
securities, they must be judged by the Manager to be of comparable quality to
bonds rated as investment grade by a rating organization.
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
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 Special Risks of Lower-Grade Securities. While it is not
anticipated that the Fund currently will invest a substantial portion of its
assets in debt securities, the Fund can do so to seek current income. Because
lower-rated securities tend to offer higher yields than investment grade
securities, the Fund may invest in lower grade securities if the Manager is
trying to achieve greater income (and, in some cases, the appreciation
possibilities of lower-grade securities may be a reason they are selected for
the Fund's portfolio).
The Fund may invest up to 25% of its total assets in "lower grade" debt
securities. However, 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. If they are
unrated, and are determined by the Manager to be of comparable quality to debt
securities rated below investment grade, they are included in limitation on the
percentage of the Fund's assets that can be invested in lower-grade securities.
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.
Some of the special credit risks of lower-grade securities are
discussed in the Prospectus. There is a greater risk that the issuer may default
on its obligation to pay interest or to repay principal than in the case of
investment grade securities. The issuer's low creditworthiness may increase the
potential for its insolvency. An overall decline in values in the high yield
bond market is also more likely during a period of a general economic downturn.
An economic downturn or an increase in interest rates could severely disrupt the
market for high yield bonds, adversely affecting the values of outstanding bonds
as well as the ability of issuers to pay interest or repay principal. In the
case of foreign high yield bonds, these risks are in addition to the special
risk of foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
However, the Fund's limitations on these investments may reduce some of
the risks to the Fund, as will the Fund's policy of diversifying its
investments. Additionally, to the extent they can be converted into stock,
convertible securities may be less subject to some of these risks than
non-convertible high yield bonds, since stock may be more liquid and less
affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's
or Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics. A description of the debt security ratings categories of
Moody's, S&P and Duff & Phelps are included in Appendix A to this Statement of
Additional Information.
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.
Therefore, the security's rating has less impact on the investment decision than
in the case of non-convertible securities.
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.
n Foreign Securities. The Fund may purchase equity and debt securities
issued or guaranteed by foreign companies or foreign governments or their
agencies. "Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments. They may be traded on foreign securities
exchanges or in the foreign over-the-counter markets.
Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or traded
in the U.S. over-the-counter markets are not considered "foreign securities" for
the purpose of the Fund's investment allocations. That is 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. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
G Risks of Foreign Investing. Investments in foreign securities may offer
special opportunities for investing but also present special additional risks
and considerations not typically associated with investments in domestic
securities. Some of these additional risks are: reduction of income by foreign
taxes; fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
transaction charges for currency exchange; lack of public information about
foreign issuers; lack of uniform accounting, auditing and financial reporting
standards in foreign countries 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
governmental 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.
[--] Risks of Conversion to Euro. On January 1, 1999, eleven countries in
the European Monetary Union will adopt the euro as their official currency.
However, their current currencies (for example, the franc, the mark, and the
lire) will also continue in use until January 1, 2002. After that date, it is
expected that only the euro will be used in those countries. A common currency
is expected to confer some benefits in those markets, by consolidating the
government debt market for those countries and reducing some currency risks and
costs. But the conversion to the new currency will affect the Fund operationally
and also has potential risks, some of which are listed below. Among other
things, the conversion will affect: o issuers in which the Fund invests, because
of changes in the competitive environment from a consolidated currency market
and greater operational costs from converting to the new currency. This might
depress stock values. o vendors the Fund depends on to carry out its business,
such as its Custodian (which holds the foreign securities the Fund buys), the
Manager (which must price the Fund's investments to deal with the conversion to
the euro) and brokers, foreign markets and securities depositories. If they are
not prepared, there could be delays in settlements and additional costs to the
Fund. o exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between the
affected currencies and the need to update the Fund's contracts could pose extra
costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio manager will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
n 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%. The Fund's portfolio turnover rate will
fluctuate from year to year, and the Fund may have a portfolio turnover rate of
100% or more. Increased portfolio turnover creates higher brokerage and
transaction costs for the Fund, which may reduce its overall performance.
Additionally, the realization of capital gains from selling portfolio securities
may result in distributions of taxable long-term capital gains to shareholders,
since the Fund will normally distribute all of its capital gains realized each
year, to avoid excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below.
n 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 be subject to volatility in
their prices. They may have a limited trading market, which may adversely affect
the Fund's ability to dispose of them and can reduce the price the Fund might be
able to obtain for them. Other investors that own a security issued by a small,
unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that
case the Fund might receive a lower price for its holdings than might otherwise
be obtained. The Fund currently intends to invest no more than 5% of its net
assets in securities of small, unseasoned issuers.
n When-Issued and Delayed Delivery Transactions. The Fund may invest in
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed delivery" basis. When-issued and delayed delivery are terms that refer
to securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Fund.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund from the investment.
The Fund will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Their
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery pursuant
to options contracts it has entered into, and not for the purpose of investment
leverage. Although the Fund will enter into delayed delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed delivery basis, it records the transaction
on its books and reflects the value of the security purchased in determining the
Fund's net asset value. In a sale transaction, it records the proceeds to be
received. The Fund will identify to its Custodian bank cash, U.S. government
securities or other high-grade debt obligations at lest equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.
When issued and delayed-delivery transactions can be used by the Fund
as a defensive technique to hedge against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
delayed delivery basis to obtain the benefit of currently higher cash yields.
n Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. Approved vendors include U.S. commercial banks, U.S. branches of
foreign banks, or broker-dealers that have been designated as primary dealers in
government securities. They must meet credit requirements set by the Fund's
Board of 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 occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. 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.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its ability
to do so. The Manager will impose creditworthiness requirements to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
n Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Fund's holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
n Loans of Portfolio Securities. The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Directors. It may do so to try to provide income or to raise cash for liquidity
purposes. These loans are limited to not more than 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.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal the value of the loaned securities. It
must consist of cash, bank letters of credit or securities of the U.S.
Government or its agencies or instrumentalities, or other cash equivalents in
which the Fund is permitted to invest. To be acceptable as collateral, letters
of credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. The terms of the letter of credit and the issuing
bank both must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and (c)
interest on any short-term debt securities purchased with such loan collateral.
Either type of interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees in connection with these
loans. The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter.
n Derivatives. The Fund may invest in a variety of derivative
investments to seek income or for hedging purposes. Some derivative investments
the Fund may use are the hedging instruments described below in this Statement
of Additional Information.
Other derivative investments the Fund may invest in include
"index-linked" notes. Principal and/or interest payments on these notes depend
on the performance of an underlying index. Currency-indexed securities are
another derivative the Fund may use. Typically these are 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 type of index security offers the potential for
increased income or principal payments but at a greater risk of loss than a
typical debt security of the same maturity and credit quality.
Other derivative investments the Fund may use 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 it
is payable in an amount based on the price of the issuer's common stock at the
time of maturity. Both alternatives present a risk that the amount payable at
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 the Manager expected.
n Hedging. The Fund may use 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. To do
so, the Fund may:
o sell futures contracts, o buy puts on such futures or on securities,
or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not expect
to engage extensively in that practice.
The Fund may use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In that
case the Fund will normally seek to purchase the securities and then terminate
that hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund may:
o buy futures, or
o buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
o Futures. The Fund may buy and sell futures contracts that relate to
(1) debt securities (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).
A broadly-based stock index is used as the basis for trading stock
index futures. They may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial futures are similar contracts based on
the future value of the basket of securities that comprise the index. These
contracts obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the
purchaser to take) cash or a specified type of debt security to settle the
futures transaction. Either party could also enter into an offsetting contract
to close out the position.
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"). Initial margin payments will be deposited with the Fund's
Custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
o Put and Call Options. The Fund may buy and sell certain kinds of put
options ("puts") and call options ("calls"). 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 above.
o Writing Covered Call Options. The Fund may write (that is,
sell) covered calls. If the Fund sells 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 certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund 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 writes.
When the Fund writes a call, it receives cash (a premium). The Fund
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period at a fixed exercise price regardless of
market price changes during the call period. The call period is usually not more
than nine months. The exercise price may differ from the market price of the
underlying security. The Fund has the risk of loss that the price of the
underlying security may decline during the call period. That risk may be offset
to some extent by the premium the Fund receives. If the value of the investment
does not rise above the call price, it is likely that the call will lapse
without being exercised. In that case the Fund would keep the cash premium and
the investment.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Fund
enters into a closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for Federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
o Writing Put Options. The Fund may sell 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.
If the Fund writes a put, the put must be covered by segregated liquid
assets. 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 represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price. If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, 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 Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay 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.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on the security, or to
sell the security and use the proceeds from the sale for other investments. The
Fund will realize a profit or loss from a closing purchase transaction depending
on whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for Federal tax purposes, and when distributed by the
Fund, are taxable as ordinary income.
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 buys a call
(other than in a closing purchase transaction), it pays a premium. The Fund then
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 it sells the call at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
Fund exercises the call. If the Fund does not exercise the call or sell it
(whether or not at a profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but lost the right to
purchase the underlying investment.
The Fund may buy puts whether or not it holds the underlying investment
in its portfolio. 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. In that case the Fund will have
paid the premium but lost the right to sell the underlying investment. However,
the Fund may sell the put prior to its expiration.
That sale may or may not be at a profit.
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.
The Fund may buy a call or put only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the Fund's
total assets.
o Buying and Selling Options on Foreign Currencies. The Fund
can buy and sell calls and puts on foreign currencies. They include puts and
calls that trade on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized dealers in such
options. The Fund would use these calls and puts to try to protect against
declines in the dollar value of foreign securities and increases in the dollar
cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency may be partially offset by writing calls
or purchasing puts on that foreign currency. However, the currency rates could
fluctuate in a direction adverse to the Fund's position. The Fund will then have
incurred option premium payments and transaction costs without a corresponding
benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in a
segregated account by its Custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund may write a call on a foreign currency to provide a hedge
against a 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. That decline may be one that occurs due to an expected adverse change in
the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by maintaining cash, U.S. government
securities or other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in a segregated account with the Fund's Custodian
bank.
o Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund may pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put. Those commissions may be higher
on a relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund could
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of the securities held in the Fund's portfolio may
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market may decline. If the Fund then concludes not to invest in
securities because of concerns that the market may decline further or for other
reasons, the Fund will realize a loss on the hedging instruments that is not
offset by a reduction in the price of the securities purchased.
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.
Under a forward contract, one party agrees to purchase, and another
party agrees to sell, a specific currency at a future date. That date may be any
fixed number of days from the date of the contract agreed upon by the parties.
The transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates. The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying securities
the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a decline
in the value of the hedged currency, at the same time they limit any potential
gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund may enter into a forward contract for the purchase
or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency exchange rates during
the period between the date on which the security is purchased or sold or on
which the payment is declared, and the date on which the payments are made or
received.
The Fund may also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency, it may
enter into a forward contract to buy that foreign currency for a fixed dollar
amount. Alternatively, the Fund may enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount if the Fund believes
that the U.S. dollar value of the foreign currency to be sold pursuant to its
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated. That
is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying
to its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of
the contracts would obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one alternative, the Fund may purchase a call option permitting the Fund to
purchase the amount of foreign currency being hedged by a forward sale contract
at a price no higher than the forward contract price. As another alternative,
the Fund may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high or
higher than the forward contact price.
The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager may decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund may have to purchase
additional foreign currency on the "spot" (that is, cash) market to settle the
security trade. If the market value of the security instead exceeds the amount
of foreign currency the Fund is obligated to deliver to settle the trade, the
Fund may have to sell on the spot market some of the foreign currency received
upon the sale of the security. There will be additional transaction costs on the
spot market in those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and to pay additional transactions costs. The use of forward
contracts in this manner may reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second contract
entitling it to sell the same amount of the same currency on the maturity date
of the first contract. The Fund would realize a gain or loss as a result of
entering into such an offsetting forward contract under either circumstance. The
gain or loss will depend on the extent to which the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and offsetting contract.
The costs to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no brokerage fees or commissions are
involved. Because these contracts are not traded on an exchange, the Fund must
evaluate the credit and performance risk of the counterparty under each forward
contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do not charge a fee for
conversion, but they do seek to realize a profit based on the difference between
the prices at which they buy and sell various currencies. Thus, a dealer might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
o Interest Rate Swap Transactions. The Fund can enter into interest
rate swap agreements. 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 the right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities that it
owns. The Fund will not enter into swaps with respect to more than 25% of its
total assets. Also, the Fund will segregate liquid assets (such as cash or U.S.
government securities) 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.
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 be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty may terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
o Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number of
options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether the options were
written or purchased on the same or different exchanges or are held in one or
more accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options that the Fund may write or hold may be
affected by options written or held by other entities, including other
investment companies having the same 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.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's Custodian bank.
o Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from section 1256 contracts that are forward contracts generally
are treated as ordinary income or loss. In addition, section 1256 contracts held
by the Fund at the end of each taxable year are "marked-to-market," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining the excise
tax applicable to investment company distributions and for other purposes under
rules prescribed pursuant to the Internal Revenue Code. An election can be made
by the Fund to exempt those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent that the loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates
that occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such
receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a
foreign currency between the date of acquisition of a debt security
denominated in a foreign currency or foreign currency forward
contracts and the date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Fund's investment company income available for distribution to its
shareholders.
n Temporary Defensive Investments. These can include (i) obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(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 securities
that mature in one year or less (generally known as "cash equivalents"); (v)
other short-term corporate debt obligations; and (vi) repurchase agreements.
Investment Restrictions
n What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
o 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 o more than 50% of the
outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Directors
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
n Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
o The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities of that
issuer or if it would then own more than 10% of that issuer's voting securities.
This limitation applies to 75% of the Fund's total assets. The limit does not
apply to securities issued by the U.S. Government or any of its agencies or
instrumentalities.
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."
o The Fund cannot concentrate investments. That means it cannot invest
25% or more of its total assets in any industry. However, there is no limitation
on investments in U.S. Government Securities.
o The Fund cannot invest in interests in oil or gas exploration or
development programs or in commodities. However, the Fund can buy and sell any
of the hedging instruments permitted by any of its other policies. It does not
matter if the 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 can purchase securities of issuers holding real estate or
interests in real estate (including securities of real estate investment
trusts).
o The Fund cannot purchase securities on margin. However, the Fund can
make margin deposits when using hedging instruments permitted by any of its
other policies.
o The Fund cannot invest in companies for the purpose of acquiring
control or management those companies.
o The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities Act
of 1933 when reselling any securities held in its own portfolio.
o The Fund cannot invest or hold securities of any issuer if officers
and directors of the Fund or the Manager individually beneficially own more than
1/2 of 1% of the securities of that issuer and together own more than 5% of the
securities of that issuer.
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.
The Fund cannot make any such investment at commission rates in excess of normal
brokerage commissions.
o The Fund cannot issue "senior securities." This restriction does not
prohibit the Fund from borrowing money as described in the Prospectus. It does
not prohibit the Fund from entering into margin, collateral, segregation or
escrow arrangements, or options, futures, hedging transactions or other
investments permitted by its other investment policies.
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.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment. The Fund need not sell securities
to meet the percentage limits if the value of the investment increases in
proportion to the size of the Fund.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is one of two investment portfolios, or
"series" of Oppenheimer Main Street Funds, Inc. That corporation is 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 Fund's parent corporation is governed by a Board of Directors,
which is responsible for protecting the interests of shareholders under Maryland
law. The Directors meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
o Classes of Shares. 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 of shares: has its own dividends and
distributions, pays certain expenses which may be different for the different
classes, may have a different net asset value, may have separate voting rights
on matters in which interests of one class are different from interests of
another class, and votes as a class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally on
matters submitted to the vote of shareholders. Each share of the Fund represents
an interest in the Fund proportionately equal to the interest of each other
share of the same class.
