<PAGE>
Oppenheimer
Global Emerging Growth Fund
(formerly "Oppenheimer Global Bio-Tech Fund")
Prospectus dated September 19, 1994
Oppenheimer Global Emerging Growth Fund (the "Fund") is a mutual fund that
aggressively seeks capital appreciation as its investment objective.
Current income is not an objective of the Fund. The Fund emphasizes
investments in emerging growth companies worldwide that offer the
potential for accelerated growth of earnings or revenue. In an uncertain
investment environment, defensive investment methods may be stressed. The
Fund is designed for investors who are willing to accept greater risks of
loss in the hopes of greater gains, and is not intended for those who
desire assured income and conservation of capital.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the September 19, 1994, Statement of Additional Information. For
a free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Because of the Fund's investment policies and practices, the Fund's shares
may be considered to be speculative. Shares of the Fund are not deposits
or obligations of any bank, are not guaranteed by any bank, are not
insured by the F.D.I.C. or any other agency, and involve investment risks,
including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
2 Expenses
4 Financial Highlights
6 Investment Objective and Policies
10 How the Fund is Managed
11 Performance of the Fund
A B O U T Y O U R A C C O U N T
13 How to Buy Shares
16 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
17 How to Sell Shares
By Mail
By Telephone
18 How to Exchange Shares
19 Shareholder Account Rules and Policies
20 Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are reflected in the Fund's net asset value per share. As a
shareholder, you pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you might expect
to bear indirectly. The calculations are based on the Fund's expenses
during its fiscal year ended September 30, 1993.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages 13 through 19 for an
explanation of how and when these charges apply.
Maximum Sales Charge 5.75%
on Purchases (as a %
of offering price)
- -----------------------------------------------------
Sales Charge on None
Reinvested Dividends
- -----------------------------------------------------
Deferred Sales Charge None(1)
(as a % of the lower of
the original purchase
price or redemption
proceeds)
- -----------------------------------------------------
Exchange Fee $5.00(2)
- -----------------------------------------------------
(1) If you invest more than $1 million in shares of the Fund, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares," below.
(2) Fee is waived for automated exchanges on PhoneLink, described in "How
to Buy Shares."
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager"), and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of the Fund's
shares for that year. The "12b-1 Distribution Plan Fees" are the Service
Plan Fees (which are a maximum of 0.25% of average annual net assets).
Management Fees 0.81%
- -----------------------------------------------------
12b-1 Distribution Plan Fees 0.24%
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Other Expenses 0.53%
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Total Fund Operating Expenses 1.58%
- -----------------------------------------------------
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in shares of the Fund, and
that the Fund's annual return is 5%, and that its operating expenses are
the ones shown in the chart above. If you were to redeem your shares at
the end of each period shown below, your investment would incur the
following expenses by the end of each period shown:
1 year 3 years 5 years 10 years
- --------------------------------------------------------------
$73 $105 $139 $236
- --------------------------------------------------------------
If you did not redeem your investment, it would incur the following
expenses:
$73 $105 $139 $236
- ---------------------------------------------------------------
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about the
Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. The information for the fiscal year ended
September 30, 1993 has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors, whose report on the Fund's financial statements for
the fiscal year ended September 30, 1993, is included in the Statement of
Additional Information. The semi-annual information on page 5 for the six
months ended March 31, 1994 is unaudited.
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991+ 1990 1989 1988++
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 20.25 $ 26.90 $ 11.81 $ 12.09 $ 10.63 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (.10) (.17) (.03) (.02) (.10) .14
Net realized and unrealized gain (loss)
on investments, options written
and translation of assets and
liabilities in foreign currencies 1.69 (6.47) 15.12 (.26) 1.69 .49
Total income (loss) from
investment operations 1.59 (6.64) 15.09 (.28) 1.59 .63
Dividends and distributions to shareholders:
Dividends from net investment income -- (.01) -- -- (.10) --
Distributions from net realized
gain on investments (.20) -- -- -- (.03) --
Total dividends and
distributions to shareholders (.20) (.01) -- -- (.13) --
Net asset value, end of period $ 21.64 $ 20.25 $ 26.90 $ 11.81 $ 12.09 $ 10.63
Total Return,
at Net Asset Value** 7.79% (24.70)% 127.78% (2.32)% 15.21% 6.30%
Ratios/Supplemental Data:
Net assets, end of
period (in thousands) $199,697 $129,634 $103,352 $16,217 $3,872 $1,921
Average net assets
(in thousands) $194,184 $166,144 $ 50,989 $ 8,716 $2,343 $1,394
Number of shares outstanding
at end of period (in thousands) 9,226 6,400 3,841 1,373 320 181
Ratios to average net assets:
Net investment income (loss) (.80)% (.71)% (.18)% (.37)% (.70)% 1.41%*
Expenses 1.59% 1.39% 1.50% 1.78% 2.40% 2.06%*
Portfolio turnover rate*** 41.0% 2.6% 11.2% 16.6% 17.1% 1.7%
</TABLE>
* Annualized.
** Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
*** The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended September 30, 1993 were
$119,628,848 and $70,050,079, respectively.
+ Per share amounts calculated based on the weighted average number of
shares outstanding during the period.
++ For the period from December 30, 1987 (commencement of operations) to
September 30, 1988. Per share amounts calculated based on the weighted
average number of shares outstanding during the period.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1994
----------------
(Unaudited)
----------------
<S> <C>
- ------------
Per Share Operating Data
Net asset value, beginning
of period $21.64
- ------------
Income (loss) from
investment operations:
Net investment loss (.16)
Net realized and unrealized gain
(loss) on investments,
options written and foreign
currency transactions (.40)
---------
Total income (loss) from
investment operations (.56)
- ------------
Dividends and distributions
to shareholders:
Dividends from net
investment income --
Distributions from net realized
gain on investments,
options written and foreign
currency transactions (.17)
---------
Total dividends and
distributions to shareholders (.17)
- ------------
Net asset value, end of period $20.91
---------
---------
- ------------
Total Return, at Net Asset Value** (2.65)%
- ------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $187,262
- ------------
Average net assets
(in thousands) $212,204
- ------------
Number of shares outstanding
at end of period (in thousands) 8,956
- ------------
Ratios to average net assets:
Net investment loss (1.28)%+
Expenses 1.73%++
- ------------
Portfolio turnover rate(4) 30.2%
<FN>
*Per share amounts calculated based on the weighted average number of
shares outstanding during the period.
**Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
+Annualized.
++The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended March 31, 1994 were
$59,163,268 and $67,607,516, respectively.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund invests its assets to aggressively seek capital
appreciation for shareholders. The Fund does not invest to seek current
income to pay to shareholders.
Investment Policies and Strategies. The Fund seeks its investment
objective by emphasizing investment in common stocks or other equity
securities, including convertible securities, and may hold warrants and
rights. These may include securities of U.S. companies or foreign
companies, as discussed below.
As a non-fundamental policy, the Fund, under normal market
conditions, invests at least 65% of its total assets in securities of
emerging growth companies located in the United States and at least three
foreign countries. As a global emerging growth fund, the Fund looks for
the most promising areas, both in the U.S. and abroad, for accelerated
growth of earnings or revenues.
The Fund may also seek to take advantage of changes in the business
cycle by investing in companies that are sensitive to those changes, if
the Manager believes they present opportunities for accelerated growth.
For example, when the economy is expanding, companies in the financial
services and consumer products industries may be in a position to benefit
from changes in the business cycle and may present long-term growth
opportunities.
When investing the Fund's assets, the Manager considers many factors,
including general economic conditions abroad relative to the U.S. and the
trends in foreign and domestic stock markets. The Fund may try to hedge
against losses in the value of its portfolio of securities by using
hedging strategies described below. When market conditions are unstable,
the Fund may invest substantial amounts of its assets in debt securities,
such as money market instruments or government securities, as described
below. The Fund's portfolio manager may employ special investment
techniques in selecting securities for the Fund. These are also described
below. Additional information may be found about them under the same
headings in the Statement of Additional Information.
The Fund previously emphasized investments in biotechnology
companies, and was named "Oppenheimer Global Bio-Tech Fund". At a meeting
held September 19, 1994, the Fund's shareholders approved a proposal to
expand the Fund's investment policies to emphasize investments in emerging
growth companies worldwide, and to eliminate the policy that the Fund
would generally invest at least 65% of its total assets in biotechnology
companies. The Fund's fundamental investment objective of capital
appreciation remained unchanged. The Fund's Board of Trustees
simultaneously changed the Fund's name to "Oppenheimer Global Emerging
Growth Fund" to reflect its revised investment policies.
The Fund reserves the freedom to concentrate its investments (that
is, invest 25% or more of its total assets) in securities of biotechnology
companies for an interim transition period to permit an ordinary reduction
in its bio-tech position. However, unanticipated market conditions
affecting the Fund's current portfolio holdings or unanticipated
redemptions of Fund shares might make it impracticable for the Fund to
quickly reduce its bio-tech position in an orderly manner to less than 25%
of its total assets until circumstances permit. The Fund defines
biotechnology companies as those with a significant business or investment
in biotechnology. For purposes of its interim biotechnology concentration
policy, the Fund's biotechnology classifications include agricultural
biotechnology, pharmaceuticals, genetic engineering and human health care.
Otherwise, the Fund does not intend to concentrate its investments in any
industry.
The Fund has entered into an agreement with Oppenheimer Global
Environment Fund ("Global Environment Fund") to acquire substantially all
of the assets of Global Environment Fund, subject to approval by
shareholders of Global Environment Fund. The Fund anticipates that it
would maintain, for at least an interim period, a substantial portion of
the assets of Global Environment Fund that are invested in environmental
securities, most of which will qualify as emerging growth companies.
-- What Are "Emerging Growth" Companies? The Manager will emphasize
investments in aggressive growth opportunities that offer the potential
for accelerated earnings or revenues growth. Emerging growth companies
tend to be smaller companies that are developing new products or services
or are expanding into new markets for their products. Emerging growth
companies can be any size and can be in any industry. While they may have
what the Manager believes to be favorable prospects for the long-term,
they normally retain a large part of their earnings for research,
development and investment in capital assets. Therefore, they tend not to
emphasize the payment of dividends. The Manager intends to use a global
"theme oriented approach" in managing the Fund, thereby seeking to
capitalize on important global trends. Examples of current themes
include special telecommunications, infrastructure spending,
efficiency enhancing technology, energy logistics, emerging consumer
markets, healthcare/biotechnology and the environment.
-- Investment Risks. Expanding the Fund's investment policies to
emphasize investments in emerging growth companies worldwide serves to
diversify the Fund's investments across a number of sectors, in addition
to the biotechnology sector. Diversification reduces some of the risk to
a shareholder's principal, while providing greater growth potential.
Nevertheless, because of the types of companies the Fund invests in and
the investment techniques the Fund uses, some of which may be speculative,
it is designed for those who are investing for the long-term and who are
willing to accept greater risks of loss of their capital in the hope of
achieving capital appreciation. Investing for capital appreciation entails
the risk of loss of all or part of your principal. There is no assurance
that the Fund will achieve its objective, and when you redeem your shares,
they may be worth more or less than what you paid for them.
-- Special Risks - Borrowing for Leverage. The Fund may borrow up to
10% of the value of its assets from banks on an unsecured basis to buy
securities. This is a speculative investment method known as "leverage."
Leveraging may subject an investment in the Fund to greater risks and
costs than funds that do not borrow. These risks may include the possible
reduction of income and increased fluctuation in the Fund's net asset
value per share, since the Fund pays interest on borrowings. Borrowing is
subject to regulatory limits, described in more detail in the Statement
of Additional Information.
-- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund may engage frequently in short-
term trading to try to achieve its objective. As a result, the Fund's
portfolio turnover may be higher than other mutual funds. The "Financial
Highlights," above, show the Fund's portfolio turnover rate during past
fiscal years. High turnover and short-term trading may cause the Fund to
have relatively larger commission expenses and transaction costs than
funds that do not engage in short-term trading. Additionally, high
portfolio turnover may affect the ability of the Fund to qualify for tax
deductions for payments made to shareholders as a "regulated investment
company" under the Internal Revenue Code. The Fund qualified in its last
fiscal year and intends to do so in the coming year, although it reserves
the right not to qualify.
-- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's
investment objective is a fundamental policy. The Fund's Board of Trustees
may change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
-- Foreign Securities. The Fund may purchase equity (and debt)
securities issued or guaranteed by foreign companies or foreign
governments or their agencies. The Fund may buy securities of companies
in any country, developed or underdeveloped. There is no limit on the
amount of the Fund's assets that may be invested in foreign securities.
Foreign currency will be held by the Fund only in connection with the
purchase or sale of foreign securities. If the Fund's securities are held
abroad, the countries in which they are held and the sub-custodians
holding them must be approved by the Fund's Board of Trustees.
