OPPENHEIMER GLOBAL EMERGING GROWTH FUND
Supplement dated January 25, 1996 to the
Prospectus dated January 25, 1996
The Prospectus is changed as follows:
In addition to paying dealers the regular commission for (1) sales
of Class A shares stated in the sales charge table in "Buying Class A
Shares" on page 26, (2) sales of Class B shares described in the third
paragraph in "Distribution and Service Plan for Class B Shares" on page
31, or (3) sales of Class C shares described in the third paragraph in
"Distribution and Service Plan for Class C Shares" on page 33, the
Distributor will pay additional commission to each participating broker,
dealer and financial institution that has a sales agreement with the
Distributor (these are referred to as "participating firms") for Class A,
B and C shares of the Fund sold in "qualifying transactions" (the
"promotion"). The additional commission will be .75% of the offering
price of shares of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If the
additional commission is paid on the sale of Class A shares of $1 million
or more and those shares are redeemed within 13 months from the end of the
month in which they were purchased, the participating firm will be
required to return the additional commission.
"Qualifying transactions" are sales of Class A, Class B and/or Class
C shares of any one or more of the Oppenheimer funds (except money market
funds and tax-exempt funds) for (1) new Individual Retirement Accounts
("IRAs"), using the OppenheimerFunds prototype IRA agreement, including
rollover IRAs, SEP IRAs and SAR-SEP IRAs, where the IRA is established and
the purchase payment is received during the period from January 1, 1996
through April 15, 1996 (the "promotion period") or, (2) IRAs using the
A.G. Edwards & Sons, Inc. prototype IRA agreement, including rollover
IRAs, SEP IRAs and SAR-SEP IRAs, where the purchase payment is received
during the promotion period. "Qualifying transactions" also include
purchases of shares of Oppenheimer funds for existing OppenheimerFunds
or A.G. Edwards & Sons, Inc. prototype IRAs, rollover IRAs, SEP IRAs and
SAR-SEP IRAs effected through a rollover from an investor, or through a
direct rollover or trustee-to-trustee transfer from another retirement
plan trustee, of IRA assets or other employee benefit plan assets from an
account or investment other than an account or investment in the
Oppenheimer funds. To qualify, the payment for the shares purchased for
a rollover to an OppenheimerFunds prototype IRA or for a rollover, direct
rollover or trustee-to-trustee transfer to an A.G. Edwards & Sons, Inc.
prototype IRA must be received during the promotion period, or the
acceptance of a direct rollover or trustee-to-trustee transfer to an
OppenheimerFunds prototype IRA must be acknowledged by the trustee of the
OppenheimerFunds prototype IRA during the promotion period. "Qualifying
transactions" do not include (1) purchases of Class A shares intended but
not yet made under a Letter of Intent, and (2) purchases of Class A,
Class B and/or Class C shares with the redemption proceeds from an
existing OppenheimerFunds account.
January 25, 1996
OPPENHEIMER
Global Emerging Growth Fund
Prospectus dated January 25, 1996
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.
In seeking its objective, the Fund emphasizes investments in emerging
growth companies in the U.S. and foreign countries that offer the
potential for growth of earnings or capital. In an uncertain investment
environment, the Fund may stress defensive investment methods. The Fund
may also use "hedging" instruments. As a "global" fund, the Fund normally
invests in the U.S. and at least three foreign countries and may have a
substantial portion of its assets invested in foreign securities.
Some investment techniques the Fund uses may be considered to be
speculative investment methods that may increase the risks of investing
in the Fund and may also increase the Fund's operating costs. You should
carefully review the risks associated with an investment in the Fund. The
Fund is designed for investors who are willing to accept greater risks of
loss in the hopes of greater gains. Please refer to "Investment Policies
and Strategies" for more information about the types of securities the
Fund invests in, its investment methods and the risks of investing in the
Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the January 25, 1996, Statement of Additional Information. For a
free copy, call OppenheimerFunds Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION 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.
Contents
A B O U T T H E F U N D
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
17 How the Fund is Managed
19 Performance of the Fund
A B O U T Y O U R A C C O U N T
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
35 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
37 How to Sell Shares
By Mail
By Telephone
38 How to Exchange Shares
40 Shareholder Account Rules and Policies
42 Dividends, Capital Gains and Taxes
A-1 Appendix: Special Sales Charge Arrangements
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are subtracted from the Fund's assets to calculate the
Fund's net asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1995.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 22 through 43 for an explanation of how and when these charges
apply.
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------
Maximum Sales Charge 5.75% None None
on Purchases (as a %
of offering price)
- -------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- -------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if shares are
(as a % of the lower of year, declining redeemed within
the original purchase to 1% in the 12 months of
price or redemption sixth year and purchase(2)
proceeds) eliminated
thereafter(2)
- -------------------------------------------------------------------------
Exchange Fee None None None
(1) If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may have
to pay a sales charge of up to 1.0% 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 - Class A Shares," below.
(2) See "How to Buy Shares - Class B Shares" and "How to Buy Shares -
Class C Shares," below for more information on contingent deferred sales
charges.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, OppenheimerFunds,
Inc. (referred to in this Prospectus as the "Manager"). The rates of the
Manager's fees are set forth in "How the Fund is Managed," below. The
Fund has other regular expenses for services, such as transfer agent fees,
custodial fees paid to the bank that holds its portfolio securities, audit
fees and legal expenses. Those expenses are detailed in the Fund's
Financial Statements in the Statement of Additional Information.
The numbers in the table below 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 each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees"
for Class A Shares are Service Plan Fees (the maximum fee is 0.25% of
average annual net assets of that class). For Class B and Class C shares,
the Distribution and Service Plan Fees are service fees (the fee is 0.25%
of average annual net assets of that class) and the asset-based sales
charge of 0.75%.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class B and Class C shares were not publicly
offered during the Fund's fiscal year ended September 30, 1995.
Accordingly, the Annual Fund Operating Expenses shown for Class B and
Class C shares are estimates of amounts that would have been payable if
Class B and Class C shares had been outstanding during that fiscal year.
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------
Management Fees 0.83% 0.83% 0.83%
- -------------------------------------------------------------------
12b-1 Distribution 0.24% 1.00% 1.00%
Plan Fees
- -------------------------------------------------------------------
Other Expenses 0.69% 0.69% 0.69%
- -------------------------------------------------------------------
Total Fund 1.76% 2.52% 2.52%
Operating Expenses
- 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 each class of shares
of the Fund, that the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses chart above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------
Class A Shares $74 $110 $147 $253
Class B Shares $76 $108 $154 $250
Class C Shares $36 $ 78 $134 $286
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------
Class A Shares $74 $110 $147 $253
Class B Shares $26 $ 78 $134 $250
Class C Shares $26 $ 78 $134 $286
*The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and contingent deferred sales charge, long-term
Class B and Class C shareholders could pay the economic equivalent of an
amount greater than the maximum front-end sales charge allowed under
applicable regulations. For Class B shareholders, the automatic conversion
of Class B shares to Class A shares is designed to minimize the likelihood
that this will occur. Please refer to "How to Buy Shares - Buying Class
B Shares" and "How to Buy Shares - Buying Class C Shares" beginning on
pages 30 and 33, respectively, for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to aggressively seek capital appreciation (that is, growth
in the value of its shares). It does not invest to earn current income
to pay to shareholders.