The Directors are authorized to create new series and classes of
shares. The Directors may reclassify unissued shares of the Fund's parent
corporation or its series or classes into additional series or classes of
shares. The Directors also may divide or combine the shares of a class into a
greater or lesser number of shares without changing the proportionate beneficial
interest of a shareholder in the Fund. Shares do not have cumulative voting
rights or preemptive or subscription rights. Shares may be voted in person or by
proxy at shareholder meetings.
Meetings of Shareholders. Although the Fund is not required by Maryland
law to hold annual meetings, it may hold shareholder meetings from time to time
on important matters. The Fund's shareholders have the right to call a meeting
to remove a Director or to take certain other action described in the Articles
of Incorporation of the Fund's parent corporation.
The Fund will hold meetings when required to do so by the Investment
Company Act or other applicable law. The Fund will hold a meeting when the
Directors call a meeting or upon proper request of shareholders. If the Fund
receives a written request of the record holders of at least 25% of the
outstanding shares eligible to be voted at a meeting to call a meeting for a
specified purpose (which might include the removal of a Director), the Fund will
call a meeting of shareholders for that specified purpose. 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.
Shareholders of the Fund and of its parent corporation's other series
vote together in the aggregate on certain matters at shareholders' meetings.
Those matters include the election of Directors and ratification of appointment
of the independent auditors. Shareholders of a particular series or class vote
separately on proposals that affect that series or class. Shareholders of a
series or class that is not affected by a proposal are not entitled to vote on
the proposal. For example, only shareholders of a particular series vote on any
material amendment to the investment advisory agreement for that series. Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.
Directors and Officers of the Fund. The Fund's Directors and officers and their
principal occupations and business affiliations during the past five years are
listed below. Directors denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Directors are also trustees, directors or managing general partners of the
following Denver-based Oppenheimer funds1:
<PAGE>
Oppenheimer Total Return Fund, Inc. Oppenheimer Equity Income Fund Oppenheimer
Real Asset Fund Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Champion Income Fund Oppenheimer International Bond Fund Oppenheimer
Integrity Funds Oppenheimer Limited-Term Government Fund Oppenheimer Main Street
Funds, Inc. Oppenheimer Municipal Fund Oppenheimer Variable Account Funds
Panorama Series Fund, Inc. Oppenheimer Cash Reserves Centennial America Fund,
L.P. Centennial Money Market Trust Centennial Government Trust Centennial New
York Tax Exempt Trust Centennial California Tax Exempt Trust Centennial Tax
Exempt Trust The New York Tax-Exempt Income Fund, Inc.
<PAGE>
Ms. Macaskill and Messrs. Swain, Bishop, Bowen, Donohue, Farrar and Zack,
who are officers of the Fund, respectively hold the same offices of the other
Denver-based Oppenheimer funds. As of November 1, 1998, the Directors and
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. The foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms.
Macaskill and Mr. Donohue, are trustees of that plan.
Robert G. Avis,* Director; Age 67
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 83
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen,* Vice President, Assistant Secretary, Treasurer and Director;
Age 62
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 Asset Management Corp., an investment adviser
subsidiary of the Manager; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial
Asset Management Corporation, an investment adviser subsidiary of the Manager;
Vice President and Treasurer (since August 1978) and Secretary (since April
1981) of Shareholder Services Inc., a transfer agent subsidiary of the Manager;
Vice President, Treasurer and Secretary (since November 1989) of Shareholder
Financial Services, Inc., a transfer agent subsidiary of the Manager; Assistant
Treasurer (since March 1998) of Oppenheimer Acquisition Corp., the parent
company of the Manager; Treasurer of Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996), an investment adviser subsidiary of the
Manager; an officer of other Oppenheimer funds; formerly Treasurer (June 1990-
March 1998) of Oppenheimer Acquisition Corp.
Charles Conrad, Jr., Director; Age 68
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 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., Shareholder Services, Inc. and Shareholder
Financial Services, Inc.
Sam Freedman, Director; Age: 58
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of Shareholder Services, Inc.
and Shareholder Financial Services, Inc., Vice President and a director of
Oppenheimer Acquisition Corp. and a director of the Manager.
Raymond J. Kalinowski, Director; Age 69
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company).
C. Howard Kast, Director; Age 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director; Age 77
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Director*; Age: 50
Two World Trade Center, 34th Floor, 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 a director (since
June 1991) of HarbourView Asset Management Corp.; Chairman and a director (since
August 1994) of Shareholder Services, Inc. and (since September 1995)
Shareholder Financial Services, Inc.; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp.; President (since
September 1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund management subsidiary of the Manager, and Oppenheimer Millennium
Funds plc ; President and a director of other Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Manager.
Ned M. Steel, Director; Age 83
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 65
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, and Chairman of the Board
of Shareholder Services, Inc..
Charles Albers, Vice President and Portfolio Manager; Age 57.
Two World Trade Center, 34th Floor, New York, New York 10048
Senior Vice President of the Manager (since April 17, 1998); a Certified
Financial Analyst; previously a Vice President and portfolio manager for
Guardian Investor Services, the investment management subsidiary of The Guardian
Life Insurance Company (from 1972 to April 1998).
Nikolaos D. Monoyios, Vice President and Portfolio Manager; Age 48
Two World Trade Center, 34th Floor, New York, New York 10048
Vice President of the Manager (since April 17, 1998); a Certified Financial
Analyst; previously a Vice President and portfolio manager for Guardian Investor
Services (from 1979 to April 1998).
Andrew J. Donohue, Vice President and Secretary; Age 48
Two World Trade Center, 34th Floor, 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 Asset Management Corp., Shareholder Services, Inc., Shareholder
Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc. (since
September 1995); President and a director of Centennial Asset Management Corp.
(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 Oppenheimer Acquisition Corp.; Vice President
and a Director of OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 40
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 33
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 50
Two World Trade Center, 34th Floor, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of Oppenheimer Millennium Funds plc (since October 1997) and
OppenheimerFunds International Ltd.; an officer of other Oppenheimer funds.
n Remuneration of Directors. The officers of the Fund and three Directors
of the Fund (Ms. Macaskill and Messrs. Bowen and Swain) are affiliated with the
Manager and receive no salary or fee from the Fund. The remaining Directors of
the Fund received the compensation shown below. 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 compensation from the Fund
and represents compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1997.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C> <C>
Total Compensation
Aggregate Compensation from all Denver-Based
Director's Name and Position from Fund Oppenheimer Funds1
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Robert G. Avis $____________ $63,501
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
William A. Baker
Audit and Review Committee
Ex-Officio Member2 $____________ $77,502
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Charles Conrad, Jr.3 $____________ $72,000
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Jon. S. Fossel $____________ $63,277
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Sam Freedman
Audit and Review Committee Member2
$____________ $66,501
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Raymond J. Kalinowski
Audit and Review Committee Member2
$____________ $71,561
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
C. Howard Kast
Audit and Review Committee Chairman2
$____________ $76,503
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Robert M. Kirchner3 $____________ $72,000
- ------------------------------------- -------------------------------------- --------------------------------------
- ------------------------------------- -------------------------------------- --------------------------------------
Ned M. Steel $____________ $63,501
- ------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
1. For the 1997 calendar year. 2. Committee positions effective July 1, 1997.
3. Prior to July 1, 1997, Messrs. Conrad and Kirchner were members of the Audit
and Review Committee.
n Deferred Compensation Plan. The Board of Directors has adopted a
Deferred Compensation Plan for disinterested directors that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Fund. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected 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 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.
n Major Shareholders. As of November 1, 1998 the only persons who owned of
record or were 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 were :
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Dr. E Floor 3,
Jacksonville, FL 32246, which owned
_______________________________________________________
Mass Mutual Life Insurance Co., 1295 State Street, Springfield, MA 01111,
which owned ______________ Class Y shares (representing 100% of the Fund's
then outstanding Class Y shares).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp.,
a holding company controlled by Massachusetts Mutual Life Insurance Company. 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.
n The Investment Advisory Agreement. The Manager provides investment advisory
and management services to the Fund under an investment advisory agreement
between the Manager and the Fund. The Manager selects securities for the Fund's
portfolio and handles its day-to-day business. The portfolio manager of the Fund
is employed by the Manager and is the person who is principally responsible for
the day-to-day management of the Fund's portfolio. Other members of the
Manager's Equity Portfolio Department provide the portfolio manager with counsel
and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide
the Fund with adequate office space, facilities and equipment. It also requires
the Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous public
sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Directors, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration costs
and non-recurring expenses, including litigation costs. The management fees paid
by the Fund to the Manager are calculated at the rates described in the
Prospectus, which are applied to the assets of the Fund as a whole. The fees are
allocated to each class of shares based upon the relative proportion of the
Fund's net assets represented by that class.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
1996 (2 months)1 $4,428,137
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
1997 $34,036,569
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
1998 $___________
- --------------------------------------- ----------------------------------------------------------------------------
</TABLE>
1. The management fees for the 12 month fiscal year ended 6/30/96 were
$19,932,096.
The investment advisory agreement contains an indemnity of the Manager. In
the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties or reckless disregard of its obligations and duties
under the investment advisory agreement, the Manager is not liable for any loss
resulting from a good faith error or omission on its part with respect to any of
its duties under the agreement.
The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the names "Oppenheimer" and "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 Manager may withdraw the right of the Fund's
parent corporation to use the names "Oppenheimer" and "Main Street" as part of
its name and the name of the Fund.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers as may, in the Manager's best
judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" of such transactions. "Best
execution" means prompt and reliable execution at the most favorable price
obtainable. The Manager need not seek competitive commission bidding. However,
it 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.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and thereby not have 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. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so.
In an option transaction, the Fund ordinarily uses the same broker for the
purchase or sale of the option and any transaction in the securities to which
the option relates. When possible, the Manager tries to combine concurrent
orders to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the Manager
and its affiliates. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The Board of Directors permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
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 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 research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the 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.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the Manager may average the price
of the transactions and allocate the average among the funds.
<TABLE>
<CAPTION>
- --------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
- --------------------------------------- -----------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------
1996 (2 months) 2 $
- --------------------------------------- -----------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------
1997 $10,046,510
- --------------------------------------- -----------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------
1998 $3
- --------------------------------------- -----------------------------------------------------------------------------
</TABLE>
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis. 2. The total brokerage commissions paid by the Fund for the 12
month fiscal year ended 6/30/96 were $_______. 3. In the fiscal year ended
8/31/98, the amount of transactions directed to brokers for research services
was $_________________ and the amount of the commissions paid to broker-dealers
for those services was $_______.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund's
parent corporation, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of shares of the Fund's Class A, Class B, Class C
and Class Y shares. The Distributor is not obligated to sell a specific number
of shares. Expenses normally attributable to sales are borne by the Distributor.
They exclude payments under the Fund's Distribution and Service Plans but
include advertising and the cost of printing and mailing prospectuses (other
than prospectuses furnished to current shareholders).
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
<PAGE>
<TABLE>
<CAPTION>
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Class B Contingent Class C Contingent
Deferred Sales Deferred Sales
Aggregate Sales Charges Class A Sales Charges Retained by Charges Retained by
Fiscal Year Ended on Class A Shares Charges Retained by Distributor Distributor
8/31: Distributor1
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
19962 $5,372,166 $1,443,507 $594,878 $39,798
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
1997 $25,549,129 $6,671,014 $5,230,649 $227,950
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
1998 $ $ $ $
- -------------------- -------------------------- ---------------------- ----------------------- ----------------------
</TABLE>
1. Includes amounts paid to a dealer affiliated with the Distributor's parent.
2. Fiscal period of two months. For the 12 month fiscal year ended 6/30/96 the
aggregate sales charges on Class A shares were $34,680,166 of which $8,833,275
was retained by the Distributor. For the same period, Class B contingent
deferred sales charges in the amount of $2,198,614 and Class C contingent
deferred sales charges in the amount of $204,629 were retained by the
Distributor.
For additional information about distribution of the Fund's shares,
including fees and expenses, please refer to "Distribution and Service Plans,"
below.
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares Rule
12b-1 of the Investment Company Act. Under those plans the Fund reimburses the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors2, cast in person at a meeting called for
the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plans for Class B and Class C shares was cast by the Manager as the sole initial
holder of Class B and Class C shares of the Fund.
Under the plans, the Manager and the Distributor, in their sole
discretion, from time to time, may use their own resources to make payments to
brokers, dealers or other financial institutions for distribution and
administrative services they perform, at no cost to the Fund. The Manager may
use its profits from the advisor fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent 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.
The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each Class, voting separately by class.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The reports on the Class B Plan and Class C Plan
shall also include the Distributor's distribution costs for that quarter and
such costs for previous fiscal periods that have been carried forward. Those
reports are subject to the review and approval of the Independent Directors.
Each Plan states that while it is in effect, the selection and nomination
of those Directors of the Fund's parent corporation who are not "interested
persons" of the corporation (or the Fund) is committed to the discretion of the
Independent Directors. This does not prevent the involvement of others in the
selection and nomination process as long as the final decision as to selection
or nomination is approved by a majority of the Independent Directors.
Under the plans, no payment will be made to any recipient in any quarter
in which the aggregate net asset value of all Fund shares held by the recipient
for itself and its customers does not exceed a minimum amount, if any, that may
be set from time to time by a majority of the Independent Directors. The Board
of Directors has set no minimum amount of assets to qualify for payments under
the plans.
o Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended August 31, 1998 payments under the Class A Plan
totaled $_________, all of which was paid by the Distributor to recipients. That
included $________ paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received the Class A Plan to pay any of its interest expenses,
carrying charges, or other financial costs, or allocation of overhead.
o Class B and Class C Service and Distribution Plan Fees. Under each plan,
service fees and distribution fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The Class B and Class C plans allow the
Distributor to be reimbursed for its services and costs in distributing Class B
and Class C shares and servicing accounts.
The Class B and the Class C Plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes payments quarterly on those shares. The
advance payment is based on the net asset value of shares sold. Shares purchased
by exchange do not qualify for the service fee payment. If Class B or Class C
shares are redeemed during the first year after their purchase, the recipient of
the service fees on those shares will be obligated to repay the Distributor a
pro rata portion of the advance payment of the service fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow investors
to buy shares without a front-end sales charge while allowing the Distributor to
reimburse dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. The payments are made to the Distributor in recognition that the
Distributor: pays sales commissions to authorized brokers and dealers at the
time of sale and pays service fees as described above, may finance payment of
sales commissions and/or the advance of the service fee payment to recipients
under the plans, or may provide such financing from its own resources or from
the resources of an affiliate, employs personnel to support distribution of
Class B and Class C shares, and bears the costs of sales literature, advertising
and prospectuses (other than those furnished to current shareholders) and state
"blue sky" registration fees and certain other distribution expenses.
For the fiscal year ended August 31, 1998, payments under the Class B plan
totaled $___________ (including $___________ paid to an affiliate of the
Distributor's parent). The Distributor retained $__________________ of the total
amount. For the fiscal year ended August 31, 1998, payments under the Class C
plan totaled $_______________, (including $___________ paid to an affiliate of
the Distributor's parent). The Distributor retained $_____________ of the total
amount.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. As of
August 31, 1998, the Distributor had incurred unreimbursed expenses under the
Class B plan in the amount of $_______________ (equal to ___% of the Fund's net
assets represented by Class B shares on that date) and unreimbursed expenses
under the Class C plan of $_____________ (equal to ___% of the Fund's net assets
represented by Class C shares on that date). If either the Class B or the Class
C 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. The plans allow for the
carry-forward of distribution expenses, to be recovered from asset-based sales
charges in subsequent fiscal periods.
All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1, 5 and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication).
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
|_| Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
your dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than the shares
used in the model.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The total returns
of each class of shares of the Fund are affected by market conditions, the
quality of the Fund's investments, the maturity of debt investments, the types
of investments the Fund holds, and its operating expenses that are allocated to
the particular class.
|X| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribe the SEC.