Foreign securities have special risks. For example, foreign issuers
are not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The value of foreign investments may be
affected by changes in foreign currency rates, exchange control
regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors. More information about the risks and
potential rewards of investing in foreign securities is contained in the
Statement of Additional Information.
-- Warrants and Rights. The Fund may invest up to 5% of its total
assets in warrants or rights (other than those that have been acquired in
units or attached to other securities). No more than 2% of the Fund's
assets may be invested in warrants that are not listed on the New York or
American Stock Exchanges.
-- 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, even after including the
operations of any predecessors. Securities of these companies may have
limited liquidity and may be subject to volatility in their prices. The
Fund currently intends to invest no more than 10% of its total assets in
securities of small, unseasoned issuers while reserving the right to
invest up to 25% of its total assets in such issuers.
-- Writing Covered Calls. The Fund may write (that is, sell) covered
call options (calls) to raise cash for liquidity purposes (for example,
to meet redemption requirements) or for defensive reasons. The Fund may
write calls only if certain conditions are met: (1) after writing any
call, not more than 25% of the Fund's total assets may be subject to
calls; (2) the calls are listed on a domestic securities exchange, quoted
on the Automated Quotation System of the National Association of
Securities Dealers, Inc.; ("NASDAQ") or traded in the over-the-counter
market; and (3) each call must be "covered" while it is outstanding; that
is, the Fund must own the securities on which the call is written or it
must own other securities that are acceptable for the escrow arrangements
required for calls. If a covered call written by the Fund is exercised
on a security that has increased in value, the Fund will be required to
sell the security at the call price and will not be able to realize any
profit on the security above the call price.
-- Hedging With Options and Futures Contracts. The Fund may buy and
sell options and futures contracts to try to manage its exposure to
declining prices on its portfolio securities or to establish a position
in the equity securities market as a temporary substitute for purchasing
individual securities. Some of these strategies, such as selling futures,
buying puts and writing covered calls, hedge the Fund's portfolio against
price fluctuations. Other hedging strategies, such as buying futures and
buying call options, tend to increase the Fund's exposure to the market.
The Fund may purchase certain kinds of put and call options, Stock
Index Futures (described below), financial futures and options on Stock
Index Futures and on broadly-based stock indices. These are all referred
to as "hedging instruments." The Fund does not use hedging instruments
for speculative purposes. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may purchase put options ("puts") which relate to (1)
securities or Stock Index Futures, whether or not the Fund owns the
particular security or Stock Index Future in its portfolio, or (2)
broadly-based stock indices. The Fund may write puts on securities,
broadly-based stock indices or Stock Index Futures in an amount up to 50%
of its total assets only if such puts are covered by segregated liquid
assets. In writing puts, there is a risk that the Fund may be required
to buy the underlying security at a disadvantageous price. The Fund may
purchase calls only on securities, broadly-based stock indices or Stock
Index Futures, or to terminate its obligation on a call the Fund
previously wrote. The Fund may also purchase "relative performance call
options." These are call options that have a cash settlement based on the
difference between the returns on two market indices. These options are
subject to the risk that the value of the option may decline because of
adverse movements in the market indices. A call or put may not be
purchased if the value of all of the Fund's put and call options would
exceed 5% of the Fund's total assets. The Fund may buy and sell futures
contracts only if they relate to broadly-based stock indices (these are
referred to as "Stock Index Futures"), as described in the Statement of
Additional Information.
Hedging instruments can be volatile investments and may involve
special risks. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
-- Illiquid and Restricted Securities. Under the policies established
by the Fund's Board of Trustees, the Manager determines the liquidity of
the Fund's investments. Investments may be illiquid because of the absence
of an active trading market, making it difficult to value them or dispose
of them promptly at an acceptable price. A restricted security is one that
has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund
will not invest more than 10% of its net assets in illiquid or restricted
securities (that limit may increase to 15% if certain state laws are
changed or the Fund's shares are no longer sold in those states). Certain
restricted securities, eligible for resale to qualified institutional
purchasers, are not subject to that limit.
-- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Trustees. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. There are some risks in connection
with securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to engage in loans
of securities that will exceed 5% of the value of the Fund's total assets
in the coming year.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor of the
securities under a repurchase agreement fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.
The Fund will not enter into a repurchase agreement which causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days.
-- Short Sales "Against-the-Box". The Fund may not sell securities
short except in collateralized transactions referred to as short sales
"against-the-box." No more than 15% of the Fund's net assets will be held
as collateral for such short sales at any one time.
-- Temporary Defensive Investments. When stock market prices are
falling or in other unusual economic or business circumstances, the Fund
may invest all or a portion of its assets in defensive securities.
Securities selected for defensive purposes may include debt securities,
such as rated or unrated bonds and debentures, and preferred stocks, cash
or cash equivalents, such as U.S. Treasury Bills and other short-term
obligations of the U.S. Government, its agencies or instrumentalities, or
commercial paper rated "A-1" or better by Standard & Poor's Corporation
or "P-1" or better by Moody's Investors Service, Inc.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the
Fund cannot do any of the following: (1) invest in securities of any one
issuer (other than the U.S. Government or any of its agencies or
instrumentalities) if immediately thereafter more than 5% of the Fund's
assets would be invested in securities of that issuer; (2) with respect
to 75% of its assets, invest in securities of any one issuer (other than
the U.S. Government or any of its agencies or instrumentalities) if the
Fund would then own more than 10% of the voting securities or 10% of any
class of securities of that issuer (all debt and all preferred stock of
an issuer are respectively considered single classes for this purpose);
(3) borrow money in excess of 10% of the value of its net assets; (4)
invest in other open-end investment companies, except in a merger,
consolidation, reorganization or acquisition of assets, or invest more
than 10% of its assets through open-market purchases in closed-end
investment companies, including small business investment companies, nor
make any such investments at commission rates in excess of normal
brokerage commissions; or (5) deviate from the percentage restrictions
listed under "Borrowing," "Warrants and Rights," "Loans of Portfolio
Securities" and "Short Sales Against-the-Box" or from the restrictions
under "Foreign Securities" as to what foreign securities may be purchased.
All of the percentage restrictions described above and elsewhere in
this Prospectus (other than the percentage limits that apply to borrowing,
described in the Statement of Additional Information) apply only at the
time the Fund purchases a security, and the Fund need not dispose of a
security merely because the Fund's assets have changed or the security has
increased in value relative to the size of the Fund. There are other
fundamental policies discussed in the Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1987 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
Presently, shares of the Fund are of one class and are freely
transferrable. However, the Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or
more classes which may have separate assets and liabilities which would
represent identical interests in the same portfolio of investments but
have different expenses.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of June 30, 1994, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
-- Portfolio Manager. The Portfolio Manager of the Fund is James
Ayer. He has been the person principally responsible for the day-to-day
management of the Fund's portfolio since August, 1994. During the past
five years, Mr. Ayer has also served as Assistant Vice President of the
Manager, primarily researching small capitalization companies, and as Vice
President and portfolio manager of Oppenheimer Gold & Special Minerals
Fund, prior to which he was an International Equities Investment Officer
with Brown Brothers Harriman & Company.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 1.0% of the first $50 million of
average annual net assets; 0.75% of the next $150 million; 0.72% of the
next $200 million; 0.69% of the next $200 million; 0.66% of the next $200
million; and 0.60% of net assets in excess of $800 million. That fee rate
is higher than that paid by most other investment companies. The Fund's
management fee for its last fiscal year ended September 30, 1993 was 0.81%
of average annual net assets.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
-- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "average annual total
return." This performance information may be useful to help you see how
well your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary, depending on
market conditions, the composition of the portfolio, and expenses that the
Fund incurs.
-- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted, they reflect the payment of the
maximum initial sales charge. Total returns may also be quoted "at net
asset value," without considering the effect of the sales charge, and
those returns would be reduced if sales charges were deducted. They may
also be shown based on the change in net asset value, without considering
the effect of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1993,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
-- Management's Discussion of Performance. During the Fund's fiscal
year ended September 30, 1993, the Manager sought to maintain a balance
between established and emerging bio-tech companies, focusing on
diversification and stock selection. With interest rates abroad
declining, the Fund expanded its European holdings. The Fund also added
five equity private placements and two convertible issues to its
portfolio, which the Manager believes tend to resist sharp declines during
market retreats while offering possible strong returns in rising markets.
-- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in shares of
the Fund held until September 30, 1993 from the inception of the Fund
(December 30, 1987), with all dividends and capital gains distributions
reinvested in additional shares. The graph reflects the deduction of the
5.75% maximum initial sales charge on the Fund's shares.
The Fund's performance is compared to the performance of the S&P 500
Index, a broad-based index of equity securities widely regarded as a
general measurement of the performance of the U.S. equity securities
market. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none
of the data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the S&P 500 index, which tend to be securities of
larger, well-capitalized companies, as contrasted to the smaller growth-
type companies in which the Fund principally invests. Moreover, the index
data does not reflect any assessment of the risk of the investments
included in the index.
Comparison of Change
in Value of $10,000 (graph)
Hypothetical Investment in
Oppenheimer Global
Emerging Growth Fund1
and S&P 500 Index
Average Annual Total Return of the Fund at 9/30/93
- --------------------------------------------------
1-Year 5-Year Life2
- --------------------------------------------------
1.59% 14.42% 13.63%
- --------------------------------------------------
Past performance is not predictive of future performance.
1. Formerly named Oppenheimer Global Bio-Tech Fund
2. The Fund began operations on 12/30/87.
A B O U T Y O U R A C C O U N T
How to Buy Shares
When you buy shares of the Fund, you pay an initial sales charge (on
investments up to $1 million). If you purchase shares as part of an
investment of at least $1 million in shares of one or more
OppenheimerFunds, and you sell any of those shares within 18 months after
the end of the calendar month of your purchase, you will pay a contingent
deferred sales charge, which will vary depending on the amount you
invested.
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, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds 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.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (all references to time in
this Prospectus mean "New York time"). The net asset value is determined
as of that time on each day The New York Stock Exchange is open (which is
a "regular business day"). If you buy shares through a dealer, the dealer
must receive your order by 4:00 P.M., on a regular business day and
transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Shares are sold at their offering price, which is normally net asset
value plus an initial sales charge. However, in some cases, described
below, where purchases are not subject to an initial sales charge, the
offering price may be net asset value. In some cases, reduced sales
charges may be available, as described below. Out of the amount you
invest, the Fund receives the net asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
- -------------------------------------------------------------------------
$25,000 or more 5.50% 5.82% 4.75%
but less than
$50,000
- -------------------------------------------------------------------------
$50,000 or more 4.75% 4.99% 4.00%
but less than
$100,000
- -------------------------------------------------------------------------
$100,000 or more 3.75% 3.90% 3.00%
but less than
$250,000
- -------------------------------------------------------------------------
$250,000 or more 2.50% 2.56% 2.00%
but less than
$500,000
- -------------------------------------------------------------------------
$500,000 or more 2.00% 2.04% 1.60%
but less than
$1 million
- -------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on such purchases in an amount equal to the sum of 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
of share purchases over $5 million. However, that commission will be paid
only on the amount of those purchases in excess of $1 million that were
not previously subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will be equal
to 1.0% of the aggregate net asset value of either (1) the redeemed shares
(not including shares purchased by reinvestment of dividends or capital
gain distributions) or (2) the original cost of the shares, whichever is
less. However, the contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the contingent
deferred sales charge. In determining whether a contingent deferred sales
charge is payable, the Fund will first redeem shares that are not subject
to the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in the
order that you purchased them. The contingent deferred sales charge is
waived in certain cases described in "Waivers of Sales Charges" below.
No contingent deferred sales charge is charged on exchanges of shares
under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 months of the end of
the calendar month of the purchase of the exchanged shares, the sales
charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Share Purchases. You may be eligible to buy
shares at reduced sales charge rates in one or more of the following ways:
-- Right of Accumulation. You and your spouse can accumulate shares
you purchase for your own accounts, or jointly, or on behalf of your
children who are minors, under trust or custodial accounts. A fiduciary
can cumulate shares purchased for a trust, estate or other fiduciary
account (including one or more employee benefit plans of the same
employer) that has multiple accounts.
Additionally, you can cumulate current purchases of shares of the
Fund and Class A shares of other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, you may purchase
shares of the Fund and Class A shares of other OppenheimerFunds during a
13-month period at the reduced sales charge rate that applies to the
aggregate amount of the intended purchases, including purchases made up
to 90 days before the date of the Letter. More information is contained
in the Application and in "Reduced Sales Charges" in the Statement of
Additional Information.
-- Waivers of Sales Charges. No sales charge is imposed on sales of
shares to the following investors: (1) the Manager or its affiliates; (2)
present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
(3) registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose; (4) 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; (5) employees and
registered representatives (and their spouses) of dealers or brokers
described above or financial institutions that have entered into sales
arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); or (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves
Funds) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor. There is a further discussion of this
policy in "Reduced Sales Charges" in the Statement of Additional
Information.