- What Does the Fund Invest In? The Fund emphasizes investment in
common stocks or other equity securities, including convertible
securities, of emerging growth companies located in the United States and
foreign countries. The Fund may have a substantial amount of its
investments in foreign securities. The Fund may hold warrants and rights.
The Fund may also use hedging instruments and some derivative investments
to try to manage investment risks. These investments are more fully
explained in "Investment Objective and Policies," starting on page 10.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a subsidiary)
manages investment company portfolios having over $40 billion in assets
at December 31, 1995. The Manager is paid an advisory fee by the Fund,
based on its net assets. The Fund's portfolio manager, who is employed
by the Manager and is primarily responsible for the selection of the
Fund's securities, is George Evans. The Fund's Board of Trustees, elected
by shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page 17
for more information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
It is important to remember that the Fund is an aggressive growth fund
designed for long-term investing and is not designed for investors seeking
income or conservation of capital. The Fund's investments in stocks are
subject to changes in their value from a number of factors such as changes
in general bond and stock market movements, or the change in value of
particular stocks because of an event affecting the issuer.
The Fund's investments in foreign securities are subject to
additional risks associated with investing abroad, such as the effect of
currency rate changes on stock values. These changes affect the value of
the Fund's investments and its price per share.
In the Oppenheimer funds spectrum, the Fund is generally expected to
be more volatile than the other stock funds, the income and growth funds,
and the more conservative income funds. While the Manager tries to reduce
risks by diversifying investments, by carefully researching securities
before they are purchased for the portfolio, and in some cases by using
hedging techniques, there is no guarantee of success in achieving the
Fund's objective and your shares may be worth more or less than their
original cost when you redeem them. Please refer to "Investment Objective
and Policies" starting on page 10 for a more complete discussion of the
Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
starting on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor three classes of shares. All classes have the same
investment portfolio but different expenses. Class A shares are offered
with a front-end sales charge, starting at 5.75% and reduced for larger
purchases. Class B and Class C shares are offered without a front-end
sales charge, but may be subject to a contingent deferred sales charge if
redeemed within 6 years or 12 months of purchase, respectively. There is
also an annual asset-based sales charge on Class B and Class C shares.
Please review "How to Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by a
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How to Sell Shares" on page ____. The Fund also
offers exchange privileges to other Oppenheimer funds, described in "How
to Exchange Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance by
quoting its average annual total return and cumulative total return, which
measure historical performance. Those returns can be compared to the
returns (over similar periods) of other funds. Of course, other funds may
have different objectives, investments, and levels of risk. The Fund's
performance can also be compared to a broad-based market index, which we
have done on page ____. Please remember that past performance does not
guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data, expense ratios and
other data based on the Fund's average net assets. This information 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, 1995, is included in the Statement of Additional
Information. Class B and Class C shares were not publicly offered during
the periods shown. Accordingly, no information on Class B and Class C
shares is included in the table or in the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991(2) 1990 1989 1988(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $ 19.35 $ 21.64 $ 20.25 $ 26.90 $ 11.81 $ 12.09 $10.63 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 (.01) (.10) (.17) (.03) (.02) (.10) .14
Net realized and unrealized
gain (loss) on investments,
options written and
foreign currency (1.33) (2.11) 1.69 (6.47) 15.12 (.26) 1.69 .49
-------- -------- -------- -------- -------- ------- ------ ------
Total income (loss) from
investment operations (1.32) (2.12) 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,
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 $ 18.03 $ 19.35 $ 21.64 $ 20.25 $ 26.90 $ 11.81 $12.09 $10.63
-------- -------- -------- -------- -------- ------- ------ ------
-------- -------- -------- -------- -------- ------- ------ ------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(3) (6.82)% (9.91)% 7.79% (24.70)% 127.78% (2.32)%
15.21% 6.30%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $139,823 $163,295 $199,697 $129,634 $103,352 $16,217 $3,872 $1,921
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $148,378 $190,984 $194,184 $166,144 $ 50,989 $ 8,716 $2,343 $1,394
- -----------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 7,756 8,437 9,226 6,400 3,841 1,373 320 181
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .07% (1.05)% (.80)% (.71)% (.18)% (.37)% (.70)% 1.41%(4)
Expenses 1.76% 1.77% 1.59% 1.39% 1.50% 1.78% 2.40% 2.06%(4)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 160.3% 54.7% 41.0% 2.6% 11.2% 16.6% 17.1% 1.7%
</TABLE>
1. 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.
2. Per share amounts calculated based on the weighted average number of
shares outstanding during the period.
3. 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. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended September 30, 1995 were
$220,834,060 and $209,019,328, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund invests its assets to aggressively seek capital
appreciation.
Investment Policies and Strategies. The Fund seeks its investment
objective by emphasizing investment in common stocks or other equity
securities, including securities that are convertible into common stock.
The Fund may hold warrants and rights. These securities may be traded on
securities exchanges or in over-the-counter markets.
Under normal market conditions, the Fund 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. The Fund may invest
a substantial amount of its assets in foreign securities, discussed below.
There is also an explanation of "emerging growth" companies below.
The Fund's portfolio manager currently uses an investment strategy
in selecting foreign and domestic securities that examines the effects of
worldwide trends on the growth of various business sectors. These trends,
or "global themes," currently include telecommunications expansion,
emerging consumer markets, infrastructure development, natural resource
use and development, corporate restructuring, capital market development
in foreign countries, healthcare expansion and global integration. These
trends, which may affect the growth of companies having businesses in
these sectors or which are affected by their development, may suggest
opportunities for investing the Fund's assets. The Manager does not
invest a fixed amount of the Fund's assets in any one sector, and these
themes and this approach may change over time.
When investing the Fund's assets, the Manager considers many factors,
including general economic conditions abroad relative to those in 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 or derivative investments, described below.
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 growth. For example,
when the economy of a country 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 market or economic conditions are unstable, the Fund may invest
substantial amounts of its assets in debt securities, such as money market
instruments or government securities, for temporary defensive purposes,
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.
Because of the types of companies in which the Fund invests and the
investment techniques the Fund uses, some of which may be speculative, the
Fund is designed for investors 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 greater capital appreciation. Investing for capital
appreciation entails the risk of loss of all or part of your investment.
- What Are "Emerging Growth" Companies? The Fund emphasizes
investments in companies that offer the potential for accelerated earnings
or revenues growth. These are "emerging growth companies," which tend to
be newer, smaller companies that are developing new products or services
or that are expanding into new markets for their products. However,
emerging growth companies can be any size and can be in any industry, and
may include established companies entering a new growth cycle. Emerging
growth companies 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.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
- Stock Investment Risks. Because the Fund may invest a substantial
portion of its assets in stocks, the value of the Fund's portfolio will
be affected by changes in the stock markets. At times, the stock markets
can be volatile, and stock prices can change substantially. This market
risk will affect the Fund's net asset values per share, which will
fluctuate as the values of the Fund's portfolio securities change. Not
all stock prices change uniformly or at the same time, not all stock
markets move in the same direction at the same time, and other factors can
affect a particular stock's prices (for example, poor earnings reports by
an issuer, loss of major customers, major litigation against an issuer,
and changes in government regulations affecting an industry). Not all of
these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the stock of
any one company and by not investing too great a percentage of the Fund's
assets in any one company. 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. Because
changes in market prices can occur at any time, there is no assurance that
the Fund will achieve its investment objective, and when you redeem your
shares, they may be worth more or less than what you paid for them.