The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown without sales charge,
as described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
|_| Average Annual Total Return. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
- --------
1. Ms. Macaskill and Mr. Bowen are not Trustees or Directors of Oppenheimer
Integrity Funds, Oppenheimer Strategic Income Fund, Panorama Series Fund, Inc.
or Oppenheimer Variable Account Funds. Mr. Fossel and Mr. Bowen are not Trustees
of Centennial New York Tax Exempt Trust or Managing General Partners of
Centennial America Fund, L.P.
2. In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Directors" in this Statement of Additional Information refers to
those Directors who are not "interested persons" of the Fund (or its parent
corporation) and who do not have any direct or indirect financial interest in
the operation of the distribution plan or any agreement under the plan. 1
- --------------------------------------------------------------------------------
Oppenheimer Main Sreet California Municipal Fund
- --------------------------------------------------------------------------------
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December __, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December __, 1998. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above or by
downloading it from the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
<TABLE>
<CAPTION>
<S> <C>
Contents Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.............................................2
The Fund's Principal Investment Policies...................................................................2
Municipal Securities.......................................................................................3
Other Investment Techniques and Strategies.................................................................8
Investment Restrictions...................................................................................19
How the Fund is Managed..........................................................................................22
Organization and History..................................................................................22
Directors and Officers of the Fund........................................................................23
The Manager ..............................................................................................29
Brokerage Policies of the Fund...................................................................................30
Distribution and Service Plans...................................................................................32
Performance of the Fund..........................................................................................36
About Your Account
How To Buy Shares................................................................................................42
How To Sell Shares...............................................................................................51
How to Exchange Shares...........................................................................................55
Dividends, Capital Gains and Taxes...............................................................................57
Additional Information About the Fund............................................................................59
Financial Information About the Fund
Independent Auditors' Report.....................................................................................61
Financial Statements ............................................................................................62
Appendix A: Municipal Bond Ratings..............................................................................A-1
Appendix B: Tax-Equivalent Yield Table..........................................................................B-1
Appendix C: Industry Classifications............................................................................C-1
Appendix D: Special Sales Charge Arrangements and Waivers D-1
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ABOUT THE FUND
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective and the principal investment policies of the
Fund are described in the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and the types of
securities that the Fund's investment manager, OppenheimerFunds, Inc., will
select for the Fund. Additional explanations are also provided about the
strategies the Fund may use to try to achieve its objective.
The Fund's Principal Investment Policies. The Fund does not make investments
with the objective of seeking capital growth, since that would generally be
inconsistent with its goal of seeking tax-exempt income. However, the value of
the securities held by the Fund may be affected by changes in general interest
rates. Because the current value of debt securities varies inversely with
changes in prevailing interest rates, if interest rates increased after a
security was purchased, that security would normally decline in value.
Conversely, should interest rates decrease after a security was purchased,
normally its value would rise.
However, those fluctuations in value will not generally result in
realized gains or losses to the Fund unless the Fund sells the security prior to
maturity. A debt security held to maturity is redeemable by its issuer at full
principal value plus accrued interest. The Fund does not usually intend to
dispose of securities prior to their maturity, but may do so for liquidity, or
because of other factors affecting the issuer that cause the Manager to sell the
particular security. In that case, the Fund could experience a capital gain or
loss on the sale.
There are variations in the credit quality of municipal securities,
both within a particular rating classification and between classifications.
These variations depend on numerous factors. The yields of municipal securities
depend on a number of factors, including general conditions in the municipal
securities market, the size of a particular offering, the maturity of the
obligation and rating (if any) of the issue. These factors are discussed in
greater detail below.
Portfolio Turnover. A change in the securities held by the Fund from
buying and selling investments is known as "portfolio turnover." Short-term
trading increases the rate of portfolio turnover and could increase the Fund's
transaction costs. However, the Fund ordinarily incurs little or no brokerage
expense because most of the Fund's portfolio transactions are principal trades
that do not require payment of brokerage commissions.
The Fund ordinarily does not trade securities to achieve short-term
capital gains, because they would not be tax-exempt income. To a limited degree,
the Fund may engage in short-term trading to attempt to take advantage of
short-term market variations. It may also do so to dispose of a portfolio
security prior to its maturity. That might be done if, on the basis of a revised
credit evaluation of the issuer or other considerations, the Fund believes such
disposition advisable or it needs to generate cash to satisfy requests to redeem
Fund shares. In those cases, the Fund may realize a capital gain or loss on its
investments. The Fund's annual portfolio turnover rate normally is not expected
to exceed 100%.
Municipal Securities. The types of municipal securities in which the Fund may
invest are described in the Prospectus under "The Fund and its Investment
Policies." Municipal securities are generally classified as general obligation
bonds, revenue bonds and notes. A discussion of the general characteristics of
these principal types of municipal securities follows below.
|X| Municipal Bonds. We have classified longer term municipal
securities as "municipal bonds." The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" (or "industrial
development") bonds. They may have fixed, variable or floating rates of
interest, as described below.
|_| General Obligation Bonds. The basic security behind
general obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the repayment of principal and the payment of interest. 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 rate of taxes that can be
levied for the payment of debt service on these bonds may be limited or
unlimited. Additionally, there may be limits on as to the rate or amount of
special assessments that can be levied to meet these obligations.
|_| 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 tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects. Examples include electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals.
Although the principal security for these types of bonds may
vary from bond to bond, many provide additional security in the form of a debt
service reserve fund that 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.
|_| Industrial Development Bonds. Industrial development bonds
are considered municipal bonds if the interest paid is exempt from federal
income tax. They 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 may also be 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 financed by the bond as security
for those payments.
|_| Mello-Roos Bonds. These are bonds issued under the
California Mello-Roos Community Facilities Act. They are used to finance
infrastructure projects, such as roads or sewage treatment plants. In most cases
they are secured by real estate taxes levied on property located in the same
community as the project. This type of financing was created in response to
statutory limits on real property taxes that were enacted in California. The
bonds do not constitute an obligation of a municipal government. Timely payment
of principal and interest depends on the ability of the developer of the project
or other property owners to pay their real estate taxes. Therefore these bonds
are subject to risks of nonpayment as a result of a general economic decline or
decline in the real estate market, as well as the credit risk that of the
developer.
|_| 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 certain types of municipal securities.
The Tax Reform Act generally did not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on general obligation
bonds issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments, continues to be
tax-exempt. However, the Tax Reform Act 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 is
taxable under the revised rules. There is an exception for "qualified"
tax-exempt private activity bonds, for example, exempt facility bonds including
certain industrial development bonds, qualified mortgage bonds, qualified
Section 501(c)(3) bonds, and qualified student loan bonds.
In addition, limitations as to the amount of private activity bonds
which each state may issue were revised downward by the Tax Reform Act, 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.
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. 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 on individuals
and corporations.
The Federal alternative minimum tax is designed to ensure that all
persons who receive income pay some tax, even if their regular tax is zero. This
is accomplished in part by including in taxable income certain tax preference
items that are used to calculate alternative minimum taxable income. The Tax
Reform Act made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals and
corporations. 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 the proportionate relationship the interest the investment company
receives on such bonds bears to all its exempt interest dividends.
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. That could occur in
situations where the "adjusted current earnings" of the corporation exceeds its
alternative minimum taxable income.
To determine whether a municipal security is treated as a taxable
private activity bond, it is subject to 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 the 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 that 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 the
use of the bond-financed facility. The Fund makes no independent investigation
of the users of such bonds or their use of proceeds of the bonds. If the Fund
should hold a bond that loses its tax-exempt status retroactively, there might
be an adjustment to the tax-exempt income previously distributed to
shareholders.
Additionally, a private activity bond that 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 applies primarily to
exempt facility bonds, including industrial development bonds. The Fund may
invest in industrial development bonds and other private activity bonds.
Therefore, the Fund may not be an appropriate investment for entities which are
"substantial users" (or persons related to "substantial users") of such exempt
facilities. Those entities and persons should consult their tax advisers before
purchasing shares of the Fund.
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 individual or the
individual'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.
|X| Municipal Notes. Municipal securities having a maturity (when the
security is issued) of less than one year are generally known as municipal
notes. These are, in effect, "tax-exempt commercial paper." Municipal notes
generally are used to provide for short-term working capital needs. Some of the
types of municipal notes the Fund can invest in are described below.
|_| Tax Anticipation Notes. These 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 other business taxes, and are payable from these specific
future taxes.
|_| Revenue Anticipation Notes. These are notes issued in expectation
of receipt of other types of revenue, such as Federal revenues
available under Federal revenue-sharing programs.
|_| Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged.
The long-term bonds that are issued typically also provide the money
for the repayment of the notes.
|_| Construction Loan Notes. These are sold to provide project
construction financing until permanent financing can be secured. After
successful completion and acceptance of the project, it may receive
permanent financing through public agencies, such as the Federal
Housing Administration.
|X| Municipal Lease Obligations. The Fund's investments in municipal
lease obligations may be through certificates of participation that are offered
to investors by public entities. 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.
Some municipal lease securities may be deemed to be "illiquid"
securities. Their purchase by the Fund 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 Board of Directors.
Those guidelines require the Manager to evaluate:
|_| the frequency of trades and price quotations for such securities;
the number of dealers or other potential buyers willing to purchase or
sell such securities; the availability of market-makers; and
|_| the nature of the trades for such securities.
While the Fund holds such securities, the Manager will also evaluate
the likelihood of a continuing market for these securities and their credit
quality.
Municipal leases have special risk considerations. 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 that purpose on a yearly basis. While the obligation
might be secured by the lease, it might be difficult to dispose of that property
in case of a default.
Projects financed with certificates of participation generally are not
subject to state constitutional debt limitations or other statutory requirements
that may apply to other municipal securities. Payments by the public entity on
the obligation underlying the certificates are derived from available revenue
sources. That revenue might 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 a state
or any of its political subdivisions.
In addition to the risk of "non-appropriation," municipal lease
securities do not have as highly liquid a market as conventional municipal
bonds. Municipal leases, like other municipal debt obligations, are subject to
the risk of non-payment of interest or repayment of principal by the issuer. 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.
A default in payment of income would result in a reduction of income to the
Fund. It could also result in a reduction in the value of the municipal lease
and that, as well as a default in repayment of principal, could result in a
decrease in the net asset value of the Fund.
|X| Ratings of Municipal Securities. Ratings by ratings organizations
such as Moody's Investors Service, Standard & Poor's Corporation and Fitch IBCA,
Inc. represent the respective rating agency's opinions of the credit quality of
the municipal securities they undertake to rate. However, their ratings are
general opinions and are not guarantees of quality. Municipal securities that
have the same maturity, coupon and rating may have different yields, while other
municipal securities that have the same maturity and coupon but different
ratings may have the same yield.
Lower grade securities may have a higher yield than securities rated in
the higher rating categories. In addition to having a greater risk of default
than higher-grade, securities, there may be less of a market for these
securities. As a result they may be harder to sell at an acceptable price. The
additional risks man that the Fund may not receive the anticipated level of
income from these securities, and the Fund's net asset value may be affected by
declines in the value of lower-grade securities. However, because the added risk
of lower quality securities might not be consistent with the Fund's policy of
preservation of capital, the Fund limits its investments in lower quality
securities.
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,
Standard & Poor's, or Fitch change as a result of changes in those rating
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.
The Fund may buy municipal securities that are "pre-refunded." The
issuer's obligation to repay the principal value of the security is generally
collateralized with U.S. government securities placed in an escrow account. This
causes the pre-refunded security to have essentially the same risks of default
as a AAA-rated security.
A list of the rating categories of Moody's, S&P and Fitch for municipal
securities is contained in Appendix A to this Statement of Additional
Information. Because the Fund may purchase securities that are unrated by
nationally recognized rating organizations, the Manager will make its own
assessment of the credit quality of unrated issues the Fund buys. The Manager
will use criteria similar to those used by the rating agencies, and assigning a
rating category to a security that is comparable to what the Manager believes a
rating agency would assign to that security. However, the Manager's rating does
not constitute a guarantee of the quality of a particular issue.
Special Risks of Investing Primarily in California Municipal Securities. Because
the Fund focuses its investments primarily on California municipal securities,
the value of its portfolio investments will be highly sensitive to events
affecting the fiscal stability of the State of California and its
municipalities, authorities and other instrumentalities that issue securities.
There have been a number of political developments, voter initiatives, state
constitutional amendments and legislation in California in recent years that may
affect the ability of the State government and municipal governments to pay
interest and repay principal on the securities they have issued.
It is not possible to predict the future impact of the legislation and
economic considerations described below on the long-term ability of the State of
California or California municipal issuers to pay interest or repay principal on
their obligations. In part that is because of possible inconsistencies in the
terms of the various laws and Propositions and the applicability of other
statutes to these issues. The budgets of California counties and local
governments may be significantly affected by state budget decisions beyond their
control. The information below about these conditions is only a brief summary,
based upon information the Fund has drawn from sources that it believes are
reliable.
|_| Changes to the State Constitution. Changes to the state
constitution in recent years have raised general concerns about the ability of
the State and municipal governments in California to obtain sufficient revenues
to pay their bond obligations. In 1978, California voters approved Proposition
13, an amendment to the state constitution. The Proposition added a new section
to the constitution that limits ad valorem taxes on real property and restricts
the ability of local taxing entities to increase real property taxes. However,
legislation enacted after Proposition 13 provided help to California municipal
issuers to raise revenue to pay their bond obligations. That legislation
provided for the redistribution of the surplus (if any) from California's
General Fund to local agencies, the reallocation of revenues to local agencies
and the assumption of certain local obligations by the State. It cannot be
predicted whether additional legislation will be enacted in the future to
redistribute state revenues. Even if such legislation is passed, it cannot be
predicted whether it will provide sufficient revenue for local municipal issuers
to pay their bond obligations.
Another amendment to the state constitution may also have an adverse
impact on state and municipal bond obligations. That amendment restricts the
state government from spending amounts in excess of appropriation limits imposed
on each state and local government entity. If revenues exceed the appropriation
limit, those revenues must be returns, in the form of a revision in the tax
rates or fee schedules.
|_| Voter Initiatives. California voters have approved a number of
initiatives that affect the ability of the state and municipalities to finance
their bond obligations. In 1988 California voters approved Proposition 98, which
requires a minimum level of funding for public schools and community colleges.
In 1986, voters approved Proposition 62, which had a number of effects. One
requires that any special tax imposed by a local government must be approved by
a two-thirds vote of the electorate. In 1995, the California Supreme Court
upheld the constitutionality of that Proposition. That created uncertainty as to
the legality of certain local taxes enacted by non-charter cities without voter
approval. It is not possible to predict the eventual impact of that decision.
In 1996, California voters approved Proposition 218. That initiative
applied the provisions of Proposition 62 to all government entities, including
cities having charters. It requires that all taxes for general purposes be
approved by a simple majority of the popular vote, and that taxes for special
purposes must be approved by a two-thirds majority vote. Proposition 218 also
limits the authority of local governments to impose property-related
assessments, fees and charges. It requires that such assessments be limited to
the special benefit conferred and prohibits their use for general governmental
services. The Proposition enables voters to use their initiative powers to
reduce or repeal previously-authorized taxes, assessments, fees and charges.
|_| Effect of other State Laws on Bond Obligations. Some of the
tax-exempt securities that the Fund can invest in may be obligations payable
solely from the revenues of a specific institution or secured by specific
properties. These 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 law limiting the
remedies of a creditor holding debt secured by a mortgage or deed of trust on
real property.
|_| The Effect of General Economic Conditions in the State. The
California economy has been recovering from a general economic recession of a
few years ago. In 1997, the rate of growth in new jobs has been generally high
compared to the rest of the country. The unemployment rate, while relatively
higher than the national average, fell to 5.8% in June 1998, compared to over
10% during the recessionary period. Many of the new jobs were created in
industries such 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. The growth rate for the Los Angeles region has nearly caught up with that
of the San Francisco Bay region, based on employment growth statistics. However,
the unsettled conditions in Asian economies in 1998 may adversely affect the
state's export-related industries, and therefore the state's overall rate of
economic growth.