The contingent deferred sales charge is also waived if shares are
redeemed in the following cases: (1) retirement distributions or loans to
participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Declaration of Trust or adopted by the Board of Trustees.
-- Service Plan. The Fund has adopted a Service Plan for shares of
the Fund to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of shareholder
accounts. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers, banks
and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures
under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of shares held in accounts
of the dealer or its customers. The payments under the Plan increase the
annual expenses of shares. For more details, please refer to "Service
Plan" in the Statement of Additional Information.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on 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.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
-- 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.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in shares of the Fund or Class A shares of other OppenheimerFunds without
paying sales charge. This privilege applies to shares of the Fund that
you sell. You must be sure to ask the Distributor for this privilege when
you send your payment. Please consult the Statement of Additional
Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
-- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
-- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
-- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment
-- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular business
day by selling (redeeming) some or all of your shares. Your shares will
be sold at the next net asset value calculated after your order is
received and accepted by the Transfer Agent. The Fund offers you a number
of ways to sell your shares: in writing or by telephone. You can also set
up Automatic Withdrawal Plans to redeem shares on a regular basis, as
described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due
to the death of the owner, or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The check is not payable to all shareholders listed on the account
statement
-- The check is not sent to the address of record on your statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- 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 as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan 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, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 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. This service is not available within 30 days of changing the
address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire 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 wired.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges between already established
accounts on PhoneLink described below. 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 may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
shares of this Fund only for Class A shares of another fund. At present,
not all of the OppenheimerFunds offer the same classes of shares. If a
fund has only one class of shares that does not have a class designation,
they are "Class A" shares for exchange purposes. In some cases, sales
charges may be imposed on exchange transactions. Certain OppenheimerFunds
offer Class A shares and either Class B or Class C shares, and a list can
be obtained by calling the Distributor at 1-800-525-7048. Please refer
to "How to Exchange Shares" in the Statement of Additional Information for
more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- 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 OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling the
Transfer Agent at 1-800-525-7048. Exchanges of shares involve a redemption
of the shares of the fund you own and a purchase of shares of the other
fund.
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 by 4:00 P.M. that
is in proper form, but either fund may delay the purchase of shares of the
fund you are exchanging into if it determines it would be disadvantaged
by a same-day transfer of the proceeds to buy shares. For example, the
receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- 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
- -- Net Asset Value Per Share is determined as of 4:00 P.M. each day The
New York Stock Exchange is open by dividing the value of the Fund's net
assets by the number of shares that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates. Therefore,
the redemption value of your shares may be more or less than their
original cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. 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 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
-- Under unusual circumstances, shares of the Fund may be redeemed
"in kind", which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
shares.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname and address on
the Fund's records. However, each shareholder may call the Transfer Agent
at 1-800-525-7048 to ask that copies of those materials be sent personally
to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends from net investment income on an
annual basis and normally pays those dividends to shareholders in
December, but the Board of Trustees can change that date. Because the
Fund does not have an objective of seeking current income, the amounts of
dividends it pays, if any, will likely be small.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains. 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 dividends for tax purposes. There can be no assurances that the Fund
will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
-- 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.
-- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
-- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
-- "Buying a Dividend": When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
-- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. 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.
-- 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. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER GLOBAL EMERGING GROWTH FUND
(formerly "Oppenheimer Global Bio-Tech Fund")
Graphic material included in Prospectus of Oppenheimer Global
Emerging Growth Fund: "Comparison of Total Return of Oppenheimer Global
Emerging Growth Fund with the S&P 500 Index - Change in Value of a $10,000
Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Global Emerging Growth Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund. That graph will cover the period from 12/30/87 (inception
of the Fund) through 9/30/93. The graph will compare such values with
hypothetical $10,000 investments over the same time periods in the S&P 500
Index. Set forth below are the relevant data points that will appear on
the linear graph. Additional information with respect to the foregoing,
including a description of the S&P 500 Index, is set forth in the
Prospectus under "Performance of the Fund - Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Oppenheimer
Fiscal Year Global Emerging S&P $10,000
(Period Ended) Growth Fund 500 Index Investment
<S> <C> <C> <C>
12/30/87 $ 9,425 $10,000
9/30/88 $10,019 13.08% $11,308
9/30/89 $11,542 32.95% $15,034
9/30/90 $11,275 -9.24% $13,645
9/30/91 $25,681 31.09% $17,887
9/30/92 $19,339 11.04% $19,862
9/30/93 $20,846 12.97% $22,438
</TABLE>
<PAGE>
Oppenheimer Global Emerging Growth Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent O P P E N H E I M E R
Oppenheimer Shareholder Services Global
P.O. Box 5270 Emerging
Denver, Colorado 80217 Growth
1-800-525-7048 Fund
Formerly Oppenheimer
Custodian of Portfolio Securities Global Bio-Tech Fund
The Bank of New York
One Wall Street Prospectus
New York, New York 10015 Effective September 19, 1994
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Additional Statement and, if given or
made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
OppenheimerFunds
PR751.0994.N
<PAGE>
Oppenheimer Global Emerging Growth Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent O P P E N H E I M E R
Oppenheimer Shareholder Services Global
P.O. Box 5270 Emerging
Denver, Colorado 80217 Growth
1-800-525-7048 Fund
Formerly Oppenheimer
Custodian of Portfolio Securities Global Bio-Tech Fund
The Bank of New York
One Wall Street Prospectus and
New York, New York 10015 New Account Application
Effective September 19, 1994
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Additional Statement and, if given or
made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
OppenheimerFunds
PR750.0994.N
<PAGE>
Oppenheimer Global Emerging Growth Fund
(formerly "Oppenheimer Global Bio-Tech Fund")
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated September 19, 1994
This Statement of Additional Information of Oppenheimer Global Emerging
Growth Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated September 19, 1994. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 3
Other Investment Restrictions 13
How the Fund is Managed 14
Organization and History 14
Trustees and Officers of the Fund 15
The Manager and Its Affiliates 18
Brokerage Policies of the Fund 20
Performance of the Fund 21
Service Plan 23
About Your AccountHow To Buy Shares 24
How To Sell Shares 29
How To Exchange Shares 33
Dividends, Capital Gains and Taxes 34
Additional Information About the Fund 35
Financial Information About the Fund
Independent Auditors' Report 36
Financial Statements 37
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment advisor, Oppenheimer Management Corporation (the "Manager"),
evaluates the merits of securities primarily through the exercise of its
own investment analysis. This may include, among other things, evaluation
of the history of the issuer's operations, prospects for the industry of
which the issuer is part, the issuer's financial condition, the issuer's
pending product developments and developments by competitors, the effect
of general market and economic conditions on the issuer's business, and
legislative proposals or new laws that might affect the issuer. Current
income is not a consideration in the selection of portfolio securities for
the Fund, whether for appreciation, defensive or liquidity purposes. The
fact that a security has a low yield or does not pay current income will
not be an adverse factor in selecting securities to try to achieve the
Fund's investment objective of capital appreciation unless the Manager
believes that the lack of yield might adversely affect appreciation
possibilities.
The portion of the Fund's assets allocated to securities and methods
selected for capital appreciation will depend upon the judgment of the
Fund's Manager as to the future movement of the equity securities markets.
If the Manager believes that economic conditions favor a rising market,
the Fund will emphasize securities and investment methods selected for
high capital growth. If the Manager believes that a market decline is
likely, defensive securities and investment methods will be emphasized
(See "Temporary Defensive Investments," below).
-- Emerging Growth Companies. The Manager uses a global "theme
oriented approach" in managing the Fund. This "theme oriented approach"
seeks to capitalize on important global trends that the Manager believes
offers the most promising areas for long-term growth. Examples currently
include, among others, telecommunications, developing capital markets,
emerging consumer markets, the environment and biotechnology. These
sectors may change from time to time as the Manager reviews important
global trends. The Manager also considers performance and growth rates
of foreign companies relative to domestic companies in selecting
investments for the Fund's portfolio.
-- Warrants and Rights. Warrants basically are options to purchase
equity securities at set prices valid for a specified period of time. The
prices of warrants do not necessarily move in a manner parallel to the
prices of the underlying securities. The price the Fund pays for a
warrant will be lost unless the warrant is exercised prior to its
expiration. 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.
Other Investment Techniques and Strategies
-- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable securities, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice as to
a Future put the Fund in a short futures position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
-- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Stock
Index Futures, (ii) buy puts, or (iii) write covered calls on securities
held by it or on Stock Index Futures (as described in the Prospectus).
When hedging to establish a position in the equity securities markets as
a temporary substitute for the purchase of individual equity securities
the Fund may: (i) buy Stock Index Futures, or (ii) buy calls on Stock
Index Futures or securities. Normally, the Fund would then purchase the
equity securities and terminate the hedging portion.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's investment activities in the underlying
cash market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
-- Stock Index Futures. As described in the Prospectus, the Fund may
invest in Stock Index Futures only if they relate to broadly-based stock
indices. A stock index is considered to be broadly-based if it includes
stocks that are not limited to issuers in any particular industry or group
of industries.
Stock index futures obligate the seller to deliver, and the purchaser
to take, cash to settle the futures transaction or to enter into an
offsetting contract. No physical delivery of the securities underlying the
index is made on settling the futures obligation. No monetary amount is
paid or received by the Fund on the purchase or sale of a Stock Index
Future. Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment, in cash or U.S. Treasury
bills, with the futures commission merchant (the "futures broker").
Initial margin payments will be deposited with the Fund's Custodian in an
account registered in the futures broker's name; however, the futures
broker can gain access to that account only under certain specified
conditions. As the Future is marked to market (that is, its value on the
Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the Future for tax purposes. Although Stock Index
Futures by their terms call for settlement by the delivery of cash, in
most cases the settlement obligation is fulfilled without such delivery
by entering into an offsetting transaction. All futures transactions are
effected through a clearing house associated with the exchange on which
the contracts are traded.
-- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium less transaction costs. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs
incurred.
When writing put options on securities or on foreign currencies, to
secure its obligation to pay for the underlying security, the Fund will
deposit in escrow liquid assets with a value equal to or greater than the
exercise price of the underlying securities. The Fund therefore foregoes
the opportunity of investing the segregated assets or writing calls
against those assets. As long as the obligation of the Fund as the put
writer continues, it may be assigned an exercise notice by the exchange
or broker-dealer through whom such option was sold, requiring the Fund to
exchange currency at the specified rate of exchange or to take delivery
of the underlying security against payment of the exercise price. The
Fund may have no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any
time prior to the termination of its obligation as the writer of the put.
This obligation terminates upon expiration of the put, or such earlier
time at which the Fund effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once the
Fund has been assigned an exercise notice, it is thereafter not allowed
to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term capital gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
-- Purchasing Puts and Calls. The Fund may purchase calls to protect
against the possibility that the Fund's portfolio will not participate in
an anticipated rise in the securities market. When the Fund purchases a
call (other than in a closing purchase transaction), it pays a premium
and, except as to calls on stock indices, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the call price, transaction costs, and the
premium paid, and the call is exercised. If the call is not exercised or
sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment. When the Fund purchases a call on
a stock index, it pays a premium, but settlement is in cash rather than
by delivery of the underlying investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to
puts on stock indices, has the right to sell the underlying investment to
a seller of a corresponding put on the same investment during the put
period at a fixed exercise price. Buying a put on an investment the Fund
owns (a "protective put") enables the Fund to attempt to protect itself
during the put period against a decline in the value of the underlying
investment below the exercise price by selling the underlying investment
at the exercise price to a seller of a corresponding put. If the market
price of the underlying investment is equal to or above the exercise price
and as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
Puts and calls on broadly-based stock indices or Stock Index Futures
are similar to puts and calls on securities or futures contracts except
that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the stock market
generally) rather than on price movements of individual securities or
futures contracts. When the Fund buys a call on a stock index or Stock
Index Future, it pays a premium. If the Fund exercises the call during
the call period, a seller of a corresponding call on the same investment
will pay the Fund an amount of cash to settle the call if the closing
level of the stock index or Future upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price
of the call times a specified multiple (the "multiplier") which determines
the total dollar value for each point of difference. When the Fund buys
a put on a stock index or Stock Index Future, it pays a premium and has
the right during the put period to require a seller of a corresponding
put, upon the Fund's exercise of its put, to deliver cash to the Fund to
settle the put if the closing level of the stock index or Stock Index
Future upon which the put is based is less than the exercise price of the
put. That cash payment is determined by the multiplier, in the same
manner as described above as to calls.
When the Fund purchases a put on a stock index, or on a security or
Stock Index Future not owned by it, the Fund is permitted to either resell
the put, or if applicable, to buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely
with the price of the underlying investment. If the market price of the
underlying investment is above the exercise price, and as a result the put
is not exercised, the put will become worthless on the expiration date.