- Foreign Securities. The Fund may invest a substantial amount of its
assets in foreign securities. The Fund may purchase securities issued or
guaranteed by foreign companies or foreign governments, including foreign
government agencies. The Fund may buy securities of companies in any
country, developed or underdeveloped. Other than the requirement that the
Fund will normally invest at least 65% of its total assets in emerging
growth companies located in the U.S. and at least three foreign countries,
there is no limit on the amount of the Fund's assets that may be invested
in foreign securities. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities.
- Foreign securities have special risks. There are special risks in
investing in foreign securities. Because the Fund may buy securities
denominated in foreign currencies or traded primarily in foreign markets,
a change in the value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in
that foreign currency. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
to be highly speculative. 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 other factors,
including 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.
In addition, it is generally more difficult to obtain court judgments
outside the U.S. if the Fund were to sue a foreign issuer or broker.
Additional costs may be incurred because foreign brokerage commissions are
generally higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad.
- Warrants and Rights. Warrants basically are options to purchase
stock at set prices that are valid for a limited period of time. Rights
are options to purchase securities, normally granted to current
stockholders by the issuer. The Fund may invest up to 5% of its net
assets in warrants or rights. That 5% does not apply to warrants or
rights the Fund has acquired as part of units with other securities or
that were attached to other securities. No more than 2% of the Fund's net
assets may be invested in warrants that are not listed on either the New
York or American Stock Exchanges. For further details about these
investments, please refer to "Warrants and Rights" in the Statement of
Additional Information.
- Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." The Fund ordinarily does not engage in
short-term trading to try to achieve its objective. As a result, the
Fund's portfolio turnover is not expected to be more than 100% each year
(although it was higher for the fiscal year ended September 30, 1995).
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 as
a "regulated investment company" under the Internal Revenue Code for tax
deductions for dividends and capital gain distributions the Fund pays to
shareholders. 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.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- Special Risks - Borrowing for Leverage. The Fund may borrow up to
10% of the value of its net assets from banks on an unsecured basis to buy
securities. This is a speculative investment method known as "leverage."
This technique may subject the Fund to greater risks and costs than funds
that do not borrow. These risks may include the possibility that the
Fund's net asset value per share will fluctuate more than funds that don't
borrow. Borrowing is subject to regulatory limits under the Investment
Company Act, described in more detail in the Statement of Additional
Information.
- 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, counting the operations of
any predecessors. Securities of these companies may have limited
liquidity (which means that the Fund may have difficulty selling them at
an acceptable price when it wants to) and the prices of these securities
may be volatile. 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 these
issuers.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and broadly-based stock indices. These
are all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on the use
of them, described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations. Other hedging strategies, such as
buying futures and call options, tend to increase the Fund's exposure to
the securities market.
Forward contracts are used to try to manage foreign currency risks
on the Fund's foreign investments. Foreign currency options are used to
try to protect against declines in the dollar value of foreign securities
the Fund owns, or to protect against an increase in the dollar cost of
buying foreign securities. Writing covered call options may also provide
income to the Fund for liquidity purposes or to raise cash to distribute
to shareholders.
- Futures. The Fund may buy and sell futures contracts that relate
to broadly-based stock indices (these are referred to as Stock Index
Futures) or foreign currencies (these are called Forward Contracts and are
discussed below).
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls). Calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on the
automated quotation system of NASDAQ, or traded in the over-the-counter
market. In the case of puts and calls on a foreign currency, they must
be traded on a securities or commodities exchange or in the over-the-
counter market, or must be quoted by recognized dealers in those options.
A call or put option may not be purchased by the Fund 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 calls only on securities, broadly-based stock
indices, foreign currencies or Stock Index Futures. The Fund may buy
calls to terminate its obligation on a call the Fund previously wrote.
The Fund may write (that is, sell) covered call options. Each call
the Fund writes must be "covered" while it is outstanding. That means the
Fund must own the investment on which the call was written or it must own
other securities that are acceptable for the escrow arrangements required
for calls. The Fund may write calls on Futures contracts it owns, but
these calls must be covered by securities or other liquid assets the Fund
owns and segregated to enable it to satisfy its obligations if the call
is exercised. After the Fund writes a call, not more than 25% of the
Fund's assets may be subject to calls. When the Fund writes a call, it
receives cash (called a premium). The call gives the buyer the ability
to buy the investment on which the call was written from the Fund at the
call price during the period in which the call may be exercised. If the
value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised, while the Fund keeps the
cash premium (and the investment).
The Fund may purchase and sell put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set price
to a seller of a put on that investment. The Fund can buy only those puts
that relate to securities that the Fund owns, broadly-based stock indices,
foreign currencies or Stock Index Futures. The Fund can buy a put on a
Stock Index Future whether or not the Fund owns the particular Stock Index
Future in its portfolio.
The Fund may write puts on securities, broadly-based stock indices,
foreign currencies or Stock Index Futures, but only if those puts are
covered by segregated liquid assets. The Fund will not write a put if it
will require more than 25% of the Fund's total assets to be segregated.
- Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to try to "lock in" the
U.S. dollar price of a security denominated in a foreign currency that the
Fund has bought or sold, or to protect against possible losses from
changes in the relative values of the U.S. dollar and foreign currency.
The Fund limits its exposure in foreign currency exchange contracts in a
particular foreign currency to the amount of its assets denominated in
that currency or in a closely-correlated currency.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell
the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price. In
writing a put, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price. The use of forward
contracts may reduce the gain that would otherwise result from a change
in the relationship between the U.S. dollar and a foreign currency. These
risks are described in greater detail in the Statement of Additional
Information.
- Derivative Investments. In general, a "derivative investment" is
a specially-designed investment. Its performance is linked to the
performance of another investment or security such as an option, future,
index or currency. The Fund can invest in a number of different kinds of
"derivative investments." They are used in some cases for hedging
purposes, and in others because they offer the potential for increased
income and principal value. In the broadest sense, exchange-traded
options and futures contracts (please refer to "Hedging," above) may be
considered "derivative" investments.
There are special risks in investing in derivative investments. The
company issuing the investment might not pay the amount due on the
maturity of the instrument. Also, the underlying investment or security
on which the derivative is based might not perform the way the Manager
expected it to perform. These risks mean that the Fund can lose part of
the value of its investments, which will affect the Fund's share price.
Certain derivative investments held by the Fund may trade in the over-the-
counter markets and may be "illiquid." If that is the case, the Fund's
investment in them will be limited, as discussed in "Illiquid and
Restricted Securities," below.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933.
The Fund will not invest more than 10% of its net assets in illiquid
or restricted securities (that limit may increase to 15% if certain state
laws are changed or the Fund's shares are no longer sold in those states).