On August 21, 1998, the Governor of California signed the 1998-1998
Budget Act. It authorizes state spending of about $72 billion. That includes
$57.3 billion from the General Fund, which is a 7.3% increase from 1997-1998. It
also includes spending of $14.7 billion from special funds, an increase of 1.7%.
Before signing the budget act, the Governor vetoed $1.5 billion in
appropriations adopted by the state legislature, including $1.4 billion in
General Fund spending. The Governor indicated that $250 million of the cuts he
made to primary education costs were being set aside pending legislative
consideration of various school reforms.
Continued state economic expansion and large revenue increases enabled
the Governor and the state legislature to provide both significant tax relief
and increases in spending programs in the 1998-1999 budget. These include an
initial 25% reduction in vehicle license fees, large increases in education
funding and cost of living adjustments and the restoration of grants for social
service programs.
However, in recent past years the state has experienced reductions in
the overall credit ratings assigned to its General Obligation bonds by several
major rating agencies. In July 1994, the ratings of those bonds were downgraded
from Aa to A1 by Moody's, from A+ to A by Standard & Poor's and from AA to A by
Fitch. At the time, the rating agencies all cited uncertainty about the State's
ability to balance its budget by 1996. However, in 1996, noting improvements in
the economy in California and the state budget, both Fitch and Standard & Poor's
raised their ratings of the State's General Obligation bonds from A to A+ and in
1997 Fitch raised its rating to AA-.
|_| Special Financial Problems of Local Governments. Some local
governments in California have experienced notable financial difficulties. On
December 6, 1994, Orange County, California, became the largest municipality in
the United States ever to have filed for protection under federal bankruptcy
laws. The filing stemmed from losses of about $1.7 billion in the County's
investment pool due to investments in high-risk derivative securities. In
September 1995 the state legislature approved legislation that permitted Orange
County to use for bankruptcy recovery $820 million in sales taxes over 20 years
that were 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 County emerged from bankruptcy. On
January 7, 1997, Orange County returned to the bond market with a $136 million
bond issue. In December 1997, Moody's raised its ratings on $325 million of
Orange County pension obligation bonds to Baa3 from Ba. In February 1998, Fitch
assigned outstanding Orange County pension obligation bonds a BBB rating.
Los Angeles County, the nation's most populous county, has also
experienced financial difficulties. In 1995 the credit rating of the county's
long-term bonds was downgraded for the third time since 1992. This occurred as a
result of a number of factors, including severe operating deficits for the
county's health care system. In addition, the County was affected by a long-term
loss of revenue caused by state property tax shift initiatives in 1993 through
1995. In June 1998, the Los Angeles County Board of Supervisors approved a
budget of approximately $13.6 billion for 1998-1999. That was more than 5%
larger than the 1997-1998 budget, but did not require cuts in services and jobs
to balance. However, the Board of Supervisors reserved the right to make further
changes to reflect revenue allocation decisions in the final State budget.
Year 2000 Concerns. In October 1997, the Governor of California issued
an executive order stating that solutions to the Year 2000 problem would be a
state government priority. It required each state agency by December 31, 1998,
to address Year 2000 problems in their essential computer systems and to protect
those systems from problems caused by interfacing with outside systems that are
not Year 2000 compliant. There can be no assurance that the steps taken by state
or local governments or agencies to address the Year 2000 problem will be
sufficient to avoid any adverse impact on their budgets or operations.
Therefore, the possible impact of Year 2000 problems on the debt securities
issued by those governments and agencies, and which may be owned by the Fund,
cannot be predicted with any certainty.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below.
|X| Floating Rate and Variable Rate Obligations. The interest rate on a
floating rate demand note is based on a stated prevailing market rate, such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or some other standard,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market rate
but is adjusted automatically at specified intervals of no less than one year.
Generally, the changes in the interest rate on such 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 of the same maturity. The Fund's investment manager,
OppenheimerFunds, Inc. (the "Manager") may determine that an unrated floating
rate or variable rate demand obligation meets the Fund's quality standards by
reason of being backed by a letter of credit or guarantee issued by a bank that
meets those quality standards.
Floating rate and variable rate demand notes that have a stated
maturity in excess of one year may have features that permit the holder to
recover the principal amount of the underlying security at specified intervals
not exceeding one year and upon no more than 30 days' notice. The issuer of that
type of note normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the note plus accrued
interest. Generally the issuer must provide a specified number of days' notice
to the holder.
|X| Inverse Floaters and Other Derivative Investments. Inverse floaters
may offer relatively high current income, reflecting the spread between
short-term and long-term tax exempt interest rates. As long as the municipal
yield curve remains relatively steep and short term rates remain relatively low,
owners of inverse floaters will have the opportunity to earn interest at
above-market rates because they receive interest at the higher long-term rates
but have paid for bonds with lower short-term rates. If the yield curve flattens
and shifts upward, an inverse floater will lose value more quickly than a
conventional long-term bond. The Fund will invest in inverse floaters to seek
higher tax-exempt yields than are available from fixed-rate bonds that have
comparable maturities and credit ratings. In some cases, the holder of an
inverse floater may have an option to convert the floater to a fixed-rate bond,
pursuant to a "rate-lock" option.
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 fluctuations.
"Embedded" caps can be used to hedge a portion of the Fund's exposure to rising
interest rates. When interest rates exceed a pre-determined rate, the cap
generates 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.
Inverse floaters are a form of derivative investment. Certain
derivatives, such as options, futures, indexed securities and entering into swap
agreements, can be used to increase the Fund's exposure to changing security
prices, interest rates or other factors that affect the value of securities.
However, these techniques could result in losses to the Fund, if the Manager
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause
losses if the counterparty does not perform its promises. An additional risk of
investing in municipal securities that are derivative investments is that their
market value could be expected to vary to a much greater extent than the market
value of municipal securities that are not derivative investments but have
similar credit quality, redemption provisions and maturities.
|X| When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. "When-issued" or "delayed delivery"
refers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery.
When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date. Normally the
settlement date is within six months of the purchase of municipal bonds and
notes. However, the Fund may, from time to time, purchase municipal securities
having a settlement date more than six months and possibly as long as two years
or more after the trade date. The securities are subject to change in value from
market fluctuation during the settlement period. The value at delivery may be
less than the purchase price. For example, changes in interest rates in a
direction other than that expected by the Manager before settlement will affect
the value of such securities and may cause loss to the Fund.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of entering
into the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to complete
the transaction. Their failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield it considers
advantageous.
When the Fund engages in when-issued and delayed delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery pursuant
to options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes a commitment to purchase or sell a security
on a when-issued or forward commitment basis, it records the transaction on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its net asset value. The
Fund will identify to its Custodian cash, U.S. Government securities or other
high grade debt obligations at least equal to the value of purchase commitments
until the Fund pays for the investment.
When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to hedge against anticipated changes in interest
rates and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, to obtain the benefit of currently higher cash yields.
|X| Puts and Standby Commitments. When the Fund buys a municipal
security subject to a standby commitment to repurchase the security, the Fund is
entitled to same-day settlement from the purchaser. The Fund receives an
exercise price equal to the amortized cost of the underlying security plus any
accrued 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 might purchase a standby commitment or put separately in cash
or it might acquire the security subject to the standby commitment or put (at a
price that reflects that additional feature). The Fund will enter into these
transactions only with banks and securities dealers that, 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 transferable by the Fund. They
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 might enable the Fund to sell a security at a
pre-arranged price that 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 that could jeopardize the Fund's business relationships with the
seller.
A put or standby commitment increases the cost of the security and
reduces the yield otherwise available from the security. Any consideration paid
by the Fund for the put or standby commitment 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 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.
|X| Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities. In a
repurchase transaction, the Fund acquires a security from, and simultaneously
resells it to an approved vendor for delivery on an agreed upon future date.
Approved vendors include U.S. commercial banks, U.S. branches of foreign banks
or broker-dealers that have been designated a primary dealer in government
securities, which meet the credit requirements set by the Fund'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. Delivery
pursuant to resale typically will occur within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value 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.
|_| Illiquid and Restricted Securities. The Fund has percentage
limitations that apply to purchases of restricted and illiquid securities, as
stated in the Prospectus. Those percentage restrictions do not limit purchases
of restricted securities that are eligible for sale to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933, provided that
those securities have been determined to be liquid by the Board of Directors of
the Fund or by the Manager under Board-approved guidelines. Those guidelines
take into account the trading activity for such securities and the availability
of reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding of that
security may be deemed to be illiquid. As a matter of fundamental policy, the
Fund cannot purchase any securities that are subject to restrictions on resale.
|X| Loans of Portfolio Securities. To attempt to raise income or raise
cash for liquidity purposes, the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions. These loans are limited to
not more than 25% of the value of the Fund's total assets. There are 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 that will exceed 5% of the value of the Fund's total assets in the
coming year. Income from securities loans does not constitute exempt-interest
income for the purpose of paying tax-exempt dividends.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of the U.S. government
or its agencies or instrumentalities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the
dividends or interest on the loaned securities, It 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 the loan collateral.
Either type of interest may be shared with the borrower. The Fund may pay
reasonable finder's, administrative or other fees in connection with these
loans. The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter.
|X| Hedging. The Fund may use hedging to attempt to protect against
declines in the market value of the its portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated, or
to facilitate selling securities for investment reasons. To do so the Fund may:
sell interest rate futures or municipal bond index futures,
buy puts on such futures or securities, or
|_| write covered calls on securities, interest rate futures or
municipal bond index futures. Covered calls may also be written on debt
securities to attempt to increase the Fund's income, but that income
would not be tax-exempt. Therefore it is unlikely that the Fund would
write covered calls for that purpose.
The Fund may also use hedging to establish a position in the debt
securities market as a temporary substitute for purchasing individual debt
securities. In that case the Fund will normally seek to purchase the securities,
and then terminate that hedging position. For this type of hedging, the Fund
may:
|_| buy interest rate futures or municipal bond index futures, or
|_| buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's investment activities in the underlying cash market.
The particular hedging instruments the Fund can use are described below. The
Fund may employ new hedging instruments and strategies when they are developed,
if those investment methods are consistent with the Fund's investment objective
and are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund may buy and sell futures contracts relating to
debt securities (these are called "interest rate futures") and municipal bond
indices (these are referred to as "municipal bond index futures").
An interest rate future obligates the seller to deliver (and the
purchaser to take) cash or a specific type of debt security to settle the
futures transaction. Either party could also enter into an offsetting contract
to close out the futures position.
A "municipal bond index" assigns relative values to the municipal bonds
in the index, and is used 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 only in cash. The obligation under the
contract may also be satisfied by entering into an offsetting contract. The
strategies which the Fund employs in using municipal bond index futures are
similar to those with regard to interest rate futures.
Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment in cash or U.S. government securities with the
futures commission merchant (the "futures broker"). Initial margin payments will
be deposited with the Fund's Custodian in an account registered in the futures
broker's name. However, the futures broker can gain access to that account only
under certain specified conditions. As the future is marked to market (that is,
its value on the Fund's books is changed) to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker daily.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position at which time a final
determination of variation margin is made and additional cash is required to be
paid by or released to the Fund. Any gain or loss is then realized by the Fund
on the Future for tax purposes. Although 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.
The Fund may concurrently buy and sell futures contracts in a strategy
anticipating that the future the Fund purchased will perform better than the
future the Fund sold. For example, the Fund might buy municipal bond futures and
concurrently sell U.S. Treasury Bond futures (a type of interest rate future).
The Fund would benefit if municipal bonds outperform U.S. Treasury Bonds on a
duration-adjusted basis.
Duration is a volatility measure that refers to the expected percentage
change in the value of a bond resulting from a change in general interest rates
(measured by each 1% change in the rates on U.S. Treasury securities). For
example, if a bond has an effective duration of three years, a 1% increase in
general interest rates would be expected to cause the bond to decline about 3%.
There are risks that this type of futures strategy will not be successful. U.S.
Treasury bonds might perform better on a duration-adjusted basis than municipal
bonds, and the assumptions about duration that were used might be incorrect (in
this case, the duration of municipal bonds relative to U.S. Treasury Bonds might
have been greater than anticipated).
|_| Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls). These strategies are described below.
|_| Writing Covered Call Options. The Fund may write (that is, sell) call
options. The Fund's call writing is subject to a number of restrictions: (1)
After the Fund writes a call, not more than 25% of the Fund's total assets may
be subject to calls. (2) Calls the Fund sells must be listed on a securities or
commodities exchange or quoted on NASDAQ, the automated quotation system of The
Nasdaq Stock Market, Inc. or traded in the over-the-counter market. (3) Each
call the Fund writes must be "covered" while it is outstanding. That means the
Fund must own the investment on which the call was written. (4) The Fund may
write calls on futures contracts that it owns, but these calls must be covered
by securities or other liquid assets that the Fund owns and segregates to enable
it to satisfy its obligations if the call is exercised.
When the Fund writes a call on a security, it receives cash (a
premium).The Fund agrees to sell the underlying investment to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has retained the risk
of loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised. In that case the Fund would
keep the cash premium and the investment.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the Fund's
entering into a closing purchase transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on illiquid securities) the
mark-to-market value of any OTC option held by it, unless the option is subject
to a buy-back agreement by the executing broker. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities. The procedure described above could be affected by the outcome of
that evaluation.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
was more or less than the price of the call the Fund purchased to close out the
transaction. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium received. Any
such profits are considered short-term capital gains for Federal tax purposes,
as are premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income.
The Fund may also write calls on futures contracts without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating 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. Because of this escrow requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
put the Fund in a "short" futures position.
|_| Purchasing Calls and Puts. The Fund may buy calls only on
securities, broadly-based municipal bond indices, municipal bond index futures
and interest rate futures. It may also buy calls to close out a call it has
written, as discussed above. Calls the Fund buys must be listed on a securities
or commodities exchange, or quoted on NASDAQ, or traded in the over-the-counter
market. A call or put option may not be purchased if the purchase would cause
the value of all the Fund's put and call options to exceed 5% of its total
assets.
When the Fund purchases a call (other than in a closing purchase
transaction), it pays a premium. For calls on securities that the Fund buys, it
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 (1) the call is sold at a profit or (2) the call is
exercised when the market price of the underlying investment is above the sum of
the exercise price plus the transaction costs and premium paid for the call. If
the call is not either exercised or sold (whether or not at a profit), it will
become worthless at its expiration date. In that case the Fund will lose its
premium payment and the right to purchase the underlying investment.
Calls on municipal bond indices, interest rate futures and municipal
bond index futures are settled in case rather than by delivering the underlying
investment. Gain or loss depends on changes in the securities included in the
index in question (and thus on price movements in the debt securities market
generally) rather than on changes in price of the individual futures contract.
The Fund may buy only those puts that relate to securities that the
Fund owns, broadly-based municipal bond indices, municipal bond index futures or
interest rate futures (whether or not the Fund owns the futures).
The Fund may not sell puts other than puts it has previously purchased.
When the Fund purchases a put, it pays a premium. The Fund then 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. Puts on
municipal bond indices are settled in cash. Buying a put on a debt security,
interest rate future or municipal bond index future the Fund owns enables it to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price. If the market price of the
underlying investment is equal to or above the exercise price and as a result
the put is not exercised or resold, the put will become worthless at its
expiration date. In that case the Fund will lose its premium payment and the
right to sell the underlying investment. A put may be sold prior to expiration
(whether or not at a profit).
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's returns.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund may pay a brokerage commission each time it buys a call or
put, sells a call, or buys or sells an underlying investment in connection with
the exercise of a call or put. Such commissions may be higher on a relative
basis than the commissions for direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the market value
of the underlying investments. Consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investment.