In the event of a decline in price of the underlying investment, the Fund
could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value
of the underlying investments and, consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
-- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency. There is a risk that use of Forward
Contracts may reduce the gain that would otherwise result from a change
in the relationship between the U.S. dollar and a foreign currency.
Forward contracts include standardized foreign currency futures contracts
which are traded on exchanges and are subject to procedures and
regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency
other than that in which the underlying security is denominated. This is
done in the expectation that there is a greater correlation between the
foreign currency of the forward contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. This technique is referred to as
"cross hedging." The success of cross hedging is dependent on many
factors, including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S. dollar.
To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
The Fund will not speculate in foreign currency exchange. There is
no limitation as to the percentage of the Fund's assets that may be
committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts
to the extent that the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of the Fund's assets denominated
in that currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have price
movements that tend to correlate closely with the currency in which the
investment being hedged is denominated. See "Tax Aspects of Covered Calls
and Hedging Instruments" below for a discussion of the tax treatment of
foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with respect to position
hedges and cross hedges. If the value of the securities placed in the
separate account declines, additional cash or securities will be placed
in the account on a daily basis so that the value of the account will
equal the amount of the Fund's commitments with respect to such contracts.
As an alternative to maintaining all or part of the separate account, the
Fund may purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price, or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
forward contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not
entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule ("CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC") under the Commodity Exchange Act (the
"CEA"). The CEA excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined under the CEA), if the Fund complies
with the CFTC Rule. Under these restrictions, the Fund will not, as to
any positions, whether long, short or a combination thereof, enter into
Futures transactions and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use Futures
and options thereon solely for "bona fide hedging purposes" within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a segregated
account or accounts with its Custodian, cash or readily-marketable, short-
term (maturing in one year or less) debt instruments in an amount equal
to the market value of the securities underlying such Future, less the
margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
-- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by (i) selling Stock Index Futures
or (ii) purchasing puts on stock indices or Stock Index Futures to attempt
to protect against declines in the value of the Fund's equity securities.
The risk is that the prices of Stock Index Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's equity securities. The ordinary spreads between prices in the
cash and futures markets are subject to distortions, due to differences
in the natures of those markets. First, all participants in the futures
markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may
close out futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures markets depends on participants
entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures markets could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the hedging instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of the equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual
equity securities (long hedging) by buying Stock Index Futures and/or
calls on such Futures, on securities or on stock indices, it is possible
that the market may decline. If the Fund then concludes not to invest in
equity securities at that time because of concerns as to a possible
further market decline or for other reasons, the Fund will realize a loss
on the hedging instruments that is not offset by a reduction in the price
of the equity securities purchased.
-- Borrowing for Leverage. From time to time, the Fund may increase
its ownership of securities by borrowing from banks on an unsecured basis
and investing the borrowed funds, subject to the restrictions stated in
the Prospectus. Any such borrowing will be made only from banks, and,
pursuant to the requirements of the Investment Company Act of 1940 (the
"Investment Company Act"), will only be made to the extent that the value
of the Fund's assets, less its liabilities other than borrowings, is equal
to at least 300% of all borrowings including the proposed borrowing. If
the value of the Fund's assets, when computed in that manner, should fail
to meet the 300% asset coverage requirement, the Fund is required within
three days to reduce its bank debt to the extent necessary to meet that
requirement. To do so, the Fund may have to sell a portion of its
investments at a time when independent investment judgment would not
dictate such sale. Interest on money borrowed is an expense the Fund
would not otherwise incur, so that during periods of substantial
borrowings, its expenses may increase more than funds that do not borrow.
-- Investing in Small, Unseasoned Companies. The securities of
small, unseasoned companies may have a limited trading market, which may
adversely affect the Fund's ability to dispose of them and can reduce the
price the Fund might be able to obtain for them. If other investment
companies and investors that invest in this type of securities trade the
same securities when the Fund attempts to dispose of its holdings, the
Fund may receive lower prices than might otherwise be obtained, because
of the thinner market for such securities.
-- Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments that are
traded on foreign securities exchanges or in the foreign over-the-counter
markets. Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Investing in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians holding them must be approved by the
Fund's Board of Trustees under applicable rules of the Securities and
Exchange Commission.
-- Risks of Foreign Investing. Investments in foreign securities
present special additional risks and considerations not typically
associated with investments in domestic securities: reduction of income
by foreign taxes; fluctuation in value of foreign portfolio investments
due to changes in currency rates and control regulations (e.g., currency
blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing
and financial reporting standards comparable to those applicable to
domestic issuers; less volume on foreign exchanges than on U.S. exchanges;
greater volatility and less liquidity on foreign markets than in the U.S.;
less regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits; higher brokerage
commission rates than in the U.S.; increased risks of delays in settlement
of portfolio transactions or loss of certificates for portfolio
securities; possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse diplomatic
developments; and unfavorable differences between the U.S. economy and
foreign economies. In the past, U.S. Government policies have
discouraged certain investments abroad by U.S. investors, through
taxation or other restrictions, and it is possible that such restrictions
could be re-imposed.
-- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
-- Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board
of Trustees from time to time. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant
to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
-- Short Sales Against-the-Box. In this type of short sale, while
the short position is open, the Fund must own an equal amount of the
securities sold short, or by virtue of ownership of other securities have
the right, without payment of further consideration, to obtain an equal
amount of the securities sold short. Short sales against-the-box may be
made to defer, for Federal income tax purposes, recognition of gain or
loss on the sale of securities "in the box" until the short position is
closed out.
-- Temporary Defensive Investments. When the equity markets in
general are declining, the Fund may commit an increasing portion of its
assets to defensive securities. These may include the types of securities
described in the Prospectus. When investing for defensive purposes, the
Fund will normally emphasize investment in short-term debt securities
(that is, securities maturing in one year or less from the date of
purchase), since those types of securities are generally more liquid and
usually may be disposed of quickly without significant gains or losses so
that the Manager may have liquid assets when it wishes to make investments
in securities for appreciation possibilities.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective, cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such "majority" vote is defined as the vote of the
holders of the lesser of: (1) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Fund.
Under these additional restrictions, the Fund cannot: (1) invest in
companies for the primary purpose of acquiring control or management
thereof; (2) invest in commodities or commodity contracts; however, the
Fund may buy and sell any of the Hedging Instruments permitted by any of
its other non-fundamental policies, whether or not any such Hedging
Instrument is considered to be a commodity or a commodity contract; (3)
invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein; (4) purchase securities on margin, except that the Fund
may make margin deposits in connection with any of the Hedging Instruments
permitted by any of its other non-fundamental policies; (5) mortgage or
pledge any of its assets; however, this does not prohibit the escrow
arrangements contemplated in the use of Hedging Instruments; (6)
underwrite securities of any issuer, except insofar as it might be deemed
an underwriter under the Securities Act of 1933 in the resale of any
securities held in its own portfolio; (7) invest or hold securities of
any issuer if those officers and Trustees or directors of the Fund or the
Manager owning individually more than 0.5% of the securities of such
issuer together own more than 5% of the securities of such issuer; (8)
invest in oil or gas exploration or development programs or in mineral-
related programs or leases; or (9) lend money, but the Fund may purchase
all or a portion of an issue of bonds, debentures, commercial paper, or
other similar corporate obligations of the types that are usually
purchased by institutions, whether or not publicly distributed.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees of Oppenheimer
Fund, Oppenheimer Global Fund, Oppenheimer Time Fund, Oppenheimer Special
Fund, Oppenheimer Discovery Fund, Oppenheimer Target Fund, Oppenheimer
Global Growth & Income Fund, Oppenheimer Global Environment Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset
Allocation Fund, Oppenheimer Mortgage Income Fund, Oppenheimer U.S.
Government Trust, Oppenheimer Multi-Sector Income Trust and Oppenheimer
Multi-Government Trust (the "New York-based OppenheimerFunds"). Messrs.
Spiro, Bishop, Bowen, Donohue, Farrar and Zack respectively hold the same
offices with the other New York-based OppenheimerFunds as with the Fund.
As of September 12, 1994, the Trustees and officers of the Fund as a group
owned less than 1% of the outstanding shares of the Fund.
Leon Levy, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
Edmund T. Delaney, Trustee
5 Gorham Road, Chester, Connecticut 06412
Attorney-at-law; formerly a member of the Connecticut State
Historical Commission and Counsel to Copp, Berall & Hempstead (a law
firm).
Robert G. Galli, Trustee*
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Elizabeth B. Moynihan, Trustee
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research and of the Freer Gallery of Art, Smithsonian
Institution; a member of the Indo-U.S. Sub-Commission on Education
and Culture; a trustee of the Institute of Fine Arts, New York
University; and a trustee of the Preservation League of New York
State.
Kenneth A. Randall, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company),
Dominion Resources, Inc. (electric utility holding company) and
Kemper Corporation (insurance and financial services company);
formerly Chairman of the Board of ICL, Inc. (information systems).
Edward V. Regan, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director or GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
and The Malaysia Fund, Inc. (closed-end investment companies); a
member of the Board of Advisors, Olympus Private Placement Fund,
L.P.; Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee
550 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), FMC
Corp. (chemicals and machinery), Lindsay Manufacturing Co. and Texas
Instruments, Inc. (electronics); formerly (in descending
chronological order) Deputy Chairman, Bush/Quayle Presidential
Campaign, Counsellor to the President (Bush) for Domestic Policy,
Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative, Executive
Office of the President.
Andrew J. Donohue, Secretary
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a partner in Kraft & McManimon (a
law firm), an officer of First Investors Corporation (a broker-
dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), and a director and an officer of First
Investors Family of Funds and First Investors Life Insurance Company.
James Ayer, Vice President and Portfolio Manager
Assistant Vice President of the Manager; an officer of other
OppenheimerFunds; formerly an international equities investment
officer with Brown Brothers Harriman & Company.
George C. Bowen, Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds; formerly Senior Vice
President/Comptroller and Secretary of Oppenheimer Asset Management
Corporation.
Robert G. Zack, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Resolution Trust
Corporation and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
[FN]
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Mr. Galli and Mr. Spiro, who is both an officer and
Trustee) receive no salary or fee from the Fund. During the Fund's fiscal
year ended September 30, 1993, the remuneration (including expense
reimbursements) paid to all Trustees of the Fund (excluding Mr. Galli and
Mr. Spiro) as a group for services as trustees and as members of one or
more committees of the Board, totalled $80,788. The Fund has adopted a
retirement plan that provides for payment to a retired Trustee of up to
80% of the average compensation paid during that Trustee's five years of
service in which the highest compensation was received. A Trustee must
serve in that capacity for any of the New York-based OppenheimerFunds for
at least 15 years to be eligible for the maximum payment. No Trustee has
retired since the adoption of the plan and no payments have been made by
the Fund under the plan. The accumulated liability for the Fund's
projected benefit obligations under the plan was $44,988 as of September
30, 1993.
-- Major Shareholders. As of September 12, 1994, the only person who
owned of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding shares Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive, E F13, Jacksonville, Florida 32246-6484, who owned of
record 653,458.585 shares (7.68% of the shares the outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Messrs. Galli and Spiro)
serve as Trustees of the Fund.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended September 30, 1991,
1992, and 1993, the management fees paid by the Fund to the Manager were
$477,289, $1,371,488, and $1,580,012, respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
-- 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 shares but is not obligated to
sell a specific number of shares. Expenses normally attributable to
sales, including advertising and the cost of printing and mailing
prospectuses, other than those furnished to existing shareholders, are
borne by the Distributor. During the Fund's fiscal years ended September
30, 1991, 1992, and 1993, the aggregate sales charges on sales of the
Fund's shares were $1,519,470, $3,810,637 and $4,353,366, respectively,
of which the Distributor and an affiliated broker-dealer retained in the
aggregate $322,104, $999,505 and $960,768 in those respective years. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Service Plan,"
below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions in
listed securities and are otherwise paid only if it appears likely that
a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each
account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
During the Fund's fiscal years ended September 30, 1991, 1992, and
1993, total brokerage commissions paid by the Fund (not including spreads
or concessions on principal transactions on a net trade basis) were
$15,139, $19,803 and $414,002, respectively. During the fiscal year ended
September 30, 1993, $36,731 was paid to brokers as commissions in return
for research services (including special research, statistical information
and execution); the aggregate dollar amount of those transactions was
$19,817,816. The transactions giving rise to those commissions were
allocated in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time to
time the "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at net
asset value" of an investment in the Fund may be advertised. An
explanation of how these total returns are calculated for each class and
the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5, and 10-year periods (or the life of the Fund, if less) ending as of
the most recently-ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its returns and share prices are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares may be
worth more or less than their original cost. Returns for any given past
period are not a prediction or representation by the Fund of future
returns. The returns of shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its allocated
operating expenses.
-- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
------- = Total Return
P
In calculating total returns, the current maximum sales charge of
5.75% (as a percentage of the offering price) is deducted from the initial
investment ("P") (unless the return is shown at net asset value, as
described below). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period. The "average annual total returns"
on an investment in shares of the Fund for the one and five year periods
ended September 30, 1993 and for the period December 30, 1987
(commencement of operations) to September 30, 1993 were 1.59%, 14.42% and
13.63%, respectively. The cumulative "total return" for the period
December 30, 1987 (commencement of operations) to September 30, 1993 was
108.46%.
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value on an investment in the Fund.
It 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
shares of the Fund (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The cumulative total return at net asset
value for the one year period ended September 30, 1993 was 7.79%.
Total return information may be useful to investors in reviewing the
performance of the Fund's shares. However, when comparing total return
of an investment in shares of the Fund with that of other alternatives,
investors should understand that as the Fund is an aggressive equity fund
seeking capital appreciation, its shares are subject to greater market
risks than shares of funds having other investment objectives and that the
Fund is designed for investors who are willing to accept greater risk of
loss in the hopes of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to investment
objectives. The performance of the Fund is ranked against (i) all other
funds (excluding money market funds), and (ii) all other emerging growth
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.
From time to time the Fund may publish the ranking of the performance
of its shares by Morningstar, Inc., an independent mutual fund monitoring
service that ranks mutual funds, including the Fund, monthly in broad
investment categories (equity, taxable bond, municipal bond and hybrid).
The ranking calculations are based upon the Fund's three, five and ten-
year average annual total returns (when available) in excess of 90-day
Treasury bill returns with a risk adjustment factor that reflects fund
performance below three-month U.S. Treasury bill monthly returns. Such
returns are adjusted for fees and sales loads. There are five ranking
categories, with a corresponding number of stars: highest (5), above
average (4), neutral (3), below average (2) and lowest (1). The top ten
percent of the funds, series or classes in an investment category receive
five stars; 22.5% receive four stars; 35% receive three stars; 22.5%
receive two stars; and the bottom 10% receive one star. Morningstar ranks
the Fund in relation to other equity funds.
The total return on an investment in the Fund may be compared with
performance for the same period of either the Dow-Jones Industrial Average
("Dow"), Standard & Poor's 500 Index ("S&P 500"), and the NASDAQ Composite
Index, which are widely recognized indices of stock market performance.
Both indices consist of unmanaged groups of common stocks; the Dow
consists of thirty such issues. The performance of both indices includes
a factor for the reinvestment of income dividends. Neither index reflects
reinvestment of capital gains or takes transaction charges or taxes into
consideration as these items are not applicable to indices.
Investors may also wish to compare the Fund's returns to the returns
on fixed income investments available from banks and thrift institutions,
such as certificates of deposit, ordinary interest-paying checking and
savings accounts, and other forms of fixed or variable time deposits, and
various other instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed by the FDIC or any other agency
and will fluctuate daily, while bank depository obligations may be insured
by the FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government.
Service Plan
The Fund has adopted a Service Plan for its shares under Rule 12b-1
of the Investment Company Act pursuant to which the Fund will reimburse
the Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. The Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the Fund's shares.
In addition, under the Plan the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in
the case of the Manager, may include profits from the advisory fee it
receives from the Fund) to make payments to brokers, dealers or other
financial institutions (each is referred to as a "Recipient" under the
Plan) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, the Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the Fund's outstanding shares. The Plan may not be amended to increase
materially the amount of payments to be made unless such amendment is
approved by the Fund's shareholders. All material amendments must be
approved by the Independent Trustees.
While the Plan is in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to the Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. The Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plan, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares, did not
exceed a minimum amount, if any, that may be determined from time to time
by a majority of the Fund's Independent Trustees. Currently, the Fund's
Board of Trustees has set no minimum amount. For the fiscal year ended
September 30, 1993, payments under the Plan totalled $464,072, all of
which was paid by the Distributor to Recipients, including $16,371 paid
to MML Investor Services, Inc., an affiliate of the Distributor.
Any unreimbursed expenses incurred by the Distributor with respect
to the Fund's shares for any fiscal year may not be recovered in
subsequent years. Payments received by the Distributor under the Plan
will not be used to pay any interest expense, carrying charge, or other
financial costs, or allocation of overhead by the Distributor.
ABOUT YOUR ACCOUNT
How To Buy Shares
Determination of Net Asset Values Per Share. The net asset value per
share of the Fund is determined each day The New York Stock Exchange (the
"NYSE") is open, as of 4:00 P.M., New York time, that day, by dividing the
value of the Fund's net assets by the number of shares outstanding. The
NYSE's most recent annual announcement (which is subject to change) states
that it will close on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days. The Fund may invest a portion of
its assets in foreign securities primarily listed on foreign exchanges
which may trade on Saturdays or customary U.S. business holidays on which
the NYSE is closed. Because the Fund's price and net asset value 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.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sale
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) debt securities having a maturity
in excess of 60 days are valued at the mean between the bid and asked
prices determined by a portfolio pricing service approved by the Board or
obtained from active market makers on the basis of reasonable inquiry;
(iv) short-term debt securities having a remaining maturity of 60 days or
less are valued at cost, adjusted for amortization of premiums and
accretion of discounts; (v) securities (including restricted securities)
not having readily-available market quotations are valued at fair value
under the Board's procedures; and (vi) securities traded on foreign
exchanges are valued at the closing or last sales prices reported on a
principal exchange, or, if none, at the mean between closing bid and asked
prices and reflect prevailing rates of exchange taken from the closing
price on the London foreign exchange market that day.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in stock markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The
values of securities denominated in foreign currency will be converted to
U.S. dollars at the prevailing rates of exchange at the time of valuation.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i),
above. Forward currency contracts are valued at the closing price on the
London foreign exchange market. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is "marked-to-market" to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call 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
was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained under Right of Accumulation and Letters of
Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No
sales charge is imposed in certain other circumstances described in the
Prospectus because the Distributor incurs little or no selling expenses.
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 and a spouse's
siblings.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
Oppenheimer Target Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase shares of the Fund (and
Class A shares of other eligible OppenheimerFunds) sold with a front-end
sales charge during the 13-month period from the investor's first purchase
pursuant to the Letter (the "Letter of Intent period"), which may, at the
investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the
aggregate amount of purchases (excluding any purchases made by
reinvestments of dividends or distributions or purchases made at net asset
value without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering prices
calculated on the date of the Letter) will equal or exceed the amount
specified in the Letter. This enables the investor to obtain the reduced
sales charge rate (as set forth in the Prospectus) applicable to purchases
of shares in that amount (the "intended purchase amount"). Each purchase
under the Letter will be made at the public offering price applicable to
a single lump-sum purchase of shares in the intended purchase amount, as
described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- 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
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a 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 "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. If shares are redeemed in kind, the redeeming shareholder
might incur brokerage or other costs in selling the securities for cash.
The method of valuing securities used to make redemptions in kind will be
the same as the method the Fund uses to value it portfolio securities
described above under "Determination of Net Asset Values Per Share" and
that valuation will be made as of the time the redemption price is
determined.
-- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of shares when
redeemed. The reinvestment may be made without sales charge only in
shares of the Fund or any of the Class A shares of other OppenheimerFunds
into which shares of the Fund are exchangeable as described below, at the
net asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a capital
loss on the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which
a sales charge was paid are reinvested in shares of the Fund or another
of the OppenheimerFunds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss
or increase the gain recognized from the redemption. However, in that
case the sales charge would be added to the basis of the shares acquired
by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to
shares redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" will be followed in determining the order in which
shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required redemption documents, with signature(s) 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 (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on the Fund's share purchases, shareholders should not make
regular additional share purchases while participating in an Automatic
Withdrawal Plan.
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the 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 because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of the Fund may be exchanged only
for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares (except for Oppenheimer Strategic
Diversified Income Fund).
Class A shares of OppenheimerFunds 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
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for Class A shares of any of the
OppenheimerFunds. No contingent deferred sales charge is imposed on
exchanges of shares subject to a contingent deferred sales charge.
However, when shares acquired by exchange of Class A shares of other
OppenheimerFunds purchased subject to 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 contingent deferred
sales charge is imposed on the redeemed shares (see "Contingent Deferred
Sales Charge" in the Prospectus).
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
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 OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. To elect
this option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from certain of the OppenheimerFunds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between
the Fund and the Custodian. It will be the practice of the Fund to deal
with the Custodian in a manner uninfluenced by any banking relationship
the Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer Global Bio-Tech
Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Global Bio-Tech Fund as of September 30, 1993,
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the five-year period then ended and the period from December 30, 1987
(commencement of operations) to September 30, 1988. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of September 30,
1993, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Oppenheimer Global Bio-Tech Fund as of September 30, 1993, the results
of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended and
the period from December 30, 1987 (commencement of operations) to
September 30, 1988, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick
- ---------------------
KPMG Peat Marwick
Denver, Colorado
October 21, 1993
<PAGE>
Statement of Investments September 30, 1993
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <S> <C> <C>
Repurchase Agreements -- 6.2%
Repurchase agreement with Morgan
Guaranty Trust Co., 3.25%, dated 9/30/93
and maturing 10/1/93, collateralized by
U.S. Treasury Bills, 3.27%, 6/30/94,
with a value of $12,665,137 (Cost
$12,400,000) $12,400,000 $12,400,000
Corporate Bonds and Notes -- 1.7%
Elan International Finance Ltd., 0% Sub.
Liq.Yld. Opt. Nts., 10/16/12 3,800,000 1,529,500
Glycomed, Inc., 7.50% Cv. Sub. Debs.,
1/1/03 2,000,000 1,735,000
Total Corporate Bonds and Notes (Cost
$3,461,730) 3,264,500
Units
Rights and Warrants -- .8%
Biota Holdings Ltd. Wts., Exp. 9/94 225,000 755,082
Genzyme Corp. Wts.:
Exp. 12/94 20,000 305,000
Exp. 12/96 50,000 500,000
Protein Polymer Technologies, Inc. Wts.,
Exp.1/97 100,000 25,000
Xoma Corp. Wts., Exp. 6/95 7,706 3,853
Total Rights and Warrants (Cost
$1,310,470) 1,588,935
Shares
Preferred Stocks -- 2.2%
Cambridge Antibody Technology Ltd., Cv.*
(2) 100,000 2,866,283
Synaptic Pharmaceutical Corp., Cv.