The Fund's percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional purchasers.
- Loans of Portfolio Investments. To raise cash for liquidity
purposes, the Fund may lend its portfolio investments to brokers, dealers
and other financial institutions. The Fund must receive collateral for
such loans. As a fundamental policy, these loans are limited to not more
than 25% of the value of the Fund's total assets and are subject to other
conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it
does, the value of securities loaned is not expected to exceed 5% of the
value of the Fund's total assets in the current year.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. They are used primarily for liquidity purposes. In a
repurchase transaction, the Fund buys a security and simultaneously sells
it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Fund will not enter into
a repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven days.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less.
- Short Sales "Against-the-Box." In a short sale, the seller does
not own the security that is sold, but normally borrows the security to
fulfill its delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Fund may not
sell securities short except in collateralized transactions referred to
as short sales "against-the-box," where the Fund owns an equivalent amount
of the securities sold short. This technique is primarily used for tax
purposes. 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, political 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. These may be rated or unrated bonds and
debentures, 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. Generally, short-term debt securities (which are
securities maturing in one year or less from the date of purchase) will
be emphasized for defensive purposes.
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:
- Invest in securities of any one issuer (other than the U.S.
Government or its agencies or instrumentalities) if immediately thereafter
more than 5% of the Fund's assets would be invested in securities of that
issuer.
- With respect to 75% of its assets, invest in securities of any one
issuer (other than the U.S. Government or 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.
- Borrow money in excess of 10% of the value of its net assets.
- Deviate from the percentage restrictions listed under "Borrowing
for Leverage", "Warrants and Rights," "Loans of Portfolio Investments" 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 regulatory percentage limits that apply
to borrowing, described in the Statement of Additional Information) apply
only at the time the Fund purchases a security. The Fund need not dispose
of a security merely because the size of the Fund's assets has 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,
under Massachusetts law, for protecting the interests of shareholders. The
Trustees periodically meet 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 officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to
remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All three classes invest in the same investment
portfolio. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Fund's
investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees,
under an Investment Advisory Agreement which states the Manager's
responsibilities. The Agreement establishes the fees paid by the Fund to
the Manager, 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 manages investment companies,
including other Oppenheimer funds, with assets of more than $40 billion
as of December 31, 1995, and with more than 2.8 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.
- Portfolio Manager. The Portfolio Manager of the Fund is George
Evans. Mr. Evans is a Vice President of the Manager. He has been the
person principally responsible for the day-to-day management of the Fund's
portfolio since December 4, 1995. During the past five years, he has also
served as an Associate Portfolio Manager for other Oppenheimer funds and
formerly served as an international securities portfolio manager/analyst
with Brown Brothers Harriman & Co.
- 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. The Fund's
management fee for its last fiscal year ended September 30, 1995 was 0.83%
of average annual net assets of the Fund.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. 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,
brokers and other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts
as the Fund's Distributor. The Distributor also distributes the shares
of the other Oppenheimer funds and is sub-distributor for funds managed
by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund on an "at-cost" basis. It also acts as the
shareholder serving agent for the other Oppenheimer funds. Shareholders
should direct inquiries about their accounts to the Transfer Agent at the
address and toll-free number shown below in this Prospectus and on the
back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return" and "average annual total return" to illustrate its performance.
The performance of each class of shares is shown separately, because the
performance of each class will usually be different as a result of the
different kinds of expenses each class bears. These returns measure the
performance of a hypothetical account in the Fund over various periods,
and do not show the performance of each shareholder's account (which will
vary if any dividends are received in cash or shares are sold or
purchased). This performance information may be useful to help you see how
your investment has done and to compare it to other funds or to a market
index, as we have done below.
It is important to understand that the Fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio and
expenses and which class of shares you purchase.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. When
total returns are shown for Class B or Class C shares, they reflect the
effect of the contingent deferred sales charge that applies to the period
for which total return is shown. Total returns may also be quoted "at net
asset value," without including the sales charge, and those returns would
be reduced if sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its fiscal year ended September 30, 1995,
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, 1995, in the Manager's view two primary economic
factors caused the U.S. and foreign markets to move in opposite directions
- -- the devaluation of the Mexican peso and weakness in the U.S. dollar.
The Manager sought to reduce the impact on the Fund's portfolio of sales
of Mexican securities by other investors late in 1995, and thereafter
began to make new investments in the Latin American markets in
anticipation that the declines in these markets had ended. The Manager
also sold some emerging market stock and used the proceeds early in 1995
to increase the Fund's domestic exposure with a focus on technology and
financial stocks. The Manager also reduced the Fund's position in U.S.
technology stocks after their dramatic run-up, using the proceeds to
increase its position in Japanese technology stocks.
- Comparing the Fund's Performance to the Market. The graph below
shows the performance of a hypothetical $10,000 investment in Class A
shares of the Fund held from the inception of the Fund (December 30, 1987)
until September 30, 1995. Class B and Class C shares were not publicly
offered during the fiscal year ended September 30, 1995, and consequently,
no information on Class B or Class C shares is presented in this graph.
Because of the Fund's global investment focus, the Fund's performance
is compared to the performance of the Morgan Stanley World Index, an
unmanaged index of issuers listed on the stock exchanges of 20 foreign
countries and the United States. It is widely recognized as a measure of
global stock market performance. 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 any one index
and that index data does not reflect any assessment of the risk of the
investments included in the index.
Comparison of a Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Global Emerging Growth Fund (Class A) and Morgan Stanley World
Index
(GRAPH)
Average Annual Total Returns of Class A Shares of the Fund at 9/30/95
1-Year 5-Year Life1
- -12.18% 7.90% 7.49%
1 The inception date of the Fund was 12/30/87. The performance information
in the graph for the Morgan Stanley World Index begins on 12/31/87. The
average annual total returns and the ending account value for Class A
shares in the graph reflect reinvestment of all dividends and capital
gains distributions and are shown net of the 5.75% maximum initial sales
charge.
Past performance is not predictive of future performance.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge which will vary depending on the amount
you invested. Sales charges are described in "Buying Class A Shares,"
below.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years of
buying them, you will normally pay a contingent deferred sales charge.
That sales charge varies depending on how long you own your shares. It
is described in "Buying Class B Shares" below.
- Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1%. It is described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase only one class
of shares and not a combination of shares of different classes.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term investment. While future financial needs cannot
be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares.