If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment at
the call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
There is a risk in using short hedging by selling interest rate futures
and municipal bond index futures or purchasing puts on municipal bond indices or
futures to attempt to protect against declines in the value of the Fund's
securities. The risk is that the prices of such futures or the applicable index
will correlate imperfectly with the behavior of the cash (that is, market)
prices of the Fund's securities. It is possible for example, that while the Fund
has used hedging instruments in a short hedge, the market may advance and the
value of debt securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value of its debt securities. However, while this could
occur over a brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same direction
as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of debt
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 debt securities being hedged. It might do so if the historical
volatility of the prices of the debt securities being hedged is greater than the
historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets. All
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. From the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the
securities markets. Therefore, increased participation by speculators in the
futures markets may cause temporary price distortions.
The Fund may use hedging instruments to establish a position in the
municipal securities markets as a temporary substitute for the purchase of
individual securities (long hedging). It is possible that the market may
decline. If the Fund then concludes not to invest in such securities because of
concerns that there may be further market decline or for other reasons, the Fund
will realize a loss on the hedging instruments that is not offset by a reduction
in the purchase price of the securities.
An option position may be closed out only on a market that provides
secondary trading for options of the same series. There is no assurance that a
liquid secondary market will exist for a 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 investment until the call lapsed or was exercised.
|_| Interest Rate Swap Transactions. 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 (such as
cash or U.S. Government securities) 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.
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 under one or more swap transactions, the net amount
payable on that date 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 master netting
agreements, if there is a default resulting in a loss to one party, that party's
damages are calculated by reference to the average cost of a replacement swap
with respect to 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."
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions established by the Commodity Futures Trading Commission (the
"CFTC"). In particular, the Fund is exempted from registration with the CFTC as
a "commodity pool operator" if the Fund complies with the requirements of Rule
4.5 adopted by the CFTC. That 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 also must use
short futures and options on futures positions solely for bona fide hedging
purposes within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number of
options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether the options were
written or purchased on the same or different exchanges, or are held in one or
more accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options that the Fund may write or hold may be
affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser that is
an affiliate of the Fund's adviser). The exchanges also impose position limits
on futures transaction. An exchange may order the liquidation of positions found
to be in violation of those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases an interest
rate future or municipal bond index future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal to the market value of
the investments underlying the future, less the margin deposit applicable to it.
The account must be a segregated account or accounts held by its custodian bank.
|X| Temporary Defensive Investments. The securities the Fund may invest in
for temporary defensive purposes include the following:
|_| obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities;
|_| corporate debt securities rated within the three highest grades by
a nationally recognized rating agency;
|_| commercial paper rated "A-1" by S&P, or a comparable rating by
another nationally recognized rating agency; and
|_| certificates of deposit of domestic banks with assets of $1
billion or more.
|X| Taxable Investments. While the Fund can invest up to 20% of its
total assets in investments that generate income subject to income taxes, it
does not anticipate investing substantial amounts of its assets in taxable
investments under normal market conditions or as part of its normal trading
strategies and policies. To the extent it invests in taxable securities, the
Fund would not be able to meet its objective of providing tax exempt income to
its shareholders. Taxable investments include, for example, hedging instruments,
repurchase agreements, and the types of securities it would buy for temporary
defensive purposes.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the vote
of the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Directors
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
[-] Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund:
|_| The Fund cannot invest in securities or other investments other than
municipal securities, the temporary investments described in its Prospectus,
repurchase agreements, covered calls, private activity municipal securities and
hedging instruments described in "About the Fund" in the Prospectus or this
Statement of Additional Information.
|_| The Fund cannot make loans. However, repurchase agreements and the
purchase of debt securities in accordance with the Fund's other investment
policies and restrictions are permitted. The Fund may also lend its portfolio
securities as described in "Loans of Portfolio Securities."
|_| The Fund cannot borrow money in excess of 10% of the value of its
total assets. It cannot buy any additional investments when borrowings exceed 5%
of its assets. The Fund may borrow only from banks as a temporary measure for
extraordinary or emergency purposes, and not for the purpose of leveraging its
investments.
|_| The Fund cannot pledge, mortgage or otherwise encumber, transfer or
assign its assets to secure a debt. However, the use of escrow or other
collateral arrangements in connection with hedging instruments is permitted.
|_| The Fund cannot concentrate its investments to the extent of 25% of
its total assets in any industry. However, there is no limitation as to the
Fund's investments in municipal securities in general or in California municipal
securities, or in obligations issued by the U.S. Government and its agencies or
instrumentalities.
|_| The Fund cannot invest in real estate. This restriction shall not
prevent the Fund from investing in municipal securities or other permitted
securities that are secured by real estate or interests in real estate.
|_| The Fund cannot purchase securities other than hedging instruments
on margin. However, the Fund may obtain such short-term credits that may be
necessary for the clearance of purchases and sales of securities.
|_| Th e Fund cannot sell securities short.
|_| The Fund cannot underwrite securities or invest in securities that
are subject to restrictions on resale.
|_| The Fund cannot invest in or hold securities of any issuer if
officers and Directors of the Fund or the Manager individually beneficially own
more than 1/2 of 1% of the securities of that issuer and together own more than
5% of the securities of that issuer.
|_| The Fund cannot invest in securities of any other investment
company, except in connection with a merger with another investment company.
|_| The Fund cannot buy or sell futures contracts other than interest
rate futures and municipal bond index futures.
Unless the Prospectus or Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. In that case 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.
Non-Diversification of the Fund's Investments. The Fund is
"diversified" as defined in the Investment Company Act . Funds that are
diversified have restrictions against investing too much of their assets in the
securities of any one "issuer." That means that the Fund can invest more of its
assets in the securities of a single issuer than a fund that is diversified.
Being non-diversified poses additional investment risks, because if the
Fund invests more of its assets in fewer issuers, the value of its shares is
subject to greater fluctuations from adverse conditions affecting any one of
those issuers. However, the Fund does limit its investments in the securities of
any one issuer to qualify for tax purposes as a "regulated investment company"
under the Internal Revenue Code. By qualifying, it does not have to pay federal
income taxes if more than 90% of its earnings are distributed to shareholders.
To qualify, the Fund must meet a number of conditions. First, not more than 25%
of the market value of the Fund's total assets may be invested in the securities
of a single issuer. Second, with respect to 50% of the market value of its total
assets, (1) no more than 5% of the market value of its total assets may be
invested in the securities of a single issuer, and (2) the Fund must not own
more than 10% of the outstanding voting securities of a single issuer.
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 it and the security is backed only by the
assets and revenues of the subdivision, agency, authority or instrumentality,
the latter would be deemed to be the sole issuer. Similarly, if an industrial
development bond is backed only by the assets and revenues of the
non-governmental user, then that user would be deemed to be the sole issuer.
However, if in either case the creating government or some other entity
guarantees a security, the guarantee would be considered a separate security and
would be treated as an issue of such government or other entity.
Applying the Restriction Against Concentration. For purposes of
implementing its policy not to concentrate its assets, the Fund has adopted the
industry classifications set forth in Appendix C to this Statement of Additional
Information. Those industry classifications are not a fundamental policy.
In implementing the Fund's policy not to concentrate its assets, the
Manager will consider a non-governmental user of facilities financed by
industrial development bonds as being in a particular industry. That is done
even though the bonds are municipal securities, as to which the Fund has no
concentration limitation. Although this application of the concentration
restriction is not a fundamental policy of the Fund, it will not be changed
without shareholder approval.
How the Fund Is Managed
Organization and History
The Fund is an open-end, diversified management investment company with
an unlimited number of authorized shares of beneficial interest. The Fund was
organized as a Massachusetts business trust in July 1988.
The Fund is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Directors
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. Although the Fund will
not normally hold annual meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and shareholders have the right
to call a meeting to remove a Director or to take other action described in the
Fund's Declaration of Trust.
Classes of Shares. 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. All classes invest in the same investment
portfolio. Shares are freely transferable. Each class of shares: has its own
dividends and distributions, pays certain expenses which may be different for
the different classes, may have a different net asset value, has one vote at
shareholder meetings, with fractional shares voting proportionally on matteres
submitted to the vote of shareholders, may have separate voting rights on
matters in which the interests of one class are different from the interests of
another class, and
|X| votes as a class on matters that affect that class alone.
Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Directors or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Director. The
Directors will call a meeting of shareholders to vote on the removal of a
Director upon the written request of the record holders of 10% of its
outstanding shares. If the Directors receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Director, the Directors will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense. The shareholders making
the request must have been shareholders for at least six months and must hold
shares of the Fund valued at $25,000 or more or constituting at least 1% of the
Fund's outstanding shares, whichever is less. The Directors may also take other
action as permitted by the Investment Company Act.
Shareholder and Director Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Director liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for satisfaction
of any claim or demand that may arise out of any dealings with the Fund. The
contracts further state that the Directors shall have no personal liability to
any such person, to the extent permitted by law.
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. Directors denoted with an asterisk (*) below are deemed to be "interested
persons" of the Fund under the Investment Company Act. All of the Directors are
also trustees, directors or managing general partners of the following
Denver-based Oppenheimer funds1:
Ms. Macaskill and Messrs. Spiro, Donohue, Bowen, Zack, Bishop and
Farrar respectively hold the same offices with the other New York-based
Oppenheimer funds as with the Fund. As of November ___, 1998, the Trustees and
officers of the Fund as a group owned of record or beneficially less than 1% of
each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares of the Fund held of record by an employee benefit plan for
employees of the Manager, other than the shares beneficially owned under the
plan by the officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are
trustees of that plan.
<TABLE>
<CAPTION>
<S> <C>
Centennial America Fund, L.P., Oppenheimer Integrity Funds
Centennial California Tax Exempt Trust Oppenheimer International Bond Fund
Centennial Government Trust Oppenheimer Limited-Term Government Fund
Centennial New York Tax Exempt Trust Oppenheimer Municipal Fund
Centennial Tax Exempt Trust Oppenheimer Real Asset Fund
Centennial Money Market Trust Oppenheimer Strategic Income Fund
Oppenheimer Cash Reserves Oppenheimer Total Return Fund, Inc.
Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds
Oppenheimer Equity Income Fund Panorama Series Fund, Inc.
</TABLE>
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 __, 1998 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*
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
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Vice President, Treasurer, Assistant Secretary and Director*
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); Assistant Treasurer of OAC (since March 1998); 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; Treasurer of OFIL and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly
Treasurer of OAC (June 1990 - March 1998).
Charles Conrad, Jr., Director
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*
P.O. Box 44, Mead Street, Waccabuc, New York 10597
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
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
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company).
C. Howard Kast, Director
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President and Director*
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL"); Chairman, President and a director of
Oppenheimer Millennium Funds plc (since October 1997); President and a director
of other Oppenheimer funds; Member, Board of Governors, NASD, Inc.; a director
of Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Manager, a director of NASDQ Stock Market, Inc.
James C. Swain, Chairman, Chief Executive Officer and Director*
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 49
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President of the Manager (since February 1996); an officer of other
Oppenheimer funds; previously (until February 1996) an officer and portfolio
manager with Prudential Mutual Funds -- Investment Management Inc.
Andrew J. Donohue, Secretary, Age 48
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp., Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since September 1995); President and a director of Centennial Asset Management
Corp. (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 Oppenheimer Acquisition Corp.; Vice President of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager; Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer, Age 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of OppenheimerFunds International Ltd. and 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.
|_| Remuneration of Directors. The officers of the Fund and certain
Directors of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. The remaining Directors of the
Fund received the compensation shown below. The compensation from the Fund was
paid during its fiscal year ended August 31, 1998. The compensation from all of
the New York-based Oppenheimer funds (including the Fund) was received as a
director, Director or member of a committee of the boards of those funds during
the calendar year 1997.
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ----------------------------
<S> <C> <C>
Total Compensation from
Aggregate Compensation from all Denver-based
Fund (Fiscal Year Ended Oppenheimer Funds (30
Director's Name and 8/31/98) Funds) in Calendar Year
Committee Positions Ended 12/31/97
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Robert G. Avis $xxx $63,501.00
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
William A. Baker $xxx $77,502.00
Audit and Review
Committee Ex-Officio
Member2
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Charles Conrad, Jr. $xxx $72,000.00
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Jon S. Fossel $xxx $63,277.18
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Sam Freedman $xxx $66,501.00
Audit and Review Committee
Member2
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Raymond J. Kalinowski $xxx $71,561.00
Audit and Review Committee
Member2
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
C. Howard Kast $xxx $76,503.00
Audit and Review
Committee Chairman2
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Robert M. Kirchner $xxx $72,000.00
- ----------------------------- ----------------------------- ----------------------------
- ----------------------------- ----------------------------- ----------------------------
Ned M. Steel $xxx $63,501.00
- ----------------------------- ----------------------------- ----------------------------
</TABLE>
1For the 1997 calendar year.
2Committee positions effective July 1, 1997.
3Prior to July 1, 1997, Messrs. Conrad and Kirchner were also
members of the Audit and Review Committee.
The Fund has adopted a retirement plan that provides for payments to
retired Directors. Payments are up to 80% of the average compensation paid
during a Director's five years of service in which the highest compensation was
received. A Director must serve as Director for any of the New York-based
Oppenheimer funds for at least 15 years to be eligible for the maximum payment.
Each Director's retirement benefits will depend on the amount of the Director's
future compensation and length of service. Therefore the amount of those
benefits cannot be determined at this time, nor can we estimate the number of
years of credited service that will be used to determine those benefits. For the
fiscal year ended August 31, 1998, $_________ was accrued for the Fund's
projected retirement benefit obligations. A payment of $________ was made for
the fiscal period August 1, 1997 through August 31, 1998.
|_| Deferred Compensation Plan for Directors. The Board of Directors
has adopted a Deferred Compensation Plan for disinterested Directors that
enables them to elect to defer receipt of all or a portion of the annual fees
they are entitled to receive from the Fund. Under the plan, the compensation
deferred by a Director is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected 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 Directors' 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.
|_| Major Shareholders. As of November ____,1998, the only persons who
owned of record or who were known by the Fund to own beneficially 5% or more of
the Fund's outstanding Class A or Class B shares were:
insert
The Manager
The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding
company controlled by Massachusetts Mutual Life Insurance Company. 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.
The portfolio managers of the Fund are principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of the
Manager's fixed-income portfolio department, particularly security analysts,
traders and other portfolio managers have broad experience with fixed-income
securities. They provide the Fund's portfolio managers with research and support
in managing the Fund's investments.
|_| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to day business. That agreement
requires the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective corporate administration for the Fund. Those
responsibilities include the compilation and maintenance of records with respect
to the Fund's operations, the preparation and filing of specified reports, and
the 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 are
paid by the Fund. The investment advisory agreement lists examples of expenses
paid by the Fund. The major categories relate to interest, taxes, fees to
disinterested Directors, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs,
brokerage commissions, and non-recurring expenses, including litigation cost.
The management fees paid by the Fund to the Manager are calculated at the rates
described in the Prospectus, which are applied to the assets of the Fund as a
whole. The fees are allocated to each class of shares based upon the relative
proportion of the Fund's net assets represented by that class. The management
fees paid by the Fund to the Manager during its last three fiscal years are
listed below.
- ---------------------------------- -----------------------------------------
Management Fee Paid to
Fiscal Year ended 8/31 OppenheimerFunds, Inc.
- ---------------------------------- -----------------------------------------
- ---------------------------------- -----------------------------------------
1996 (six months) $______________
- ---------------------------------- -----------------------------------------
- ---------------------------------- -----------------------------------------
1997 $______________
- ---------------------------------- -----------------------------------------
- ---------------------------------- -----------------------------------------
1998 $______________
- ---------------------------------- -----------------------------------------
The investment advisory agreement contains an indemnity of the Manager.
In the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties, or reckless disregard for its obligations and duties
under the investment advisory agreement, the Manager is not liable for any loss
sustained by reason of any investment of the Fund assets made with due care and
in good faith. The agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the Manager may withdraw the Fund's right to use the name
"Oppenheimer" as part of its name.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to buy and sell portfolio
securities for the Fund. The investment advisory agreement allows the Manager to
use broker-dealers to effect the Fund's portfolio transactions. Under the
agreement, the Manager may employ those broker-dealers (including "affiliated"
brokers, as that term is defined in the Investment Company Act) that, in the
Manager's best judgment based on all relevant factors, will implement the Fund's
policy to obtain, at reasonable expense, the "best execution" of portfolio
transactions. "Best execution" refers to prompt and reliable execution at the
most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to minimize the commissions paid to
the extent consistent with the interest and policies of the Fund as established
by its Board of Directors.