Series 3* (2) 500,000 1,609,253
Total Preferred Stocks (Cost $5,300,000) 4,475,536
Common Stocks -- 88.7%
Consumer Non-Cyclicals -- 87.0%
Agriculture
Biotechnology -- 6.2%
biosys* 140,000 945,000
Calgene, Inc.* 100,000 1,387,500
DNA Plant Technology Corp.* 150,000 843,750
EcoScience Corp.* 175,000 1,771,875
Mogen International* 150,000 580,334
Pioneer Hi-Bred International, Inc. 60,000 1,995,000
Plant Genetics Systems International NV*
(2) 213,944 3,472,187
Syntro Corp.* 400,000 1,300,000
12,295,646
Anti-sense/
Nucleic Acids -- 4.9%
Genetics Institute, Inc.* 100,000 4,125,000
Genzyme Transgenics Corp.* 75,000 525,000
Gilead Sciences, Inc.* 205,000 2,972,500
Isis Pharmaceuticals, Inc.* 350,000 2,187,500
9,810,000
Cardiovascular/Blood --3.9%
Aramed, Inc., Units* 110,000 4,152,500
COR Therapeutics, Inc.* 123,500 1,698,125
Corvas International, Inc.* 135,000 556,875
Gensia Pharmaceuticals, Inc.* 50,000 1,325,000
Protein Polymer Technologies, Inc.* 100,000 68,750
7,801,250
<PAGE>
Market Value
Shares See Note 1
Common Stocks (continued)
Consumer Non-Cyclicals (continued)
Chemicals/Industrial Biotechnology -- 2.9%
Celgene Corp.* 240,000 $ 2,280,000
PerSeptive Biosystems, Inc.* 100,000 2,200,000
PerSeptive Technology Corp., Units* (2) 1,000 1,218,100
5,698,100
Drugs -- 7.1%
Allergan, Inc. 50,000 1,100,000
Astra AB, Series A Free Shares 105,000 2,161,667
Elan Corp. PLC, Units* 13,108 304,761
Merck & Co., Inc. 50,000 1,537,500
Roche Holdings AG 600 2,250,103
Sandoz AG 1,200 2,711,878
Takeda Chemical Industries 132,000 1,704,630
Telor Ophthalmic Pharmaceuticals, Inc.* 148,000 777,000
Zeneca GR 150,000 1,607,241
14,154,780
Drug Delivery -- 3.3%
Cygnus Therapeutic Systems* 150,000 918,750
Elan Corp. PLC, ADR* 50,000 1,537,500
Liposome Technology, Inc.* 225,000 2,306,250
Matrix Pharmaceutical, Inc.* 187,000 1,776,500
6,539,000
Drug Design -- 5.4%
Biota Holdings Ltd. 400,000 2,194,282
Protein Design Labs, Inc.* 300,000 4,237,500
Vertex Pharmaceuticals. Inc.* 350,000 4,462,500
10,894,282
Endocrine/
Metabolism -- 1.2%
Amylin Pharmaceuticals, Inc.* 200,000 2,400,000
Gene Therapy -- 6.0%
CellPro, Inc.* 225,300 5,350,875
Genetic Therapy, Inc.* 300,500 5,484,125
Somatix Therapy Corp.* 90,000 675,000
Vical, Inc. 60,000 510,000
12,020,000
Healthcare-
Diversified -- 2.5%
American Cyanamid Co. 25,000 1,378,125
Johnson & Johnson 30,000 1,177,500
Schering AG 4,000 2,416,572
4,972,197
Healthcare -
Miscellaneous -- 6.0%
Biochem Pharmaceuticals, Inc.* 100,000 987,500
Magainin Pharmaceuticals, Inc.* 400,000 4,600,000
Medco Containment Services, Inc. 45,000 1,603,125
Peptide Technology Ltd. (1) 2,829,280 3,743,202
Quintiles Transnational Corp. (2) 28,950 519,653
Skandigen AB 125,700 612,090
12,065,570
<PAGE>
Market Value
Shares See Note 1
Statement of Investments (continued)
Common Stocks (continued)
Consumer Non-Cyclicals (continued)
Imaging -- .8%
Molecular Biosystems, Inc.* 60,000 $ 1,545,000
Immunology -- 5.4%
AutoImmune, Inc.* 113,000 1,017,000
Cantab Pharmaceuticals PLC, Sponsored
ADR* 99,000 717,750
CytoRad, Inc./Cytogen Corp., Units* 150,000 806,250
ImmuLogic Pharmaceutical Corp.* 147,500 1,438,125
ImmunoGen, Inc.* 100,000 750,000
Immunomedics, Inc.* 105,000 695,625
Medimmune, Inc.* 146,000 3,212,000
T Cell Sciences, Inc.* 223,000 1,421,625
Univax Biologics, Inc.* 103,000 811,125
10,869,500
Inflammation -- 3.2%
Alpha Beta Technology, Inc.* 145,000 3,915,000
Cortech, Inc.* 64,000 1,008,000
Glycomed, Inc.* 114,000 969,000
ICOS Corp.* 100,000 550,000
6,442,000
Labs/Diagnostics -- 2.0%
Agen Ltd. 1,415,000 429,208
DNX Corp. 100,000 500,000
Genelabs Technologies, Inc.* 75,000 318,750
IG Laboratories, Inc.* 322,500 2,660,625
3,908,583
Major Biotechnology -- 18.3%
ALZA Corp., Cl. A* 125,001 2,765,646
Amgen, Inc.* 150,000 5,793,750
Biogen, Inc.* 100,000 3,687,500
Chiron Corp.* (3) 100,500 7,524,938
Genentech, Inc.* 193,400 8,292,025
Genzyme Corp.* 200,435 6,714,572
Immunex Corp.* 50,000 925,000
Neozyme Corp. 20,000 300,000
Neozyme II Corp., Units* 20,000 520,000
Therapeutic Discovery Corp., Units* 10,000 51,250
36,574,681
Medical Products -- 2.5%
Applied Immune Sciences, Inc.* 232,000 3,248,000
Molecular Dynamics, Inc.* 102,500 1,806,562
5,054,562
Neuroscience -- 2.4%
Athena Neurosciences, Inc.* 200,000 1,500,000
Cambridge Neuroscience, Inc.* 100,000 937,500
Cephalon, Inc.* 115,000 1,725,000
CoCensys, Inc.* 100,000 725,000
4,887,500
<PAGE>
Market Value
Shares See Note 1
Common Stocks (continued)
Consumer Non-Cyclicals (continued)
Wound Healing -- 3.0%
Advanced Tissue Sciences, Inc., Cl. A* 355,000 $ 3,061,875
BioSurface Technology, Inc.* 73,000 310,250
Celtrix Pharmaceuticals, Inc.* 350,000 2,525,938
5,898,063
Technology -- 1.7%
Electronics- IDEXX Laboratories, Inc.* 50,000 2,450,000
Instrumentation
-- 1.7% Oxford GlycoSystems Group PLC* (2) 515,132 911,679
3,361,679
Total Common Stocks (Cost $166,413,122) 177,192,393
Total Investments, at Value (Cost $188,885,322) 99.6% 198,921,364
Other Assets Net of Liabilities .4% 775,253
Net Assets 100.0% $199,696,617
</TABLE>
* Non-Income producing security
(1)Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the year ended September 30,
1993. Transactions during the period in which the issuer was an affiliate
are as follows:
<TABLE>
<CAPTION>
Balance Balance
September 30, 1992 Gross Additions Gross Reductions September 30, 1993
Shares Cost Shares Cost Shares Cost Shares Cost
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peptide Technology Ltd.+ 6,581,080 $ 3,965,009 -- $ --- 3,751,800 $1,994,973 2,829,280 $1,970,036
Univax Biologics, Inc.+ 43,000 516,000 60,000 680,615 -- -- 103,000 1,196,615
$4,481,009 $680,615 $1,994,973 $3,166,651
</TABLE>
+ Not an affiliate as of September 30, 1993.
(2) Restricted security-See Note 6 of notes to financial statements.
(3) Securities with an aggregate market value of $3,743,750 are held in
escrow to cover outstanding call options, as follows:
<TABLE>
<CAPTION>
Shares Subject Expiration Exercise Premium Market Value
to Call Date Price Received See Note 1
<S> <C> <C> <C> <C> <C>
Chiron Corp. 50,000 1/94 $65.00 $232,867 $643,750
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Assets and Liabilities September 30, 1993
<TABLE>
<S> <C> <C>
Assets Investments, at value (cost $188,885,322) - see accompanying statement $198,921,364
Cash 49,947
Receivables:
Investments sold 2,477,499
Shares of beneficial interest sold 728,878
Dividends and interest 103,439
Other 19,540
Total assets 202,300,667
Liabilities Options written, at value (premiums received $232,867) -
see accompanying statement - Note 4 643,750
Payables and other liabilities:
Shares of beneficial interest redeemed 918,958
Investments purchased 754,200
Distribution assistance - Note 5 119,097
Other 168,045
Total liabilities 2,604,050
Net Assets $199,696,617
Composition of Net Paid-in capital $195,369,199
Assets
Accumulated net investment loss (2,926,679)
Distributions in excess of net realized gain from investment
and written option transactions (2,370,466)
Net unrealized appreciation on investments, options written and
translation of assets and liabilities in foreign currencies - Note 3 9,624,563
Net Assets -- Applicable to 9,226,406 shares of beneficial interest outstanding $199,696,617
Net Asset Value and Redemption Price Per Share $21.64
Maximum Offering Price Per Share (net asset value plus sales charge of 5.75% of offering price) $22.96
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statement of Operations For the Year Ended September 30, 1993
<TABLE>
<S> <C> <C>
Investment Income Interest $ 861,045
Dividends (including $103,372 from foreign securities less $15,506 of foreign 665,624
tax withheld at source)
Total income 1,526,669
Expenses Management fees - Note 5 1,580,012
Transfer and shareholder servicing agent fees - Note 5 650,147
Distribution assistance - Note 5 464,072
Shareholder reports 136,817
Trustees' fees and expenses 80,788
Custodian fees and expenses 62,985
Legal and auditing fees 35,054
Registration and filing fees 34,838
Other 20,609
Total expenses 3,065,322
Net Investment Loss (1,538,653)
Realized and Net realized gain (loss) on investments:
Unrealized Gain (Loss) Unaffiliated companies (6,594,919)
on Investments, Affiliated companies 6,019,697
Options Written and Net realized loss on investments (575,222)
Translation of Assets Net realized loss on closing of option contracts written - Note 4 (105,457)
and Liabilities in Net realized loss (680,679)
Foreign Currencies Net change in unrealized appreciation (depreciation) on investments,
options written and translation of assets and liabilities in foreign currencies:
Beginning of year (3,823,657)
End of year - Note 3 9,624,563
Net change 13,448,220
Net Realized and Unrealized Gain on Investments, Options Written and
Translation of Assets and Liabilities in Foreign Currencies 12,767,541
Net Increase in Net Assets Resulting from Operations $11,228,888
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992
<S> <C> <C> <C>
Operations Net investment loss $ (1,538,653) $ (1,181,561)
Net realized gain (loss) on investments and options written (680,679) 590,388
Net change in unrealized appreciation or depreciation
on investments, options written and translation of assets
and liabilities in foreign currencies 13,448,220 (44,464,262)
Net increase (decrease) in net assets resulting from 11,228,888 (45,055,435)
operations
Dividends and Dividends from net investment income ($.01 per share) -- (64,575)
Distributions to Distributions from net realized gain on investments
Shareholders ($.202 per share) (1,873,746) --
Beneficial Interest Net increase in net assets resulting from beneficial
Transactions interest
transactions - Note 2 60,707,523 71,401,564
Net Assets Total increase 70,062,665 26,281,554
Beginning of year 129,633,952 103,352,398
End of year (including accumulated net investment losses
of $2,926,679 and $1,388,026, respectively) $199,696,617 $129,633,952
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
1993 1992 1991+ 1990 1989 1988++
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 20.25 $ 26.90 $ 11.81 $ 12.09 $ 10.63 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (.10) (.17) (.03) (.02) (.10) .14
Net realized and unrealized gain (loss)
on investments, options written
and translation of assets and
liabilities in foreign currencies 1.69 (6.47) 15.12 (.26) 1.69 .49
Total income (loss) from
investment operations 1.59 (6.64) 15.09 (.28) 1.59 .63
Dividends and distributions to shareholders:
Dividends from net investment income -- (.01) -- -- (.10) --
Distributions from net realized
gain on investments (.20) -- -- -- (.03) --
Total dividends and
distributions to shareholders (.20) (.01) -- -- (.13) --
Net asset value, end of period $ 21.64 $ 20.25 $ 26.90 $ 11.81 $ 12.09 $ 10.63
Total Return,
at Net Asset Value** 7.79% (24.70)% 127.78% (2.32)% 15.21% 6.30%
Ratios/Supplemental Data:
Net assets, end of
period (in thousands) $199,697 $129,634 $103,352 $16,217 $3,872 $1,921
Average net assets
(in thousands) $194,184 $166,144 $ 50,989 $ 8,716 $2,343 $1,394
Number of shares outstanding
at end of period (in thousands) 9,226 6,400 3,841 1,373 320 181
Ratios to average net assets:
Net investment income (loss) (.80)% (.71)% (.18)% (.37)% (.70)% 1.41%*
Expenses 1.59% 1.39% 1.50% 1.78% 2.40% 2.06%*
Portfolio turnover rate*** 41.0% 2.6% 11.2% 16.6% 17.1% 1.7%
</TABLE>
* Annualized.
** Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
*** The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended September 30, 1993 were
$119,628,848 and $70,050,079, respectively.
+ Per share amounts calculated based on the weighted average number of
shares outstanding during the period.
++ For the period from December 30, 1987 (commencement of operations) to
September 30, 1988. Per share amounts calculated based on the weighted
average number of shares outstanding during the period.
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer Global Bio-Tech Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment adviser is
Oppenheimer Management Corporation (the Manager). The following is a
summary of significant accounting policies consistently followed by the
Fund.
Investment Valuation -- Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Listed and unlisted securities for which
such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term
debt securities are valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot be valued by the
approved portfolio pricing service are valued by averaging the mean
between the bid and asked prices obtained from two active market makers
in such securities. Short-term debt securities having a remaining maturity
of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount.
Securities for which market quotes are not readily available are valued
under procedures established by the Board of Trustees to determine fair
value in good faith. A call option is valued based upon the last sales
price on the principal exchange on which the option is traded or, in the
absence of any transactions that day, the value is based upon the last
sale on the prior trading date if it is within the spread between the
closing bid and asked prices. If the last sale price is outside the
spread, the closing bid or asked price closest to the last reported sale
price is used.
Foreign Currency Translation -- The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in non-U.S.
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund generally enters into forward currency exchange contracts as a
hedge, upon the purchase or sale of a security denominated in a foreign
currency. Risks may arise from the potential inability of the counterparty
to meet the terms of the contract and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
The effect of changes in foreign currency exchange rates is not separately
identified in the Fund's results of operations. Gains and losses on
foreign currency transactions are accounted for with the transactions that
gave rise to the exchange gain or loss.
Repurchase Agreements -- The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian's vault, all securities
held as collateral for repurchase agreements. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
Call Options Written -- The Fund may write covered call options. When an
option is written, the Fund receives a premium and becomes obligated to
sell the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an
unfavorable change in the price of the security underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling a security at a price different from the current market value. All
securities covering call options written are held in escrow by the
custodian bank.