The effect of the sales charge over time, using our assumptions, will
generally depend on the amount invested. Because of the effect of class-
based expenses, your choice will also depend on how much you plan to
invest. For example, the reduced sales charges available for larger
purchases of Class A shares may, over time, offset the effect of paying
an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account) compared to
the effect over time of higher class-based expenses on shares of Class B
or C, for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge on
Class C shares will have a greater economic impact on your account over
the longer term than the reduced front-end sales charge available for
larger purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or $1 million or more of Class
B or Class C shares, respectively, from a single investor.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charge available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumptions stated above. Therefore, these examples should
not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, or other features (such as Automatic Withdrawal Plans) might
not be advisable (because of the effect of the contingent deferred sales
charge) for Class B or Class C shareholders, you should carefully review
how you plan to use your investment account before deciding which class
of shares to buy. For example, share certificates are not available for
Class B or Class C shares, and if you are considering using your shares
as collateral for a loan, that may be a factor to consider. Additionally,
the dividends payable to Class B and Class C shareholders will be reduced
by the additional expenses borne solely by those classes, such as the
asset-based sales charge to which Class B and Class C shares are subject,
as described below and in the Statement of Additional Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class rather than another class. It is important that investors
understand that the purpose of the contingent deferred sales charges and
asset-based sales charges for Class B and Class C shares are the same as
the purpose of the front-end sales charge on sales of Class A shares: that
is, to compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
- 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. 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. 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 Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- 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. When you buy shares, be sure to
specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- 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
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the application, the
Distributor will act as your agent in buying the shares. However, it is
recommended that you discuss your investment first with a financial
advisor, to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to have the Transfer Agent send redemption proceeds, or to transmit
dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to "AccountLink"
below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are 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 (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day The New York Stock Exchange closes, which is normally
4:00 P.M., but may be earlier on some days (all references to time in this
Prospectus mean "New York time"). The net asset value of each class of
shares is determined as of that time on each day the New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange 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, in its sole discretion, may reject any purchase order for the
Fund's shares.
Special Sales Charge Arrangements for Certain Persons. The Appendix to
this Prospectus sets forth conditions for the waiver of, or exemption
from, sales charges or the special sales charge rates that apply to
purchases of shares of the Fund (including purchases by exchange) by a
person who was a shareholder of one of the Former Quest for Value Funds
(as defined in that Appendix).
Buying Class A Shares. Class A shares are sold at their offering price
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
As Percentage As Percentage As Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ----------------------------------------------------------------------
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
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.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
- purchases aggregating $1 million or more; or
- purchases by an OppenheimerFunds prototype 401(k) plan that (1)
buys shares costing $500,000 or more, or (2) has, at the time of purchase,
100 or more eligible participants, or (3) certifies that it projects to
have annual plan purchases of $200,000 or more.
Shares of any of the other Oppenheimer funds that offer only one
class of shares that has no class designation are considered "Class A"
shares for this purpose. 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. That commission will be paid only on the
amount of those purchases in excess of $1 million ($500,000, for purchases
by OppenheimerFunds prototype 401(k) plans) that were not previously
subject to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
either (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions), or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all Oppenheimer funds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's exchange privilege (described below). However,
if the shares acquired by exchange are redeemed within 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 Oppenheimer funds
(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 Class A Share Purchases. You may be eligible
to buy Class A shares of the Fund at reduced sales charge rates in one or
more of the following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or for trust or custodial accounts on behalf of your
children who are minors. A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account (including one or more employee
benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also include Class A and Class B shares of other Oppenheimer funds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
Oppenheimer funds. The 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 Oppenheimer funds are listed in "Reduced Sales Charges" in
the Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge rate for the Class A shares purchased during that
period. This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" 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;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and 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);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor (1) providing specifically
for the use of shares of the Fund in particular investment products made
available to their clients (those clients may be charged a transaction
fee by their dealer, broker or adviser for the purchase or sale of Fund
shares) or (2) to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
- directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
- accounts for which Oppenheimer Capital is the investment adviser
(the Distributor must be advised of this arrangement) and persons who
are directors or trustees of the company or trust which is the
beneficial owner of such accounts;
- any unit investment trust that has entered into an appropriate
agreement with the Distributor;
- a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and C TRAC-2000 program on November 24,
1995; or
- qualified retirement plans that had agreed with the former Quest
for Value Advisors to purchase shares of any of the Former Quest for
Value Funds at net asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund clearinghouse, provided
that such arrangements are consummated and share purchases commence
by March 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor;
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver.
- shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series;
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans");
- to return excess contributions made to Retirement Plans;
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below);
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees in writing to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if the shares are
redeemed within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or purposes: (1) following death or disability
(as defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the participant's
account was established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
shareholder accounts that hold Class A shares of the Fund. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of the Fund. The Distributor
uses all of those fees to compensate dealers, brokers, banks and other
financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares and
to reimburse itself for its other expenditures under the Plan (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 Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its expenses
of providing distribution-related services to the Fund in connection with
the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charges"
below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to Charge)
0 - 1 5.0%
- -------------------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------------
2 - 3 3.0%
- -------------------------------------------------------------------------
3 - 4 3.0%
- -------------------------------------------------------------------------
4 - 5 2.0%
- -------------------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------------
6 and following None
- -------------------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B,
and Class C Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per
year. Both fees are computed on the average annual net assets of Class
B shares, determined as of the close of each regular business day. The
asset-based sales charge allows investors to buy Class B shares without
a front-end sales charge while allowing the Distributor to compensate
dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fee increase
Class B expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class B shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge or service fee
to the Distributor for distributing Class B shares before the Plan was
terminated.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to shares
redeemed in certain circumstances as described below. The reasons for
this policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B and
Class C contingent deferred sales charges will be waived for redemptions
of shares in the following cases:
- distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic Withdrawal
Plan after the participant reaches age 59-1/2, as long as the payments are
no more than 10% of the account value annually (measured from the date the
Transfer Agent receives the request), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by
the Social Security Administration);
- returns of excess contributions to Retirement Plans;
- distributions from IRAs (including SEP-IRAs and SAR/SEP accounts)
before the participant is age 59-1/2, and distributions from 403(b)(7)
custodial plans or pension or profit sharing plans before the participant
is age 59-1/2 but only after the participant has separated from service,
if the distributions are made in substantially equal periodic payments
over the life (or life expectancy) of the participant or the joint lives
(or joint life and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must comply
with other requirements for such distributions under the Internal Revenue
Code and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent receives the request);
- shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
- distributions from OppenheimerFunds prototype 401(k) plans (1) for
hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; or
- shares issued in plans of reorganization to which the Fund is a
party.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B and
Class C Sales Charges."
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those services provided under the Class A Service
Plan, described above. The asset-based sales charge and service fees
increase Class C expenses by 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year, after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The
distributor retains the asset-based sales charge during the first year
shares are outstanding. The services rendered by the Distributor include
paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class C shares. The Distributor
plans to pay the asset-based sales charge as an ongoing commission to the
dealer on Class C shares that have been outstanding for a year or more.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge and/or
service fee to the Distributor for distributing Class C shares before the
Plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges should 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 by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
- 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 Oppenheimer fund 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
Oppenheimer fund account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $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. Automatic withdrawal Plans are not advisable for Class B and Class
C shares subject to a contingent deferred sales charge ("CDSC") unless
waivers of the CDSC apply. 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 automatically an amount you establish in advance for shares of
up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each Oppenheimer funds account is $25. These exchanges are subject
to the terms of the exchange privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B shares of the Fund, you have up to 6 months to reinvest all or
part of the redemption proceeds in Class A shares of the Fund or other
Oppenheimer funds without paying a sales charge. This privilege applies
only to Class A shares that you purchased subject to an initial sales
charge and to Class A or Class B shares on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to Class
C shares. 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, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
- 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account 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 an Automatic Withdrawal Plan 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 redemption check is not payable to all shareholders listed on
the account statement
- The redemption check is not sent to the address of record on your
account statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are 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 on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held 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 statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone in any 7-day period. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.