Under the investment advisory agreement, the Manager may select brokers
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would charge, if the Manager makes a good faith determination that the
commission is fair and reasonable in relation to the services provided. Subject
to the those other considerations, as a factor in selecting brokers for the
Fund's portfolio transactions, the Manager may also consider sales of shares of
the Fund and other investment companies managed by the Manager or its
affiliates.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally the Manager's portfolio traders
allocate brokerage upon recommendations from the Manager's portfolio managers.
In certain instances, portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive officers supervise the
allocation of brokerage.
Most securities purchases made by the Fund are in principal
transactions at net prices. The Fund usually deals directly with the selling or
purchasing principal or market maker without incurring charges for the services
of a broker on its behalf unless the Manager determines that a better price or
execution may be obtained by using the services of a broker. Therefore, the Fund
does not incur substantial brokerage costs. Portfolio securities purchased from
underwriters include a commission or concession paid by the issuer to the
underwriter in the price of the security. Portfolio securities purchased from
dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most
favorable net prices. In an option transaction, the Fund ordinarily uses the
same broker for the purchase or sale of the option and any transaction in the
investment to which the option relates. When possible, the Manager tries to
combine concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates. The transactions under
those combined orders are averaged as to price and allocated in accordance with
the purchase or sale orders actually placed for each account.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the Manager
and its affiliates. Investment research received by the Manager for the
commissions paid by those other accounts may be useful both to the Fund and one
or more of the Manager's other accounts. Investment research services may be
supplied to the Manager by a third party at the instance of a broker through
which trades are placed. Investment research services include information and
analyses on particular companies and industries as well as market or economic
trends and portfolio strategy, market quotations for portfolio evaluations,
information systems, computer hardware and similar products and services. If a
research service also assists the Manager in a non-research capacity (such as
bookkeeping or other administrative functions), then only the percentage or
component that provides assistance to the Manager in the investment
decision-making process may be paid in commission dollars.
The Board of Directors has permitted the Manager to use concessions on
fixed-price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Board has also permitted the Manager to use stated
commissions on secondary fixed-income agency trades to obtain research if the
broker represents 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 broaden the scope and
supplement the research activities of the Manager. That research provides
additional views and comparisons for consideration and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board of the Fund about the commissions paid to
brokers furnishing research services, together with the Manager's representation
that the amount of such commissions was reasonably related to the value or
benefit of such services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Those other funds may purchase or sell
the same securities as the Fund at the same time as the Fund, which could affect
the supply and price of the securities. If two or more of funds advised by the
Manager purchase the same security on the same day from the same dealer, the
Manager may average the price of the transactions and allocate the average among
the funds.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's Class A and Class B shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor. They exclude payments under the Distribution
and Service Plans but including advertising and the cost of printing and mailing
prospectuses (other than those furnished to existing shareholders).
The compensation paid to (or retained by) the Distributor from the sale
of shares or on the redemption of shares is discussed in the table below:
- -------------------- ------------------ ------------------- ------------------
Aggregate Sales Class A Sales
Charges Class A Charges Retained Class B CDSC
Fiscal Year Ended Shares by Distributor* Retained by
8/31 Distributor**
- -------------------- ------------------ ------------------- ------------------
- -------------------- ------------------ ------------------- ------------------
1996 (6 months) $_________ $_________ $_________
- -------------------- ------------------ ------------------- ------------------
- -------------------- ------------------ ------------------- ------------------
1997 $_________ $_________ $_________
- -------------------- ------------------ ------------------- ------------------
- -------------------- ------------------ ------------------- ------------------
1998 $_________ $__________ $_________
- -------------------- ------------------ ------------------- ------------------
* Includes amounts retained by Distributor and a broker-dealer affiliated with
the Distributor's parent. ** There are no initial commissions received by the
Distributor on the sale of Class B and Class C shares.
For additional information about distribution of the Fund's shares,
including fees and expenses, please refer to "Distribution and Service Plans."
Distribution and Service Plans
The Fund has adopted a Service Plan for its Class A shares and
Distribution and Service Plans for its Class B shares under Rule 12b-1 of the
Investment Company Act. Under those plans, the Fund makes payments to the
Distributor in connection with the distribution and/or servicing of the shares
of the particular class.
Each plan has been approved by a vote of the Board of Directors of the
Fund, including a majority of the Independent Directors, cast in person at a
meeting called for the purpose of voting on that plan. Each plan has also been
approved by a vote of the holders of a "majority" (as defined in the Investment
Company Act) of the shares of each class.
Under the Plans the Manager and the Distributor, in their sole
discretion, from time to time may use their own resources to make payments to
brokers, dealers or other financial institutions for distribution and
administrative services they perform at no cost to the Fund. In the case of the
Manager, those resources may include profits from the advisory fee it receives
from the Fund. The Distributor and the Manager may, in their sole discretion,
increase or decrease the amount of payments they make to plan recipients from
their own resources.
Unless a plan is terminated as described below, the plan continues in
effect from year to year, but only if the Fund's Board of Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent 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.
The Board and the Independent Directors must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under the plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares automatically convert into Class A
shares after six years, the Fund must obtain the approval of Class B
shareholders (as well as Class A shareholders) for an amendment to the Class A
plan that would materially increase the amount to be paid under that plan. That
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.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Fund's Board of Directors at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The report on the Class B plans shall also
include the Distributor's distribution costs for the quarter, and any costs for
previous fiscal periods that have been carried forward. Those reports are
subject to the review and approval of the Independent Directors in the exercise
of their fiduciary duty.
Each plan states that while it is in effect, the selection or
replacement and nomination of those Directors of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Directors. This provision does not prevent the involvement of others
in the selection and nomination process as long as the final decision as to
selection or nomination is approved by a majority of the Independent Directors.
Under the plans, no payment will be made to any recipient in any
quarter in which the aggregate net asset value of all Fund shares held by the
recipient for itself and its customers does not exceed a minimum amount, if any,
that may be set from time to time by a majority of the Fund's Independent
Directors. Initially, the Board of Directors has set the fees at the maximum
rate allowed under the plans and has set no minimum asset amount needed to
qualify for payments.
|_| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Distributor
makes payments to plan recipients 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.
For the fiscal year ended August 31, 1998, payments under the Plan for
Class A shares totaled $_____________, all of which was paid by the Distributor
to recipients. That included $_________ paid to an affiliate of the Distributor.
Any unreimbursed expenses the Distributor incurs with respect to Class A shares
for any fiscal year may not be recovered in subsequent years. The Distributor
may not use payments received under the Class A plan to pay any of its interest
expenses, carrying charges, other financial costs, or allocation of overhead.
|_| Class B Service and Distribution Plan Fee. Under the plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B plan provides for the Distributor to
be compensated at a flat rate, whether the Distributor's distribution expenses
are more or less than the amounts paid by the Fund under the plans during that
period. The Class B plan permits the Distributor to retain both the asset-based
sales charges and the service fee on shares or to pay recipients the service fee
on a quarterly basis, without payment in advance.
The Distributor presently intends to pay recipients the service fee on
Class B shares in advance for the first year the shares are outstanding. After
the first year shares are outstanding, the Distributor makes payments quarterly
on those shares. The advance payment is based on the net asset value of shares
sold. Shares purchased by exchange do not qualify for an advance service fee
payment. If Class B shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment made on those
shares.
The Distributor retains the asset-based sales charge on Class B shares.
If a dealer has a special agreement with the Distributor, the Distributor will
pay the Class B service fee and the asset-based sales charge to the dealer
quarterly in lieu of paying the sales commission and service fee advance at the
time of purchase.
The asset-based sales charge on Class B shares allows investors to buy
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. 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
plans. The Fund pays the asset-based sales charge to the Distributor for its
services rendered in distributing Class B shares. The payments are made to the
Distributor in recognition that the Distributor:
|X| pays sales commissions to authorized brokers and dealers at the time of sale
and pays service fees as described in the Prospectus,
|X| may finance payment of sales commissions and/or the advance of the service
fee payment to recipients under the plans, or may provide such financing from
its own resources or from the resources of an affiliate,
|X| employs personnel to support distribution of shares, and
|X| bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky" registration
fees and certain other distribution expenses.
Payments made under the Class B Plan for the fiscal year ended August
31, 1998, totaled $__________ (including $_______ paid to an affiliate of the
Distributor). The Distributor retained $_____________ of that amount. At August
31, 1998, the Distributor had incurred unreimbursed expenses under the Class B
plan in the amount of $__________ (equal to ____% 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 distributing shares before the
plan was terminated.
All payments under the Class B plan is 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 to NASD members.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"tax-equivalent yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1, 5 and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
|_| Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily
basis.
|_| When an investor's shares are redeemed, they may be worth more or
less than their original cost.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be
considered, a prediction of future yields or returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating expenses
that are allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate
its current returns. Each class of shares calculates its yield separately
because of the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just 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.
Standardized 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 [( cd + 1) - 1]
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 assumptions).
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 for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized 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.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend 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 = dividends paid x 12/maximum offering price (payment date)
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.
|_| Tax-Equivalent Yield. The "tax-equivalent yield" of a class of
shares is the equivalent yield that would have to be earned on a taxable
investment to achieve the after-tax results represented by the Fund's
tax-equivalent yield. It adjusts the Fund's standardized yield, as calculated
above, by a stated Federal tax rate. Using different tax rates to show different
tax equivalent yields shows investors in different tax brackets the tax
equivalent yield of the Fund based on their own tax bracket.
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. The result is added 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. Your tax bracket is determined
by your Federal and state taxable income (the net amount subject to Federal and
state income tax after deductions and exemptions). The tax-equivalent yield
table assumes 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The Fund's Yields for the Periods Ended 8/31/98
- ---------------------------------------------------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 8/31/98
- ---------------------------------------------------------------------------------------------------------------------
- ----------------- -------------------------------- --------------------------------- --------------------------------
Tax-Equivalent Yield (39.6%
Standardized Yield Dividend Yield Fed. Tax Bracket)
Class of Shares
- ----------------- -------------------------------- --------------------------------- --------------------------------
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Without Sales Without Sales Without Sales
Charge After Sales Charge After Sales Charge After Sales
Charge Charge Charge
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Class A % % % % % %
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Class B % N/A % N/A % N/A
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
|X| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribe the SEC.
The methodology is discussed below.
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 without sales charge,
as described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter.
|_| Average Annual Total Return. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:
1/n
(ERV) - 1 = Average Annual Total Return
---
( P )
|_| Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis.
Cumulative total return is determined as follows:
ERV - P
___________ = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A 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 Fund's Total Returns for the Periods Ended 8/31/98
- --------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 8/31/98
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Returns (10 years or
life of class)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class of
Shares
- ------------- ------------------------- -----------------------------------------------------------------------------
- ------------- ------------------------- ------------------------- ------------------------- -------------------------
5-Year 10-Year
1-Year (or life of class) (or life of class)
- ------------- ------------------------- ------------------------- ------------------------- -------------------------
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class A % % % % % % % %
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B % % % % % % % %
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Inception of Class A: 5/18/90
Inception of Class B: 10/29/93
</TABLE>
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|_| Lipper Rankings. 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"). Lipper is a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund is ranked by Lipper against all other bond funds, other than money market
funds, and all general municipal bond funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the performance of
all mutual funds in a category that it monitors and averages of the performance
of the funds in particular categories.
|_| Morningstar Rankings. From time to time the Fund may publish the
star ranking of the performance of its Class A or 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 and municipal bond funds. The Fund is ranked among
municipal bond funds.
Morningstar star rankings are based on risk-adjusted total investment
return. Investment return measures a fund's (or class's) one, three, five and
ten-year average annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after considering the
fund's sales charges and expenses. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and investment return
are combined to produce star rankings reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top 10%
of funds in a category), four stars is "above average" (next 22.5%), three stars
is "average" (next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). The current star ranking is the fund's (or class's)
3-year ranking or its combined 3- and 5-year ranking (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year ranking (weighted 40%, 30%
and 30%, respectively), depending on the inception date of the fund (or class).
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
|_| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, the Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's Class A or Class B shares may be compared in publications to the
performance of various market indices or other investments, and averages,
performance rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Investors may also wish to compare the Fund's Class A or Class B
returns to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by the
FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is backed
by the full faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services to
those provided by other mutual fund families selected by the rating or ranking
services. They may be based upon the opinions of the rating or ranking service
itself, using its research or judgment, or based upon surveys of investors,
brokers, shareholders or others.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix D contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix D to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together:
|_| Class A and Class B shares you purchase for your individual
accounts, or for your joint accounts, or for trust or
custodial accounts on behalf of your children who are minors,
and
|_| current purchases of Class A and Class B shares of the Fund
and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares, and
|_| Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases
of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds.
A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
|_| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Oppenheimer Municipal Bond Fund Oppenheimer Global Fund
Oppenheimer New York Municipal Fund Oppenheimer Global Growth & Income Fund
Oppenheimer California Municipal Fund Oppenheimer Gold & Special Minerals Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund Oppenheimer International Bond Fund
Oppenheimer Main Street California Municipal Oppenheimer Enterprise Fund
Fund Oppenheimer International Growth Fund
Oppenheimer Florida Municipal Fund Oppenheimer Developing Markets Fund
Oppenheimer New Jersey Municipal Fund Oppenheimer Real Asset Fund
Oppenheimer Pennsylvania Municipal Fund Oppenheimer International Small Company Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Growth Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer Equity Income Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Multiple Strategies Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Total Return Fund, Inc. Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Main Street Income & Growth Fund Oppenheimer MidCap Fund
Oppenheimer High Yield Fund Oppenheimer Convertible Securities Fund
Oppenheimer Champion Income Fund Rochester Fund Municipals
Oppenheimer Bond Fund Limited-Term New York Municipal Fund
Oppenheimer U.S. Government Trust Oppenheimer Disciplined Value Fund
Oppenheimer Limited-Term Government Fund Oppenheimer Disciplined Allocation Fund
Oppenheimer World Bond Fund
</TABLE>
and the following Money Market Funds:
O Oppenheimer Money Market Fund, Inc. Centennial Government Trust Oppenheimer
Cash Reserves Centennial New York Tax Exempt Trust Centennial Money Market Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust Centennial
America Fund, L.P.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
|X| Letters of Intent. Under a Letter of Intent, if you purchase Class A shares
or Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the 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. However, if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the Application used
for a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bounded by the amended terms and
that those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the excess of the amount
of commissions allowed or paid to the dealer over the amount of commissions that
apply to the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
|_| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject
to a Class A contingent deferred
sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to
a contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1)
Class A shares of one of the other Oppenheimer funds that
were acquired subject to a Class A initial or contingent
deferred sales charge or (2) Class B shares of one of the
other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmission.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. The amount of the
Asset Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
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.
Checkwriting. When a check is presented to the Fund's 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 to receive 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 listed on the check or at the Fund's custodian bank.
That 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.
In choosing to take advantage of the Checkwriting privilege by signing
the Account Application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are either the
registered owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other
entities, represents that they are an officer, general partner,
trustee or other fiduciary or agent, as applicable, duly
authorized to act on behalf of such registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which
the Fund's drafts (checks) are payable to pay all checks drawn on
the Fund account of such person(s) and to redeem a sufficient
amount of shares from that account to cover payment of each
checks;
(4) specifically acknowledges that if they choose to permit checks to
be honored if there is 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 the account, even if that account is registered in
the names of more than one person or more than one authorized
signature appears on the Checkwriting card or the Application, as
applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) that neither the Fund nor its bank shall incur any liability for
that amendment or termination of privileges or for redeeming
shares to pay checks reasonably believed by them to be genuine, or
for returning or not paying checks that have not been accepted for
any reason.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B
shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class. Those expenses include the
asset-based sales charges to which Class B are subject.