<PAGE>
Federal Income Taxes -- The Fund intends to continue to comply with
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to
shareholders. Therefore, no federal income tax provision is required.
Trustees' Fees and Expenses -- The Fund has adopted a nonfunded
retirementplan for the Fund's independent trustees. Benefits are based on
years of service and fees paid to each trustee during the years of
service. During the year ended September 30, 1993, a provision of $44,988
was made for the Fund's projected benefit obligations, resulting in an
accumulated liability of $63,821 at September 30, 1993. No payments have
been made under the plan.
Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes.
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1993 Year Ended September 30, 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 5,810,447 $123,150,808 4,540,515 $124,706,623
Dividends and distributions reinvested 72,297 1,686,679 2,049 58,089
Redeemed (3,056,478) (64,129,964) (1,983,809) (53,363,148)
Net increase 2,826,266 $ 60,707,523 2,558,755 $ 71,401,564
</TABLE>
3. Unrealized Gains and Losses on Investments and Options Written
At September 30, 1993, net unrealized appreciation of investments and
options written of $9,625,159 was composed of gross appreciation of
$31,347,803, and gross depreciation of $21,722,644.
4. Call Option Activity
Call option activity for the year ended September 30, 1993 was as follows:
<TABLE>
<CAPTION>
Number of Amount of
Options Premiums
<S> <C> <C>
Options outstanding at September 30, 1992 -- $ --
Options written 1,455 528,994
Options cancelled in closing purchase transactions (955) (296,127)
Options outstanding at September 30, 1993 500 $ 232,867
</TABLE>
The cost of cancelling options in closing purchase transactions was
$401,584, resulting in a net short-term capital loss of $105,457.
<PAGE>
Notes to Financial Statements (continued)
5. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 1%
on the first $50 million of net assets, .75% on the next $150 million with
a reduction of .03% on each $200 million thereafter to $800 million, and
.60% on net assets in excess of $800 million. The Manager has agreed to
reimburse the Fund if aggregate expenses (with specified exceptions)
exceed the most stringent applicable regulatory limit on Fund expenses.
For the year ended September 30, 1993, commissions (sales charges paid by
investors) on sales of Fund shares totaled $4,353,366, of which $960,768
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker-dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of providing such
services are allocated ratably to these companies.
Under an approved plan of distribution, the Fund may expend up to .25%
ofits net assets annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. During the year ended
September 30, 1993, OFDI paid $16,371 to an affiliated broker-dealer as
reimbursement for distribution-related expenses.
6. Restricted Securities
The Fund owns securities purchased in private placement transactions,
without registration under the Securities Act of 1933 (the Act). The
securities are valued under methods approved by the Board of Trustees as
reflecting fair value. The Fund intends to invest no more than 10% of its
net assets (determined at the time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale pursuant to Rule 144A
of the Act that are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Restricted and illiquid
securities amount to $9,685,475, or 4.9% of the Fund's net assets, at
September 30, 1993.
<TABLE>
<CAPTION>
Valuation
Per Share as of
Security Acquisition Date Cost Per Unit September 30, 1993
<S> <C> <C> <C>
Cambridge Antibody Technology
Ltd., Cv. 2/5/93 $ 33.00 $ 28.66
Oxford GlycoSystems Group PLC+ 5/21/93 $ 1.94 $ 1.77
PerSeptive Technology Corp. 12/16/92 $ 1,000.00 $ 1,218.10
Plant Genetics Systems
International NV 5/27/92 $ 11.18 $ 16.23
Quintiles Transnational Corp. 8/2/93 $ 17.27 $ 17.95
Synaptic Pharmaceutical
Corp., Cv. Series 3 1/20/93 $ 4.00 $ 3.22
</TABLE>
+ Transferable under Rule 144A of the Act.
<PAGE>
------------
Statement of Investments March 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
------ ------------
<S> <C> <C>
- ------------
Repurchase Agreements--13.2%
- ------------
Repurchase agreement with J.P. Morgan Securities, Inc., 3.53%, dated
3/31/94, to be repurchased at $24,809,727 on 4/4/94, collateralized
by U.S. Treasury Nts., 4.25%--8.875%, 5/15/95--10/15/96, with a value
of $25,396,708 (Cost $24,800,000) $24,800,000 $24,800,000
- ------------
Corporate Bonds and Notes--3.0%
- ------------
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(3) 2,500,000 2,037,500
- ------------
Elan International Finance Ltd., 0% Sub. Liq. Yld. Opt. Nts., 10/16/12 5,000,000 1,975,000
- ------------
Glycomed, Inc., 7.50% Cv. Sub. Debs., 1/1/03 2,000,000 1,540,000
- ------------
Total Corporate Bonds and Notes (Cost $6,159,193) 5,552,500
Units
-----
- ------------
Rights and Warrants--1.4%
- ------------
Biota Holdings Ltd. Wts., Exp. 9/94 225,000 741,325
- ------------
Gensia Pharmaceuticals, Inc. Wts., 12/96 110,000 632,500
- ------------
Genzyme Corp. Wts.:
Exp. 12/94 20,000 185,000
Exp. 12/96 50,000 331,250
- ------------
PerSeptive Technology Corp. Wts., Exp. 12/97 1,000 683,939
- ------------
Protein Polymer Technologies, Inc. Wts., Exp. 1/97 100,000 31,250
- ------------
Xoma Corp. Wts., Exp. 6/95 7,706 3,853
- ------------
Total Rights and Warrants (Cost $2,864,434) 2,609,117
Shares
------
- ------------
Preferred Stocks--2.1%
- ------------
Cambridge Antibody Technology Ltd., Cv.(1)(3) 100,000 2,474,013
- ------------
Synaptic Pharmaceutical Corp., Cv. Series 3(1)(2)(3) 500,000 1,541,461
------------
Total Preferred Stocks (Cost $5,300,000) 4,015,474
- ------------
Common Stocks--79.8%
- ------------
Basic Materials--0.3%
- ------------
Chemicals--0.3% Ringer Corp. 150,000 487,500
- ------------
Consumer Non-Cyclicals--74.4%
- ------------
Agriculture Biotechnology--5.4% biosys(1) 160,000 760,000
- ------------
Delta and Pine Land Co. 70,000 962,500
- ------------
DNA Plant Technology Corp.(1) 200,000 975,000
- ------------
EcoScience Corp.(1) 175,000 1,225,000
- ------------
Mogen International(1) 150,000 351,675
- ------------
Pioneer Hi-Bred International, Inc.(1) 50,000 1,637,500
- ------------
Plant Genetics Systems International NV(1)(3) 213,944 3,290,420
- ------------
Syntro Corp.(1) 400,000 950,000
------------
10,152,095
- ------------
Anti-sense/Nucleic Acids--2.4%
Gilead Sciences, Inc.(1) 215,000 2,311,250
- ------------
Isis Pharmaceuticals, Inc.(1) 300,000 2,137,500
------------
4,448,750
</TABLE>
<PAGE>
------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
------ ------------
<S> <C> <C>
- ------------
Cardiovascular/Blood--2.6% Aramed, Inc.(1) 90,000 $2,092,500
- ------------
COR Therapeutics, Inc.(1) 175,000 2,078,125
- ------------
Corvas International, Inc.(1) 135,000 506,250
- ------------
Protein Polymer Technologies, Inc.(1) 100,000 131,250
- ------------
4,808,125
------------
Chemicals/Industrial
Biotechnology--4.2%
Celgene Corp.(1) 200,000 1,350,000
- ------------
PerSeptive Biosystems, Inc.(1) 154,079 4,468,291
- ------------
PerSeptive Technology II Corp., Units(1) 70,000 1,995,000
------------
7,813,291
- ------------
Drugs--5.0% Astra AB, Series A Free Shares 150,000 2,935,863
- ------------
CytoTherapeutics, Inc. 20,000 207,500
- ------------
Roche Holdings AG 125 621,955
- ------------
Sandoz AG 1,475 3,999,321
- ------------
Watson Pharmaceutical, Inc. 90,000 1,372,500
- ------------
Yuhan Corp. 6,526 263,588
------------
9,400,727
- ------------
Drug Delivery--4.9% Cygnus Therapeutic Systems(1) 150,000 1,425,000
- ------------
Elan Corp. PLC, ADR(1) 50,000 1,662,500
- ------------
Elan Corp. PLC, Units(1) 13,108 368,663
- ------------
Ethical Holdings Ltd., Sponsored ADR(1) 100,000 950,000
- ------------
Liposome Technology, Inc.(1) 225,000 1,743,750
- ------------
Matrix Pharmaceutical, Inc.(1) 280,000 3,115,000
------------
9,264,913
- ------------
Drug Design--6.4% Biota Holdings Ltd. 400,000 2,276,882
- ------------
Protein Design Labs, Inc.(1) 260,000 5,720,000
- ------------
Vertex Pharmaceuticals, Inc.(1) 300,000 4,012,500
------------
12,009,382
- ------------
Endocrine/Metabolism--1.4% Amylin Pharmaceuticals, Inc.(1) 250,000 2,687,500
- ------------
Gene Therapy--1.8% Applied Immune Sciences, Inc. 200,000 1,750,000
- ------------
Viagene, Inc. 100,000 887,500
- ------------
Vical, Inc. 60,000 705,000
------------
3,342,500
<PAGE>
------------
Statement of Investments (Unaudited) (Continued)
<CAPTION>
Market Value
Shares See Note 1
------ ------------
<S> <C> <C>
Healthcare: Diversified--2.1%
Schering AG 6,120 $3,874,780
- ------------
Healthcare:
Miscellaneous--6.1%
Biochem Pharmaceuticals, Inc.(1) 140,000 1,400,000
- ------------
ClinTrials, Inc. 60,000 705,000
- ------------
Genzyme Transgenics Corp. 75,000 543,750
- ------------
Magainin Pharmaceuticals, Inc.(1) 225,000 2,981,250
- ------------
Martek Biosciences Corp.(1) 145,000 1,341,250
- ------------
Penederm, Inc. 80,000 1,140,000
- ------------
Quintiles Transnational Corp.(3) 28,950 580,459
- ------------
Shaman Pharmaceuticals, Inc. 150,000 1,462,500
- ------------
Syncor International Corp. 60,000 1,215,000
------------
11,369,209
- ------------
Immunology--4.9% Ares-Serono Group, Cl. B 2,885 1,621,817
- ------------
AutoImmune, Inc.(1) 170,000 1,232,500
- ------------
Cantab Pharmaceuticals PLC, Sponsored ADR(1) 99,000 569,250
- ------------
ImmuLogic Pharmaceutical Corp.(1) 147,500 1,548,750
- ------------
Medimmune, Inc.(1) 100,000 1,025,000
- ------------
Sangstat Medical Corp. 100,000 762,500
- ------------
T Cell Sciences, Inc.(1) 371,000 1,505,625
- ------------
Univax Biologics, Inc.(1) 130,000 991,250
------------
9,256,692
- ------------
Inflammation--1.5% Alpha Beta Technology, Inc.(1) 50,000 1,075,000
- ------------
Cortech, Inc.(1) 89,000 734,250
- ------------
Glycomed, Inc.(1) 114,000 541,500
- ------------
ICOS Corp.(1) 100,000 500,000
------------
2,850,750
- ------------
Labs/Diagnostics--1.7% DNX Corp. 200,000 912,500
- ------------
Genelabs Technologies, Inc.(1) 75,000 234,375
- ------------
IG Laboratories, Inc.(1) 325,000 2,112,500
------------
3,259,375
- ------------
Major Biotechnology--18.2% ALZA Corp., Cl. A(1) 75,001 1,706,273
- ------------
Amgen, Inc.(1) 210,000 8,032,500
- ------------
Chiron Corp.(1)(4) 63,000 4,142,250
- ------------
Genentech, Inc.(1) 150,000 6,600,000
- ------------
Genetic Therapy, Inc.(1) 250,500 3,131,250
- ------------
Genetics Institute, Inc. 100,000 4,225,000
- ------------
Genzyme Corp.(1) 200,435 5,361,636
- ------------
Neozyme II Corp., Units(1) 20,000 740,000
- ------------
Therapeutic Discovery Corp., Units(1) 10,000 57,500
------------
33,996,409
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
------ ------------
<S> <C> <C>
- ------------
Neuroscience--2.9% Athena Neurosciences, Inc.(1) 300,000 $2,212,500
- ------------
Cambridge Neuroscience, Inc.(1) 100,000 725,000
- ------------
Cephalon, Inc.(1) 138,000 1,880,250
- ------------
CoCensys, Inc.(1) 122,500 581,875
------------
5,399,625
- ------------
Wound Healing--2.9% Advanced Tissue Sciences, Inc., Cl. A(1) 200,000 1,550,000
- ------------
Celtrix Pharmaceuticals, Inc.(1) 300,000 2,157,188
- ------------
Creative BioMolecules, Inc. 200,000 1,700,000
------------
5,407,188
- ------------
Industrial--0.2%
- ------------
Pollution Control--0.2% EnSys Environmental Products, Inc. 55,000 412,500
- ------------
Technology--4.9%
- ------------
Computer Software
And Services--1.5%
Cerner Corp. 30,000 1,245,000
- ------------
Pyxis Corp.(1) 60,000 1,575,000
------------
2,820,000
- ------------
Electronics:
Instrumentation--3.4%
IDEXX Laboratories, Inc.(1) 100,000 2,700,000
- ------------
Igen, Inc. 100,000 1,000,000
- ------------
Molecular Dynamics, Inc. 177,500 1,775,000
- ------------
Oxford GlycoSystems Group PLC(1)(3) 515,132 915,158
------------
6,390,158
------------
Total Common Stocks (Cost $153,422,107) 149,451,469
- ------------
Total Investments, at Value (Cost $192,545,734) 99.5% 186,428,560
- ------------
Other Assets Net of Liabilities .5 833,618
------------ ------------
Net Assets 100.0% $187,262,178
------------ ------------
------------ ------------
<FN>
1. Non-income producing security.
2. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended March 31, 1994.