- 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.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- 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 Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares, which are considered to be Class A shares for this purpose. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at one of 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 Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. The list can change
from time to time.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to seven days if it determines it would be disadvantaged by a same-day
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 portfolio 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.
- For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. For more information about
taxes affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
- 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 for each class of shares
as of the close of The New York Stock Exchange, which is normally 4:00
P.M., but may be earlier on some days, on each day the Exchange is open
by dividing the value of the Fund's net assets attributable to a class by
the number of shares of that class that are outstanding. The 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 and obligations for which market values cannot be
readily obtained. 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 neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the values of the securities in the Fund's portfolio fluctuate and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. 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. For accounts registered
in the name of a broker/dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by 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 "How to Sell
Shares" in 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 Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How to Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares 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. The Board may also cause the Fund to
declare dividends after the close of the Fund's fiscal year (which ends
September 30th). Because the Fund does not have an objective of seeking
current income, the amounts of dividends it pays, if any, will likely be
small. Dividends paid with respect to Class A shares will generally be
higher than for Class B and Class C shares because expenses allocable to
Class B and Class C shares will generally be higher than for Class A
shares. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains and the Fund may make
supplemental distributions of capital gains following the end of its
fiscal year. Short-term capital gains are treated as dividends for tax
purposes. Long-term capital gains will be separately identified in the
tax information the Fund sends you after the end of the year. There can
be no assurance that the Fund will pay any capital gains distributions in
a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your 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 Oppenheimer Fund Account.
You can reinvest all distributions in another Oppenheimer fund account you
have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you have held
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Distributions are
subject to federal income tax and may be subject to state or local taxes.
Your distributions are taxable when paid, whether you reinvest them in
additional shares or 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.
When more than 50% of its assets are invested in foreign securities
at the end of any fiscal year, the Fund may elect that Section 853 of the
Internal Revenue Code will apply to it to permit shareholders to take a
credit (or a deduction) on their own federal income tax returns for
foreign income taxes paid by the Fund. The Statement of Additional
Information contains further discussion of this tax provision.
- "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. Generally speaking, 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. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
APPENDIX
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class
A, Class B and Class C shares of the Fund described elsewhere in this
Prospectus are modified as described below for those shareholders of (i)
Quest for Value Fund, Inc., Quest for Value Growth and Income Fund, Quest
for Value Opportunity Fund, Quest for Value Small Capitalization Fund and
Quest for Value Global Equity Fund, Inc. on November 24, 1995, when
OppenheimerFunds, Inc. became the investment adviser to those funds, and
(ii) Quest for Value U.S. Government Income Fund, Quest for Value
Investment Quality Income Fund, Quest for Value Global Income Fund, Quest
for Value New York Tax-Exempt Fund, Quest for Value National Tax-Exempt
Fund and Quest for Value California Tax-Exempt Fund when those funds
merged into various Oppenheimer funds on November 24, 1995. The funds
listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund (i)
acquired by such shareholder pursuant to an exchange of shares of one of
the Oppenheimer funds that was one of the Former Quest for Value Funds or
(ii) received by such shareholder pursuant to the merger of any of the
Former Quest for Value Funds into an Oppenheimer fund on November 24,
1995.
Class A Sales Charges
- - Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
- - Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for
Class A shares purchased by a "Qualified Retirement Plan" through a single
broker, dealer or financial institution, or by members of "Associations"
formed for any purpose other than the purchase of securities if that
Qualified Retirement Plan or that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this purpose
only, a "Qualified Retirement Plan" includes any 401(k) plan, 403(b) plan,
and SEP/IRA or IRA plan for employees of a single employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
9 or fewer 2.50% 2.56% 2.00%
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement plans and Associations having
50 or more eligible employees or members, there is no initial sales charge
on purchases of Class A shares, but those shares are subject to the Class
A contingent deferred sales charge described on pages 26 to 28 of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rates in the table based on the number of eligible employees
in a Qualified Retirement Plan or members of an Association or the sales
charge rate that applies under the Rights of Accumulation described above
in the Prospectus. In addition, purchases by 401(k) plans that are
Qualified Retirement Plans qualify for the waiver of the Class A initial
sales charge if they qualified to purchase shares of any of the Former
Quest For Value Funds by virtue of projected contributions or investments
of $1 millon or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of Associations, or
as eligible employees in Qualified Retirement Plans also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Fund's Distributor.
- - Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund issued in the reorganization on November 24,
1995 for shares of Quest For Value Investment Quality Income Fund that
were subject to a contingent deferred sales charge, will be subject to a
contingent deferred sales charge at the following rates: if they are
redeemed within 18 months of the end of the calendar month in which they
were purchased, at a rate equal to 1.0% if the redemption occurs within
12 months of their initial purchase and at a rate of 0.50 of 1.0% if the
redemption occurs in the subsequent six months. This contingent deferred
sales charge rate also applies to shares of the Fund purchased by exchange
of shares of other Oppenheimer funds that were acquired as a result of the
merger of Former Quest for Value Funds into those Oppenheimer funds, and
which shares were subject to a Class A contingent deferred sales charge
prior to November 24, 1995. Class A shares of any of the Former Quest
Fund for Value Funds purchased without an initial sales charge on or
before November 22, 1995 will continue to be subject to the applicable
contingent deferred sales charge in effect as of that date as set forth
in the then-current prospectus for such fund.
- - Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
- Shareholders of the Fund who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family of Funds.
- Shareholders of the Fund who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the Unified Funds.
- - Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions
The Class A contingent deferred sales charge will not apply to redemptions
of Class A shares of the Fund purchased by the following investors who
were shareholders of any Former Quest for Value Fund:
- Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted
under that law.
- Participants in Qualified Retirement Plans that purchased shares
of any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's
Distributor will pay a commission to the dealer for purchases of Fund
shares as described above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
- - Waivers for Redemptions of Shares Purchased Prior to March 6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest for Value Fund or into which
such fund merged, if those shares were purchased prior to March 6, 1995:
in connection with (i) distributions to participants or beneficiaries of
plans qualified under Section 401(a) of the Internal Revenue Code or from
custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457 of the
Code, and other employee benefit plans, and returns of excess
contributions made to each type of plan, (ii) withdrawals under an
automatic withdrawal plan holding only either Class B or C shares if the
annual withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum value of such accounts.
- - Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, B or C shares of the Fund acquired by
merger of a Former Quest for Value Fund into the Fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which
such fund merged, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) distributions to participants
or beneficiaries from Individual Retirement Accounts under Section 408(a)
of the Internal Revenue Code or retirement plans under Section 401(a),
401(k), 403(b) and 457 of the Code, if those distributions are made either
(a) to an individual participant as a result of separation from service
or (b) following the death or disability (as defined in the Code) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by
a determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan (but
only for Class B or C shares) where the annual withdrawals do not exceed
10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in
the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, B or C shares
of the Fund described in this section if within 90 days after that
redemption, the proceeds are invested in the same Class of shares in this
Fund or another Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and that were transferred to an OppenheimerFunds
prototype 401(k) plan shall be eligible for an additional one-time payment
by the Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000 as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to Quest
for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged
for Class A shares, or (ii) the plan assets were transferred to an
OppenheimerFunds prototype 401(k) plan, shall be eligible for an
additional one-time payment by the Distributor of 1% of the value of the
plan assets transferred, but that payment may not exceed $5,000.