The availability of three classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares in general are sold subject to an initial sales charge. While Class B
shares have no initial sales charge, the purpose of the deferred sales charge
and asset-based sales charge on Class B shares is the same as that of the
initial sales charge on Class A shares - to compensate the Distributor and
brokers, dealers and financial institutions that sell shares of the Fund. A
salesperson who is entitled to receive compensation for selling Fund shares may
receive different levels of compensation for selling to one class of shares than
another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts). That is because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund.
|_| Class B Conversion. 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.
|_| Allocation of Expenses. 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.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Directors, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, share registration fees and
shareholder meeting expenses (to the extent that such expenses pertain only to a
specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. It is done by
dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class that are outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some other days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Martin Luther King, Jr. Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in municipal
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. Because the Fund's net
asset values will not be calculated on those days, the Fund's net asset values
per share may be significantly affected on such days when shareholders may not
purchase or redeem shares.
|X| Securities Valuation. The Fund's Board of Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Long-term debt securities having a remaining maturity in excess of
60 days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid"
and "asked" prices determined by a pricing service approved by the Fund's Board
of Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for
amortization of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that
had a maturity of less than 397 days when issued that have a
remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less. |_| Securities (including restricted
securities) not having readily-available market quotations are
valued at fair value determined under the Board's procedures. If the Manager is
unable to locate two market makers willing to give quotes, a security may be
priced at the mean between the "bid" and "asked" prices provided by a single
active market maker (which in certain cases may be the "bid" price if no "asked"
price is available).
In the case of municipal securities, when last sale information is not
generally available, the Manager may use pricing services approved by the Board
of Directors. The pricing service may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity. Other special
factors may be involved (such as the tax-exempt status of the interest paid by
municipal securities). The Manager will monitor the accuracy of the pricing
services. That monitoring may include comparing prices used for portfolio
valuation to actual sales prices of selected securities.
Puts, calls, interest rate futures and municipal bond index futures are
valued at the last sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, as determined by a pricing service approved by the
Board of Directors or by the Manager. If there were no sales that day, they
shall be valued at the last sale price on the preceding trading day if it is
within the spread of the closing "bid" and "asked" prices on the principal
exchange or on NASDAQ on the valuation date. If not, the value shall be the
closing bid price on the principal exchange or on NASDAQ on the valuation date.
If the put, call or future is not traded on an exchange or on NASDAQ, it shall
be valued by the mean between "bid" and "asked" prices obtained by the Manager
from two active market makers. In certain cases that may be at the "bid" price
if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium. If the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below provides additional information about the
procedures and conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of :
|_| Class A shares that you purchased subject to an initial sales charge or
Class A shares on which a contingent deferred sales charge which was paid, or
|_| Class B shares that were subject to the Class B contingent deferred sales
charge when redeemed.
The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Directors of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of securities from the portfolio of
the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Directors has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $200 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 such shares has
fallen below the stated minimum solely as a result of market fluctuations. If
the Board exercises this right, it may also fix the requirements for any notice
to be given to the shareholders in question (not less than 30 days). The Board
may alternatively set requirements for the shareholder to increase the
investment, or set other terms and conditions so that the shares would not be
involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B
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. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares have
been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have been changed within the prior 30 days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have Automatic
Withdrawal Plan payments transferred to the bank account designated on the
OppenheimerFunds Account Application or by signature-guaranteed instructions.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular additional Class A
share purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans, because of the imposition of
the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in "Waivers of Class B
Sales Charges" below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|_| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares (of
the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $25.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.
|_| Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first. Shares acquired with reinvested dividends and capital
gains distributions will be redeemed next, followed by shares acquired with a
sales charge, to the extent necessary to make withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted. Payments
made under these plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder. Receipt
of payment on the date selected cannot be guaranteed
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a Plan. The Transfer Agent will also terminate a Plan upon its receipt
of evidence satisfactory to it that the Planholder has died or is legally
incapacitated. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed will be held in uncertificated form in the
name of the Planholder. The account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are received from
the Planholder, his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Upon written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A" shares
for this purpose. You can obtain a current list showing which funds offer which
classes by calling the Distributor at 1-800-525-7048.
|_| All of the Oppenheimer funds currently offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial
America Fund, L.P., which only offer Class A shares.
|_| Oppenheimer Main Street California Municipal Fund currently offers
only Class A and Class B shares.
|_| 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.
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. They may also be used to
purchase shares of Oppenheimer funds subject to a contingent deferred sales
charge. Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge. To
qualify for that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must
supply proof of entitlement to this privilege.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Convertible Securities Fund, Class M shares can be
exchanged only for Class A shares of other Oppenheimer funds. Exchanges to Class
M shares of Oppenheimer Convertible Securities Fund are permitted from Class A
shares of Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that
were acquired by exchange of Class M shares. No other exchanges may be made to
Class M shares.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with the
Distributor may be exchanged at net asset value for shares of any of the
Oppenheimer funds.
|_| How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 18 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares. The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within 6
years of the initial purchase of the exchanged Class B shares.
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. Before exchanging shares, shareholders
should take into account how the exchange may affect any contingent deferred
sales charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one Class must specify whether
they intend to exchange Class A or Class B shares.
|_| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
|_| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must either have an existing account in the fund to which the
exchange is to be made. Otherwise, the investors must obtain a Prospectus of
that fund before the exchange request may be submitted. For full or partial
exchanges of an account made by telephone, any special account features such as
Asset Builder Plans and Automatic Withdrawal Plans will be switched to the new
account unless the Transfer Agent is instructed otherwise. 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.
|_| Processing Exchange Requests. Shares to be exchanged are redeemed
on the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it. For example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund, the Fund may refuse the
request.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, or as otherwise
described in "How to Buy Shares." Daily dividends will not be declared or paid
on newly purchased shares until such time as Federal Funds (funds credited to a
member bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order.
Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three business days following the
trade date (that is, up to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends accrued on
shares of the same class in the account will be paid together with the
redemption proceeds.
The Fund's practice of attempting to pay dividends on Class A shares at
a constant level requires the Manager to monitor the Fund's portfolio and, if
necessary, to select higher-yielding securities when it is deemed appropriate to
seek income at the level needed to meet the target. Those securities must be
within the Fund's investment parameters, however. The Fund expects to pay
dividends at a targeted level from its net investment income and other
distributable income without any impact on the net asset values per share.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc. Reinvestment will be made as promptly as possible after the return of
such checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
The amount of a distribution paid on a class of shares may vary from
time to time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same time and on the same
day for shares of each class. However, dividends on Class B shares are expected
to be lower than dividends on Class A shares. That is due to the effect of the
asset-based sales charge on Class B shares. Those dividends will also differ in
amount as a consequence of any difference in net asset value among Class A and
Class B shares.
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 that
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 that are free from Federal
income taxes. This allocation will be made by the use of one designated
percentage applied uniformly to all income dividends paid during the Fund's tax
year. That 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.
The amount of any dividends attributable to tax preference items for purposes of
the alternative minimum tax will be identified when tax information is
distributed by the Fund.
A shareholder receiving a dividend from income earned by the Fund from
one or more of the following sources 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:
(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.
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. That qualification enables the Fund
to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. 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 qualifies. 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, the Fund will also be exempt from
California corporate income and franchise taxes. It will also be qualified under
California law to pay exempt interest dividends that will be exempt from
California personal income tax. That exemption applies to the extent that the
Fund's distributions are attributable to interest on California municipal
securities and qualifying obligations of the United States government, if at
least 50% of the Fund's assets are invested in such obligations at the close of
each quarter in its tax year. Distributions from the Fund attributable to income
from sources other than California municipal securities and U.S. government
obligations will generally be subject to California income tax as ordinary
income.
Distributions by the Fund from investment income and long- and
short-term capital gains will generally not be excludable from taxable income in
determining California corporate franchise tax or income tax for corporate
shareholders of the Fund. Additionally, certain distributions paid to corporate
shareholders of the Fund 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. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Fund's Board of Directors and the Manager might determine in a particular year
that it would be in the best interest of shareholders not to make 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.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made at net asset value without sales charge. To elect this option, the
shareholder must notify the Transfer Agent in writing and must have an existing
account in the fund selected for reinvestment. Otherwise the shareholder must
first obtain a prospectus for that fund and an application from the Transfer
Agent 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 certain of the
other Oppenheimer funds may be invested in shares of this Fund on the same
basis.
Additional Information About the Fund
The Transfer Agent. The Fund's Transfer Agent, OppenheimerFunds Services, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of the Fund. It also handles
shareholder servicing and administrative functions.
- --------------------------------------------------------------------------------
Address for Mail Inquiries: For Phone Inquiries:
- --------------------------------------------------------------------------------
OppenheimerFunds Services 1-800-525-7048 (toll free)
P.O. Box 5270
Denver Colorado 80217
On the Internet:
http://www.oppenheimerfunds.com
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates. The
Fund's cash balances with the Custodian in excess of $100,000 are not protected
by Federal Deposit Insurance. Those uninsured balances may at times be
substantial.
Independent Auditors. KPMG Peat Marwick are the independent auditors of the
Fund. They audit the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds advised by the
Manager and its affiliates.
<PAGE>
A-5
Appendix A
Descriptions of Municipal Bond Ratings Categories Of Principal Rating Agencies
Municipal Bonds
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. 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.
Aaa. Municipal bonds rated "Aaa" are judged to be of the "best
quality."
Aa. The rating "Aa" is assigned to bonds which are judged 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. "Aaa" and "Aa" rated bonds are generally
known as "high grade bonds."
|_| A. Municipal bonds 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.
|_| Baa. 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. These bonds lack outstanding investment characteristics and have
speculative characteristics as well.
|_| Ba. Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered 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.
|_| B. Bonds rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
|_| Caa. Bonds rated "Caa" are in poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
|_| Ca. Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
|_| C. Bonds rated "C" are the lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Municipal bonds rated by Moody's that 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 that 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. 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." 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.
|_| AAA. Municipal bonds rated AAA are "obligations of the highest quality."
|_| AA. The rating AA is given to issues with investment characteristics "only
slightly less marked than those of the prime quality issues."
|_| A. The rating 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 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.
|_| BBB. 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.
|_| BB. Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face 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.
|_| B. 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.
|_| CCC. Bonds rated CCC have a current identifiable vulnerability to default,
and are 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, they are not likely to have
the capacity to pay interest and repay principal.
|_| CC. Bonds noted CC typically are debt subordinated to senior debt which is
assigned on actual or implied CCC debt rating.
|_| C. Bonds rated C typically are debt subordinated to senior debt that 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.
|_| D. 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.
Fitch. The ratings of Fitch IBCA, Inc. for municipal bonds are AAA, AA, A, BBB,
BB, B, CCC, CC, C, DDD, DD, and D. 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.
|_| AAA. Municipal Bonds rated AAA are judged to be of the "highest credit
quality."
|_| AA. The rating of AA is assigned to bonds of "very high credit quality."
|_| A. Municipal bonds rated A are considered to be of "high credit quality."
|_| BBB. The rating BBB is assigned to bonds of "satisfactory credit quality." A
and BBB rated bonds are more vulnerable to adverse changes in economic
conditions than bonds with higher ratings.
|_| BB. The rating BB is assigned to bonds considered to be "speculative."
|_| B. The rating B is assigned to bonds considered to be "highly speculative."
|_| CCC. Bonds rated CCC have certain identifiable characteristics which, if not
remedied, may lead to default.
|_| CC. Bonds rated CC are considered minimally protected. Default in payment of
interest and/or principal seems probable over time.
|_| C. Bonds rated C are in imminent default in payment of interest or
principal.
|_| DDD and below. 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.
Duff & Phelps. The ratings of Duff & Phelps are as follows:
|_| AAA. These are judged to be the "highest credit quality". The risk factors
are negligible, being only slightly more than for risk-free U.S. 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-. These have below average protection factors but are still
considered sufficient for prudent investment. They have considerable variability
in risk during economic cycles.
|_| BB+, BB & BB-. These are below investment grade but are deemed to be able 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-. These are below investment grade and possess 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. These are defaulted debt obligations. The issuer failed to meet
scheduled principal and/or interest payments.
Municipal Notes
Moody's. 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-1." Such short-term notes that 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.
Standard & Poor's. S&P's ratings 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.
Fitch. 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
defensive investments the Fund may hold are corporate (as opposed to municipal)
debt obligations. The Moody's, S&P and Fitch corporate debt ratings do not
differ materially from those set forth above for municipal bonds.
Commercial Paper
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.
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. These issues 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.
Fitch. The ratings of commercial paper by Fitch are similar to its ratings of
Municipal Notes, above.
<PAGE>
B-1
Appendix B
Tax-Exempt/Tax-Equivalent Yields
The equivalent yield table below compares tax-free income with taxable income
under Federal income tax rates and California state individual income tax rates
in effect in 1998. 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, that the investor is not subject to the Alternative
Minimum Tax, and that the state income tax payments are fully deductible for
Federal income tax purposes. The income tax brackets are subject to indexing in
future years to reflect changes in the Consumer Price Index.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Federal Effective Oppenheimer Main Sreet California Municipal Fund Yield of:
Taxable Combined Tax
Income Bracket 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
JOINT RETURN
Over Not over Is Approximately Equivalent To a Taxable Yield:
$ 23,776 $ 37,522 18.40% 2.45% 3.68% 4.90% 6.13% 7.35% 8.58%
$ 37,522 $ 42,350 20.10% 2.50% 3.75% 5.01% 6.26% 7.51% 8.76%
$ 42,350 $ 52,090 32.32% 2.96% 4.43% 5.91% 7.39% 8.87% 10.34%
$ 52,090 $ 65,832 33.76% 3.02% 4.53% 6.04% 7.55% 9.06% 10.57%
$ 65,832 $102,300 34.70% 3.06% 4.59% 6.13% 7.66% 9.19% 10.72%
$102,300 $155,950 37.42% 3.20% 4.79% 6.39% 7.99% 9.59% 11.19%
$155,950 $278,450 41.95% 3.45% 5.17% 6.89% 8.61% 10.34% 12.06%
$278,450 45.22% 3.65% 5.48% 7.30% 9.13% 10.95% 12.78%
Oppenheimer Main Sreet California Municipal Fund Yield of:
2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
SINGLE RETURN
Over Not over Is Approximately Equivalent To a Taxable Yield:
18,761 25,350 20.10% 2.50% 3.75% 5.01% 6.26% 7.51% 8.76%
25,350 26,045 32.32% 2.96% 4.43% 5.91% 7.39% 8.87% 10.34%
26,045 32,916 33.76% 3.02% 4.53% 6.04% 7.55% 9.06% 10.57%
32,916 61,400 34.70% 3.06% 4.59% 6.13% 7.66% 9.19% 10.72%
61,400 128,100 37.42% 3.20% 4.79% 6.39% 7.99% 9.59% 11.19%
128,100 278,450 41.95% 3.45% 5.17% 6.89% 8.61% 10.34% 12.06%
278,450 45.22% 3.65% 5.48% 7.30% 9.13% 10.95% 12.78%
</TABLE>
<PAGE>
C-7
Appendix C
Municipal Bond Industry Classifications
Electric
Resource Recovery
Gas
Water
Higher Education
Sewer
Education
Telephone
Lease Rental
Adult Living Facilities
Hospital
Non Profit Organization
General Obligation
Highways
Special Assessment
Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables
Single Family Housing
Manufacturing, Durables
Pollution Control
<PAGE>
APPENDIX D
- --------------------------------------------------------------------------------
Special Sales Charge Arrangements and
- --------------------------------------------------------------------------------
Waivers
- --------------------------------------------------------------------------------
Other Waivers of Class A Sales Charges
- --------------------------------------------------------------------------------
|X| 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:
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose.
|_| Dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for retirement
plans for their employees.
|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are identified
as such to the Distributor) or with the Distributor. The purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients. Those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, 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.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who buy shares
for their own accounts may also purchase shares without sales charge but only if
their accounts are linked to a master account of their investment advisor or
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements .
Each of these investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which is the
beneficial owner of such accounts; and
|_| y unit investment trust that has entered into an appropriate
agreement with the Distributor.
|X| Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to sales charges:
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.
|_| Shares purchased 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 shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of
any Qualified Unit Investment Liquid Trust Series.
|X| Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value.
|_| Involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules and
Policies," in the Prospectus).
- --------------------------------------------------------------------------------
Waivers of Class B Sales Charges.
- --------------------------------------------------------------------------------
The Class B contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions or redeemed in certain circumstances
described below. In order to receive a waiver of the Class B contingent deferred
sales charge, you must notify the Transfer Agent which conditions apply.
|X| Waivers for Redemptions in Certain Cases.
The Class B contingent deferred sales charges will be waived for
redemptions of shares in the following cases: |_| Redemptions from
accounts 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. For disability you must provide evidence of a
determination of disability by the Social Security Administration.
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the Statement of Additional Information.
|X| 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:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a
party.
- --------------------------------------------------------------------------------
Special Sales Charge Arrangements for Shareholders of the Fund
- --------------------------------------------------------------------------------
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described in the Prospectus or Statement
of Additional Information of the Fund are modified as described below for
certain persons who were shareholders of the former Quest for Value Funds. Those
funds include:
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Growth & Income
Fund, Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small
Cap Value Fund and Oppenheimer Quest Global Value Fund, Inc.
To be eligible, those persons must have been shareholders on December __, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds.
The table also applies to shareholders of the following funds when they merged
into various Oppenheimer funds on December __, 1995:
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
All of the funds listed above are referred to in this Appendix as the "Former
Quest for Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund that are either:
|_|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
|_|purchased by such shareholder by exchange of other Oppenheimer funds that
were acquired pursuant to the merger of any of
the Former Quest for Value Funds into an Oppenheimer fund on December __, 1995.
Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if that Association purchased shares of any of the Former Quest for
Value Funds or received a proposal to purchase such shares from OCC Distributors
prior to December __, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Initial Initial Commission
Sales Charge Sales 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%
</TABLE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the Fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the Fund's Prospectus and Statement of Additional
Information. Individuals who qualify under this arrangement for reduced sales
charge rates as members of Associations also may purchase shares for their
individual or custodial accounts at these reduced sales charge rates, upon
request to the Fund's Distributor.
|X| 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:
|_| 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.
|_| 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.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the
following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund. The Fund shares
must have been acquired by the merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged. Those shares must have been purchased prior
to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only
either Class B or Class C shares if the annual withdrawal does not
exceed 10% of the initial value of the account, and |_| liquidation
of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum value
of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to December __, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund. The Fund shares must have been acquired by the merger of a
Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest For Value Fund or into which such fund merged.
Those shares must have been purchased on or after March 6, 1995, but prior to
December __, 1995:
|_| redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability
by the U.S. Social Security Administration); |_| withdrawals under
an automatic withdrawal plan (but only for Class B or Class C
shares) where the annual withdrawals do not exceed 10% of the
initial value of the account; and |_| liquidation of a
shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum account
value.
A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class B
or Class C shares of the Fund described in this section if the proceeds are
invested in the same Class of shares in this Fund or another Oppenheimer fund
within 90 days after redemption.
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Main Sreet California Municipal Fund
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
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
67890
725SAI.1298
- --------
1 Ms. Macaskill is not a Trustee or Director of Oppenheimer Integrity Funds,
Panorama Series Fund, Inc., Oppenheimer Strategic Income Fund and Oppenheimer
Variable Account Funds. Mr. Fossel is not a Trustee of Centennial New York
Tax-Exempt Trust or a Managing General Partner of Centennial America Fund, L.P.
Mr. Bowen is not a Trustee, Director or Managing General Partner of Oppenheimer
Variable Account Funds, Pnorama Series Fund, Inc., Oppenheimer Integrity Funds,
Oppenheimer Strategic Income Fund, Centennial New York Tax-Exempt Fund and
Centennial America Fund, L.P.
OPPENHEIMER MAIN STREET FUNDS, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (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.
(b) Amended By-Laws dated 06/20/90: Previously filed with Registrant's
Post-Effective Amendment No. 8, 10/22/91, refiled with Registrant's
Post-Effective Amendment No. 14 (9/30/94) pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(c) (i) Specimen Class A Stock Certificate - Oppenheimer Main Street
Growth & Income 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
Growth & Income: 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
Growth & Income 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
Growth & Income 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.
(d) (i) Investment Advisory Agreement dated 10/22/90 for Oppenheimer Main
Street Growth & Income Fund: Filed with Registrant's Post-Effective
Amendment No. 6, 11/1/90, refiled with Registrant's 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, refiled with
Post-Effective Amendment No. 14, 9/30/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(e) (i) General Distributor's Agreement dated 10/13/92: Previously
filed with Registrant's Post-Effective Amendment No. 11, 8/25/93, and
incorporated herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement:
Filed with Post-Effective Amendment No. 14 of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(f) No applicable.
(g) Custody Agreement dated 8/5/92: Previously filed with Registrant's
Post-Effective Amendment No. 10, 10/19/92, refiled with Registrant's
Post-Effective Amendment No. 14, 9/30/94 pursuant to Item 102 of
Regulation S-T and incorporated herein by reference.
(h) (i) Agreement and Plan of Reorganization dated 4/28/92 between Main
Street Funds, Inc. - Asset Allocation Fund, and Main Street Funds,
Inc. - Growth & Income 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.
(i) (i) Opinion and Consent of Counsel dated 2/1/88: Previously filed with
Registrant's Post-Effective Amendment No. 1 to Registrant's
Registration Statement, 6/28/88, refiled with Registrant's
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.
(j) Independent Auditors Consent: To be filed by Post-Effective Amendment.
(k) Not applicable.
(l) Investment Letter from OppenheimerFunds, Inc. to Registrant:
[Previously 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, and incorporated herein by reference.
(m) (i) Amended and Restated Service Plan and Agreement for Class A shares
of Oppenheimer Main Street Growth & Income Fund, dated 10/25/93:
Previously filed with Registrant's Post-Effective Amendment No. 14,
9/30/94, and incorporated herein by reference.
(ii) Amended Distribution and Service Plan and Agreement for Class B
shares of Oppenheimer Main Street Growth & Income Fund dated 10/1/94:
Previously filed with Registrant's Post-Effective Amendment No. 21,
12/5/97, and incorporated herein by reference.
(iii) Amended Distribution and Service Plan and Agreement for Class C
shares of Oppenheimer Main Street Growth & Income Fund dated 12/1/93:
Previously filed with Registrant's Post-Effective Amendment No. 21,
12/5/97, and incorporated herein by reference.
(iv) Amended Distribution and Service Plan and Agreement for Class B
shares of Oppenheimer Main Street California Municipal Fund dated
2/23/94: Previously filed with Registrant's Post-Effective Amendment
No. 21 (Reg. #33-17850), 12/5/97, and incorporated herein by
reference.
(n) (i) Financial Data Schedule for Oppenheimer Main Street Growth &
Income Fund Class A Shares: To be filed by Post-Effective Amendment.
(ii) Financial Data Schedule for Oppenheimer Main Street Growth &
Income Fund Class B Shares: To be filed by Post-Effective Amendment.
(iii) Financial Data Schedule for Oppenheimer Main Street Growth &
Income Fund Class C Shares: To be filed by Post-Effective Amendment.
(iv) Financial Data Schedule for Oppenheimer Main Street Growth &
Income Fund Class Y Shares: To be filed by Post-Effective Amendment.
(v) Financial Data Schedule for Oppenheimer Main Street California
Municipal Fund Class A Shares: To be filed by Post-Effective
Amendment.
(vi) Financial Data Schedule for Oppenheimer Main Street California
Municipal Fund Class B Shares: To be filed by Post-Effective Amendment.
(o) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/25/98: Previously filed with Post-Effective Amendment No. 70 to the
Registration Statement of Oppenheimer Global Fund (Reg. No. 2-31661), 9/14/98,
and incorporated herein by reference.
- -- Powers of Attorney (including Certified Board resolutions): Previously
filed (all Directors except Bridget A. Macaskill and Sam Freedman) with
Registrant's Post-Effective Amendment No. 11, 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. For George C. Bowen, filed herewith.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of paragraph (b) of Section 7 of
Article SEVENTH of Registrant's Articles of Incorporation filed as Exhibit 23(a)
to this Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to 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 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
<TABLE>
<CAPTION>
<S> <C>
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds
(since April 1998); a
Chartered Financial
Analyst; formerly, a Vice
President and portfolio
manager for Guardian
Investor Services, the
investment management
subsidiary of The Guardian
Life Insurance Company
(since 1972).
Edward Amberger,
Assistant Vice President Formerly
Assistant Vice President,
Securities Analyst for
Morgan Stanley Dean Witter
(May 1997 - April 1998);
and Research Analyst (July
1996 - May 1997), Portfolio
Manager (February 1992 -
July 1996) and Department
Manager (June 1988 to
February 1992) for The Bank
of New York.
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; he 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.
George Batejan,
Executive Vice President,
Chief Information Officer
Formerly Senior Vice
President, Group Executive,
and Senior Systems Officer
for American International
Group (October 1994 - May,
1998).
John R. Blomfield,
Vice President Formerly Senior Product Manager (November, 1995 - August, 1997) of
International Home Foods and American Home Products (March, 1994 -
October, 1996).
Kathleen Beichert,
Vice President 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, Treasurer
and Director Vice 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);
Assistant Treasurer of Oppenheimer Acquisition Corp. ("OAC") (since
March, 1998); Treasurer of Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and Treasurer of ORAMI (since
July 1996); an officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
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.
John Cardillo,
Assistant Vice President None.
Erin Cawley,
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.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly,
Senior Vice President of
Human Resources for
Fidelity Investments-Retail
Division (January, 1995 -
January, 1996), Fidelity
Investments FMR Co.
(January, 1996 - June,
1997) and Fidelity
Investments FTPG (June,
1997 - January, 1998).
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);
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 and Director of OppenheimerFunds International, Ltd.
("OFIL") and Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
Eric Edstrom,
Vice President
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 of
HarbourView, 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.
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 former Rochester
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,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for Schroder Capital Management
International.
Jill Glazerman,
Assistant Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President and
Chief Financial Officer Chief
Financial Officer and
Treasurer (since March,
1998) of Oppenheimer
Acquisition Corp.; a Member
and Fellow of the Institute
of Chartered Accountants;
formerly, an accountant for
Arthur Young (London,
U.K.).
Robert Grill,
Senior 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.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989 - January, 1997) of Bankers
Trust Company.
Robert Haley
Assistant Vice President Formerly,
Vice President of
Information Services for
Bankers Trust Company
(January, 1991 - November,
1997).
Thomas B. Hayes,
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
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,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Thomas W. Keffer,
Senior Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President An officer
and/or portfolio manager
for certain
OppenheimerFunds; formerly,
Managing Director and
Senior Portfolio Manager at
Prudential Global Advisors
(1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President None.
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.
Dan Loughran,
Assistant Vice President:
Rochester Division
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 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.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly,
Product Manager, Assistant
Vice President (June 1995-
October, 1997) of Merrill
Lynch Pierce Fenner &
Smith.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing Manager May, 1996 - June, 1997) and
Director of Product Marketing (August, 1992 - May, 1996) with
Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President
and/or portfolio manager of
certain Oppenheimer funds
(since April 1998); a
Certified Financial
Analyst; formerly, a Vice
President and portfolio
manager for Guardian
Investor Services, the
management subsidiary of
The Guardian Life Insurance
Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November 1996) for Chase
Investment Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
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.
James Phillips
Assistant Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice President (April, 1995 - January, 1998) of
Van Kampen American Capital.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset Management, Inc. (since
March, 1995).
Thomas Reedy,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds;
formerly, a Securities
Analyst for the Manager.
John Reinhardt,
Vice President: Rochester Division None
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Stuart J. Speckman
Vice President Formerly, Vice President and Wholesaler for Prudential Securities
(December, 1990 - July, 1997).
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 Division Assistant Vice President (since 1995) of Rochester Capitol Advisors,
L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
John Stoma,
Senior Vice President, Director
of Retirement Plans None.
Michael C. Strathearn,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds;
a Chartered Financial
Analyst; a Vice President
of HarbourView.
James C. Swain,
Vice Chairman of the Board
Chairman, CEO and Trustee,
Director or Managing
Partner of the Denver-based
Oppenheimer Funds;
formerly, President and
Director of OAMC, CAMC and
Chairman of the Board of
SSI.
Susan Switzer,
Assistant Vice President
Anthony A. Tanner,
Vice President: Rochester Division
James Tobin,
Vice President None.
Susan Torrisi,
Assistant Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed income Oppenheimer 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.
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;
Point of Contact: Finance
Supporters of Children;
Member of the Oncology
Advisory Board of the
Childrens Hospital.
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),
SFSI (since November 1989),
OFIL (since 1998),
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.
</TABLE>
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 Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer 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 the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
<TABLE>
<CAPTION>
<S> <C> <C>
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
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)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55403
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
And General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
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
412 Commons Way
Doylestown, PA 18901
Patrice Falagrady(1) Senior Vice President None
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
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
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656
C. Webb Heidinger Vice President None
138 Gales Street
Portsmouth, NH 03801
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Vice President/ None
Director of Sales
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
54511 Southern Hills
LaQuinta, CA 92253
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
2714 Orchard Terrace
Linden, NJ 07036
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
LuAnn Mascia(2) Assistant Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212
John McDonough Vice President None
3812 Leland Street
Chevey Chase, MD 20815
Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
2408 Eagleridge Dr.
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
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
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
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
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
Timothy Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
7009 Metropolitan Place, #300
Falls Church, VA 22043
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
Mark Stephen Vandehey(1) Vice President None
James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
</TABLE>
(1) 6803 South Tuscon Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. Location of Accounts and Records
(4) 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 Tuscon Way, Englewood, CO 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
(a) Not applicable
(b) Not applicable
(c) Not applicable
<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 23rd day of October, 1998.
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:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Signatures Title Date
/s/ James C. Swain* Chairman of the
- ------------------------------------- Board of Directors
James C. Swain and Principal Executive
Officer October 23, 1998
/s/ George C. Bowen* Director, Chief Financial
- ------------------------------------- and Accounting
George C. Bowen Officer and Treasurer October 23, 1998
/s/ Bridget A. Macaskill* President
- ------------------------------------- and Director October 23, 1998
Bridget A. Macaskill
/s/ Robert G. Avis* Director October 23, 1998
- -------------------------------------
Robert G. Avis
/s/ William A. Baker* Director October 23, 1998
- -------------------------------------
William A. Baker
/s/ Charles Conrad, Jr.* Director October 23, 1998
- -------------------------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Director October 23, 1998
- -------------------------------------
Jon S. Fossel
/s/ Sam Freedman* Director October 23, 1998
- -------------------------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Director October 23, 1998
- -------------------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director October 23, 1998
- -------------------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director October 23, 1998
- -------------------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Director October 23, 1998
- -------------------------------------
Ned M. Steel
*By:
/s/ Robert G. Zack
- ---------------------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
<PAGE>
OPPENHEIMER MAIN STREET FUNDS, INC.
EXHIBIT INDEX
Exhibit No. Description
- -- Power of Attorney for George C. Bowen
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Andrew J. Donohue or Robert G. Zack, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his capacity as Director and/or as Treasurer
(Principal Financial and Accounting Officer) of OPPENHEIMER MAIN STREET FUNDS,
INC. a Maryland corporation (the "Corporation"), to sign on his behalf any and
all Registration Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, the Investment
Company Act of 1940 and any amendments and supplements thereto, and other
documents in connection thereunder, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, may
lawfully do or cause to be done by virtue hereof.
Dated this 16th day of December, 1997.
/s/ George C. Bowen
- ------------------------------
George C. Bowen