3. Restricted security--See Note 6 of Notes to Financial Statements.
4. Securities with an aggregate market value of $2,301,250 are held in escrow to
cover outstanding call options, as follows:
Shares
Subject Expiration Exercise Premium Market Value
to Call Date Price Received See Note 1
------------
Chiron Corp. 15,000 4/94 $90.00 $ 67,048 $1,875
------------
Chiron Corp. 20,000 7/94 $90.00 94,897 16,250
-------- -------
$161,945 $18,125
-------- -------
-------- -------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
------------
Statement of Assets and Liabilities March 31, 1994 (Unaudited)
<TABLE>
<S> <C>
- ------------
Assets Investments, at value (cost $192,545,734)--see accompanying statement $186,428,560
- ------------
Cash 154,428
- ------------
Receivables:
Investments sold 6,907,239
Shares of beneficial interest sold 193,736
Dividends and interest 99,220
- ------------
Other 20,803
- ------------
Total assets 193,803,986
- ------------
Liabilities Options written, at value (premiums received $161,945)--
see accompanying statement--Note 4 18,125
- ------------
Payables and other liabilities:
Investments purchased 3,293,125
Shares of beneficial interest redeemed 2,768,375
Service plan fees--Note 5 127,075
Other 335,108
------------
Total liabilities 6,541,808
- ------------
Net Assets $187,262,178
------------
------------
- ------------
Composition of Net Assets
Paid-in capital $189,589,871
- ------------
Accumulated net investment loss (4,278,219)
- ------------
Accumulated net realized gain from investment, written option and foreign
currency transactions 7,906,485
- ------------
Net unrealized depreciation on investments, options written and translation of assets and
liabilities denominated in foreign currencies (5,955,959)
------------
Net assets--applicable to 8,955,930 shares of beneficial interest outstanding $187,262,178
------------
------------
- ------------
Net Asset Value and Redemption Price Per Share $20.91
- ------------
Maximum Offering Price Per Share (net asset value plus sales charge of 5.75% of offering
price) $22.19
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
- ------------
Statement of Operations For the Six Months Ended March 31, 1994 (Unaudited)
<TABLE>
<S> <C>
- ------------
Investment Income Interest $388,027
- ------------
Dividends (net of withholding taxes of $6,931) 94,109
------------
Total income 482,136
- ------------
Expenses Management fees--Note 5 864,226
- ------------
Transfer and shareholder servicing agent fees--Note 5 500,323
- ------------
Service plan fees--Note 5 276,698
- ------------
Trustees' fees and expenses 64,215
- ------------
Shareholder reports 45,606
- ------------
Legal and auditing fees 19,001
- ------------
Custodian fees and expenses 6,596
- ------------
Other 57,011
------------
Total expenses 1,833,676
- ------------
Net Investment Loss (1,351,540)
- ------------
Realized and Unrealized Gain (Loss) On Investments, Options Written and
Foreign Currency Transactions Net realized gain (loss) from:
Investments 12,528,634
Closing of option contracts written (675,507)
Foreign currency transactions (14,893)
------------
Net realized gain 11,838,234
------------
Net change in unrealized appreciation or depreciation on:
Investments (15,457,484)
Translation of assets and liabilities denominated in foreign currencies (123,038)
------------
Net change (15,580,522)
------------
Net realized and unrealized loss on investments, options written and foreign
currency transactions (3,742,288)
------------
Net Decrease in Net Assets Resulting From Operations $(5,093,828)
------------
------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1994 September 30,
(Unaudited) 1993
---------------- -------------
<S> <C> <C>
- ------------
Operations Net investment loss $(1,351,540) $(1,538,653)
- ------------
Net realized gain (loss) on investments, options written and foreign
currency transactions 11,838,234 (680,679)
- ------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated
in foreign currencies (15,580,522) 13,448,220
------------ ------------
Net increase (decrease) in net assets resulting from operations (5,093,828) 11,228,888
- ------------
Dividends and Distributions to Shareholders
Distributions from net realized gain on investments, options written and
foreign currency transactions ($.169 and $.202 per share, respectively) (1,561,283) (1,873,746)
- ------------
Beneficial Interest
Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions--Note 2 (5,779,328) 60,707,523
- ------------
Net Assets Total increase (decrease) (12,434,439) 70,062,665
- ------------
Beginning of period 199,696,617 129,633,952
------------ ------------
End of period (including accumulated net investment losses of
$4,278,219 and $2,926,679, respectively) $187,262,178 $199,696,617
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
------------
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1994 September 30,
---------------- ------------------------------------------------------
(Unaudited) 1993 1992 1991(1) 1990 1989
---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
- ------------
Per Share Operating Data
Net asset value, beginning
of period $21.64 $20.25 $26.90 $11.81 $12.09 $10.63
- ------------
Income (loss) from
investment operations:
Net investment loss (.16) (.10) (.17) (.03) (.02) (.10)
Net realized and unrealized gain
(loss) on investments,
options written and foreign
currency transactions (.40) 1.69 (6.47) 15.12 (.26) 1.69
--------- --------- --------- --------- --------- ---------
Total income (loss) from
investment operations (.56) 1.59 (6.64) 15.09 (.28) 1.59
- ------------
Dividends and distributions
to shareholders:
Dividends from net
investment income -- -- (.01) -- -- (.10)
Distributions from net realized
gain on investments,
options written and foreign
currency transactions (.17) (.20) -- -- -- (.03)
--------- --------- --------- --------- --------- ---------
Total dividends and
distributions to shareholders (.17) (.20) (.01) -- -- (.13)
- ------------
Net asset value, end of period $20.91 $21.64 $20.25 $26.90 $11.81 $12.09
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
- ------------
Total Return, at Net Asset Value(2) (2.65)% 7.79% (24.70)% 127.78% (2.32)% 15.21%
- ------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $187,262 $199,697 $129,634 $103,352 $16,217 $3,872
- ------------
Average net assets
(in thousands) $212,204 $194,184 $166,144 $50,989 $8,716 $2,343
- ------------
Number of shares outstanding
at end of period (in thousands) 8,956 9,226 6,400 3,841 1,373 320
- ------------
Ratios to average net assets:
Net investment loss (1.28)%(3) (.80)% (.71)% (.18)% (.37)% (.70)%
Expenses 1.73%(3) 1.59% 1.39% 1.50% 1.78% 2.40%
- ------------
Portfolio turnover rate(4) 30.2% 41.0% 2.6% 11.2% 16.6% 17.1%
<FN>
1. Per share amounts calculated based on the weighted average number of shares
outstanding during the period.
2. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the six
months ended March 31, 1994 were $59,163,268 and $67,607,516, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
------------
Notes to Financial Statements (Unaudited)
- ------------
1. Significant Accounting Policies
Oppenheimer Global Bio-Tech Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The following is a summary of significant accounting
policies consistently followed by the Fund.
- ------------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the day
or, in the absence of sales, at values based on the closing bid or asked price
or the last sale price on the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the Board of Trustees.
Long-term debt securities which cannot be valued by the approved portfolio
pricing service are valued by averaging the mean between the bid and asked
prices obtained from two active market makers in such securities.
Short-term debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which market quotes are not
readily available are valued under procedures established by the Board of
Trustees to determine fair value in good faith. A call option is valued based
upon the last sales price on the principal exchange on which the option is
traded or, in the absence of any transactions that day, the value is based upon
the last sale on the prior trading date if it is within the spread between the
closing bid and asked prices. If the last sale price is outside the spread, the
closing bid or asked price closest to the last reported sale price is used.
- ------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The Fund generally enters into forward currency exchange contracts as a hedge,
upon the purchase or sale of a security denominated in a foreign currency. Risks
may arise from the potential inability of the counterparty to meet the terms of
the contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's results of operations.
- ------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. If the seller of the agreement defaults and the value of
the collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
- ------------
Call Options Written. The Fund may write covered call options. When an option is
written, the Fund receives a premium and becomes obligated to sell the
underlying security at a fixed price, upon exercise of the option. In writing an
option, the Fund bears the market risk of an unfavorable change in the price of
the security underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling a security at a price different from the
current market value. All securities covering call options written are held in
escrow by the custodian bank.
- ------------
Federal Income Taxes. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income tax provision is required.
- ------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the six months
ended March 31, 1994, a provision of $44,299 was made for the Fund's projected
benefit obligations, resulting in an accumulated liability of $108,120 at March
31, 1994. No payments have been made under the plan.
<PAGE>
- ------------
1. Significant Accounting Policies (continued)
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- ------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes.
- ------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended March 31, 1994 Year Ended September 30, 1993
------------------------------- -----------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 1,433,919 $33,597,662 5,810,447 $123,150,808
Distributions reinvested 63,095 1,414,298 72,297 1,686,679
Redeemed (1,767,490) (40,791,288) (3,056,478) (64,129,964)
------------ ------------ ------------ ------------
Net increase (decrease) (270,476) $(5,779,328) 2,826,266 $60,707,523
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
- ------------
3. Unrealized Gains and Losses on Investments And Options Written
At March 31, 1994, net unrealized depreciation of investments and options
written of $5,973,354 was composed of gross appreciation of $22,168,978, and
gross depreciation of $28,142,332.
- ------------
4. Call Option Activity Call option activity for the six months ended March 31,
1994 was as follows:
<TABLE>
<CAPTION>
Number Amount
of Options of Premiums
---------- -----------
<S> <C> <C>
- ------------
Options outstanding at September 30, 1993 500 $232,867
- ------------
Options written 1,000 227,556
- ------------
Options cancelled in closing purchase transactions (1,150) (298,478)
------------ ------------
Options outstanding at March 31, 1994 350 $161,945
------------ ------------
------------ ------------
</TABLE>
- ------------
5. Management Fees And Other Transactions With Affiliates
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for an annual fee of
1% on the first $50 million of net assets, .75% on the next $150 million with a
reduction of .03% on each $200 million thereafter to $800 million, and .60% on
net assets in excess of $800 million. The Manager has agreed to reimburse the
Fund if aggregate expenses (with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
For the six months ended March 31, 1994, commissions (sales charges paid by
investors) on sales of Fund shares totaled $731,051, of which $180,448 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under an approved service plan, the Fund may expend up to .25% of its
net assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other financial
institutions. During the six months ended March 31, 1994, OFDI paid $9,754 to an
affiliated broker/dealer as reimbursement for personal service and maintenance
expenses.
<PAGE>
------------
Notes to Financial Statements (Unaudited) (Continued)
- ------------
6. Restricted Securities
The Fund owns securities purchased in private placement transactions, without
registration under the Securities Act of 1933 (the Act). The securities are
valued under methods approved by the Board of Trustees as reflecting fair value.
The Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase) in restricted and illiquid securities, excluding securities
eligible for resale pursuant to Rule 144A of the Act that are determined to be
liquid by the Board of Trustees or by the Manager under Board-approved
guidelines. Restricted and illiquid securities amount to $8,801,511, or 4.7% of
the Fund's net assets, at March 31, 1994.
<TABLE>
<CAPTION>
Valuation Per Unit
Security Acquisition Date Cost Per Unit as of March 31, 1994
- ------------ ---------------- ------------- --------------------
<S> <C> <C> <C>
Cambridge Antibody Technology Ltd., Cv. 2/5/93 $33.00 $24.74
- ------------
Chiron Corp., 1.90% Cv. Sub. Nts., 11/17/00(1) 11/19/93 $85.00 $81.50
- ------------
Oxford GlycoSystems Group PLC 5/21/93 $1.94 $1.78
- ------------
Plant Genetics Systems International NV 5/27/92 $11.18 $15.38
- ------------
Quintiles Transnational Corp. 8/2/93 $17.27 $20.05
- ------------
Synaptic Pharmaceutical Corp., Cv. Series 3 1/20/93 $4.00 $3.08
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder 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, NY 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