<PAGE>
APPENDIX B TO PROSPECTUS OF
OPPENHEIMER GLOBAL EMERGING GROWTH FUND
Graphic material included in Prospectus of Oppenheimer Global
Emerging Growth Fund: "Comparison of Total Return of Oppenheimer Global
Emerging Growth Fund with the Morgan Stanley World 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 Class A shares of the Fund. That graph will cover the period from
12/30/87 (inception of the Fund) through 9/30/95. The graph will compare
such values with a hypothetical $10,000 investment over the same time
periods in the Morgan Stanley World 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
Morgan Stanley World Index, is set forth in the Prospectus under
"Performance of the Fund - Comparing the Fund's Performance to the
Market."
Oppenheimer Morgan
Fiscal Year Global Emerging Stanley
(Period Ended) Growth Fund:A World Index
12/30/87 $ 9,425 $10,000
09/30/88 $10,019 $ 9,355
09/30/89 $11,542 $11,709
09/30/90 $11,275 $ 9,184
09/30/91 $25,681 $11,437
09/30/92 $19,339 $11,322
09/30/93 $20,846 $13,613
09/30/94 $18,780 $14,642
09/30/95 $17,499 $16,335
<PAGE>
Oppenheimer Global Emerging Growth Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 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
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 Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, OppenheimerFunds, Inc.,
OppenheimerFunds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0750.001.0196 Printed on recycled paper
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Oppenheimer Global Emerging Growth Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated January 25, 1996
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 January 25, 1996. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies
Investment Policies and Strategies
Other Investment Techniques and Strategies
Other Investment Restrictions
How the Fund is Managed
Organization and History
Trustees and Officers of the Fund
The Manager and Its Affiliates
Brokerage Policies of the Fund
Performance of the Fund
Distribution and Service Plans
About Your Account
How To Buy Shares
How To Sell Shares
How To Exchange Shares
Dividends, Capital Gains and Taxes
Additional Information About the Fund
Financial Information About the Fund
Independent Auditors' Report
Financial Statements
Appendix A: Industry Classifications A-1
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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 may invest, 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, OppenheimerFunds, Inc. (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 selected for
capital appreciation and the investment techniques used 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
may 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. 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.
- 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 sell them and can reduce the price
the Fund might be able to obtain for them. If other investment companies
and investors 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 sub-custodians or
depositaries holding them must be approved by the Fund's Board of Trustees
to the extent that approval is required 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.
- 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 Techniques and Strategies
- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the 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 must, on each business day be at least equal to the value of
the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government or its agencies or instrumentalities
or other cash equivalents in which the Fund is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund. In a
securities lending transaction, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan as well as the interest on the
collateral securities less any finders', administrative or other fees the
Fund pays in connection with the loan. In connection with securities
lending, the Fund might experience risks or delay in receiving additional
collateral, or risks of delay in recovery of securities, or loss of rights
in the collateral should the borrower fail financially. 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 (a U.S. commercial bank,
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 the
credit requirements set by the Fund's Board of Trustees from time to
time), for delivery on an agreed upon future date. The resale price
exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to 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 collateral's value must
equal or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will maintain a segregated
account with its Custodian, consisting of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transaction, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if sale, the proceeds to be received,
in determining its net asset value. If the Fund chooses to (i) dispose
of the right to acquire a when-issued security prior to its acquisition
or (ii) dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving a delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to use against anticipated changes in
interest rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its portfolio
on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and
rising prices, the Fund might sell portfolio securities and purchase the
same or similar securities on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
- Hedging With Options and Futures Contracts. The Fund may employ one
or more types of 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
subsequently 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 and Financial Futures. The Fund may buy and
sell futures contracts relating to a securities index ("Financial
Futures"), including "Stock Index Futures," a type of Financial Future for
which the index used as the basis for trading is a broadly-based stock
index (including stocks that are not limited to issuers in a particular
industry or group of industries). A stock index assigns relative values
to the common stocks included in the index and fluctuates with the changes
in the market value of those stocks. Stock indices cannot be purchased
or sold directly. Financial Futures are contracts based on the future
value of the basket of securities that comprise the underlying index. The
contracts 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 Financial Future or 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 Financial
Futures and Stock Index Futures by their terms call for settlement by the
delivery of cash, and Interest Rate Futures call for the delivery of a
specific debt security, in most cases the settlement obligation is
fulfilled without such delivery by entering into an offsetting
transaction. All Futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are
traded.
- 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 deliverable securities or 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.
- 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 forgoes
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.
The Trustees have adopted a non-fundamental policy that the Fund may
write covered call options or write covered put options with respect to
not more than 5% of the value of its net assets. Similarly, the Fund may
only purchase call options and put options with a value of up to 5% of its
net assets.
- 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 exercise 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 Stock Index
Future not owned by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities the Fund holds. The
Fund can either resell the put or, in the case of a put on a Stock Index
Future, 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.
- Options on Foreign Currencies. The Fund intends to write and
purchase puts and calls on foreign currencies that are traded on a
securities or commodities exchange or over-the-counter markets or are
quoted by major recognized dealers in such options. It does so to protect
against declines in the dollar value of foreign securities and against
increases in the dollar cost of foreign securities to be acquired. If a
rise is anticipated in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing puts on
that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of
currency rate fluctuations adverse to the Fund's position, it would lose
the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
- Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set
at the time the contract is entered into. These contracts are generally
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. Some forward
contracts are standardized foreign currency futures contracts that are
traded on exchanges and are subject to procedures and regulations
applicable to other Futures.
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. To attempt to limit its exposure to loss under forward
contracts in a particular foreign currency, the Fund's assets denominated
in that currency or denominated in a closely-denominated foreign currency
will at least equal the difference between the market value and the cost
of the forward contracts in that particular foreign currency.
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 (this is called a "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 (a "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 each foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
that 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, also
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 (this is known
as a "cross-hedge"). The Fund will not 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. The success of cross
hedging depends 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-hedge.
The Fund will not enter into 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 portfolio securities denominated in that currency or in a closely-
correlated currency, unless such net exposure is covered by segregated
liquid assets. The Fund's custodian will place cash or U.S. Government
securities or other liquid high-quality debt securities in a separate
account having a value equal to the net exposure. 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
account value will equal the Fund's net exposure. As an alternative, the
Fund may purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a price no
higher than the Forward Contract price, or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
Forward 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.
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 is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options thereon as established by the Commodities
Futures Trading Commission ("CFTC"). In particular, the Fund is excluded
from registration as a "commodity pool operator" if it complies with the
requirements of Rule 4.5 adopted by the CFTC. Under this Rule, the Fund
is not limited regarding the percentage of its assets committed to futures
margins and related options premiums subject to a hedge position.
However, aggregate initial futures margins and related options premiums
are limited to 5% or less of the Fund's net asset value for other than
bona fide hedging strategies employed by the Fund within the meaning and
intent of applicable provisions of the Commodity Exchange Act and CFCT
regulations thereunder.
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.
- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. That formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is exercisable below the market price
of the underlying security (that is, the extent to which the option is
"in-the-money"). When option the Fund writes an OTC option, it will treat
as illiquid (for purposes of the limit on its assets that may be invested
in the illiquid securities, stated in the Prospectus) the mark-to-market
value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a put or call, sells a cal, or buys or sells an
underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading options could result in the
Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
- 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.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of the disposition
also are treated as an ordinary gain or loss. Currency gains and losses
are offset against market gains and losses on each trade before
determining a net "section 988" gain or loss under the Internal Revenue
Code, which may ultimately increase or decrease the amount of the Fund's
investment company income available for distribution to its shareholders.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to options 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.
- 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. They may also be used to protect a gain on the security "in-
the-box" when the Fund does not want to sell it and recognize a capital
gain. No more than 15% of the Fund's net assets may be held as collateral
for these short sales.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such "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 a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (2) more than 50% of the
outstanding shares of the Fund.
Under these additional restrictions, the Fund cannot:
- invest in companies for the primary purpose of acquiring control
or management thereof;
- 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;
- invest in real estate or in interests in real estate, but may
purchase readily marketable securities of companies holding real
estate or interests therein;
- 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;
- mortgage or pledge any of its assets; however, this does not
prohibit the escrow arrangements contemplated in the use of hedging
instruments;
- 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;
- 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;
- invest in other open-end investment companies except in a merger,
consolidation, reorganization or acquisition of assets.
- invest in oil or gas exploration or development programs or in
mineral-related programs or leases; or
- 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.
In connection with the registration of its shares in certain states,
the Fund has undertaken that it will not invest in real property,
including real estate limited partnership interests. This undertaking
shall terminate if the Fund ceases to qualify its shares for sale in that
state or if that state's rules or regulations are amended.
For purposes of the Fund's policy not to concentrate its investments,
the Fund has adopted the industry classifications set forth in the
Appendix to this Statement of Additional Information.
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 at least 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
applicant's 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 Fund, and any
shareholder of the Fund, agrees under the Fund's Declaration of Trust to
look solely to the assets of the Fund for satisfaction of any claim or
demand which may arise out of any dealings with the Fund, 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
Money Market Fund, Inc., Oppenheimer Fund, Oppenheimer Global Fund,
Oppenheimer Growth Fund, Oppenheimer Discovery Fund, Oppenheimer Target
Fund, Oppenheimer Global Growth & Income 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
Enterprise Fund, Oppenheimer U.S. Government Trust, Oppenheimer Multi-
Sector Income Trust and Oppenheimer Multi-Government Trust (the "New York-
based Oppenheimer funds"). Ms. Macaskill and Messrs. Bishop, Bowen,
Donohue, Farrar and Zack respectively hold the same offices with the other
New York-based Oppenheimer funds as with the Fund. As of December 31,
1995, the Trustees and officers of the Fund as a group owned less than 1%
of the outstanding shares of the Fund. The statement does not include
ownership of shares held of record by an employee benefit plan for
employees of the Manager (one of the Trustees of the Fund listed below,
Ms. Macaskill, and one of the officers, Mr. Donohue, are trustees of that
plan), other than the shares beneficially owned under that plan by
officers of the Fund listed below.
Leon Levy, Chairman of the Board of Trustees; Age: 70
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age: 62
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp. ("OAC"), 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 Oppenheimer funds and Executive
Vice President and General Counsel of the Manager and the
Distributor.
Benjamin Lipstein, Trustee; Age: 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and of
Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age 47
President, Chief Executive Officer and a Director of the Manager;
Chairman and a Director of SSI; President and a Director of OAC,
Harbourview and Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; formerly an Executive Vice
President of the Manager.
Elizabeth B. Moynihan, Trustee; Age: 66
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institute), the Institute of Fine Arts (New York
University), National Building Museum; a member of the Trustees
Council, Preservation League of New York State; a member of the Indo-
U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company), and Fidelity
Life Association (mutual life insurance company); formerly Chairman
of the Federal Deposit Insurance Corporation, Chairman of the Board
of ICL, Inc. (information systems) and President and Chief Executive
Officer of The Conference Board, Inc. (international economic and
business research).
____________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Edward V. Regan, Trustee; Age: 65
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; President of Jerome Levy Institute, Bard College; a member of
the U.S. Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 64
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; Age: 83
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.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, Trustee*; Age: 70
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee; Age: 83
498 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; Age: 65
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), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order)
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.
____________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other Oppenheimer funds; President and a
director of Centennial; 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.
George Evans, Vice President and Portfolio Manager; Age: 35
Vice President of the Manager; formerly an International Equities
Portfolio Manager/Analyst with Brown Brothers Harriman & Co.,
George C. Bowen, Treasurer; Age: 59
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 Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; 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.
- 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 (Ms. Macaskill and Messrs. Galli and Spiro; Ms. Macaskill
is also an officer) receive no salary or fee from the Fund. The Trustees
of the Fund (excluding Ms. Macaskill and Messrs. Galli and Spiro) received
the total amounts shown below (i) from the Fund during its fiscal year
ended September 30, 1995 and (ii) from all 18 of the New York-based
Oppenheimer funds (including the Fund) listed in the first paragraph of
this section (and from Oppenheimer Time Fund and Oppenheimer Mortgage
Income Fund which ceased operation following the acquisition of their
assets by certain other Oppenheimer funds), for services in the positions
shown:
____________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
<TABLE>
<CAPTION>
Retirement
Benefits Total Compensation
Aggregate Accrued as From All
Compensation Part of New York-based
Name and Position From Fund Fund Expenses Oppenheimer funds1
<S> <C> <C> <C>
Leon Levy $5,818 $10,454 $141,000.00
Chairman and Trustee
Benjamin Lipstein $3,557 $6,391 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan$3,557 $6,391 $ 86,200.00
Study Committee
Member and Trustee
Kenneth A. Randall $3,235 $5,813 $ 78,400.00
Audit Committee
Member and Trustee
Edward V. Regan $2,839 $5,101 $ 68,800.00
Audit Committee
Member and Trustee
Russell S. Reynolds, Jr.$2,150 $3,863 $ 52,100.00
Trustee
Sidney M. Robbins $5,038 $9,052 $122,100.00
Study Committee
Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere $2,150 $3,863 $ 52,100.00
Trustee
Clayton K. Yeutter $2,150 $3,863 $ 52,100.00
Trustee
</TABLE>
______________________
1For the 1995 calendar year.
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 Oppenheimer funds for at least 15 years to be eligible for the
maximum payment. Because each Trustee's retirement benefits will depend
on the amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor can
the Fund estimate the number of years of credited service that will be
used to determine those benefits.
- Major Shareholders. As of December 31, 1995, the only persons who
owned of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding Class A, Class B or Class C shares were: Merrill
Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, Florida 32246-6484, who owned of record 381,561 shares
(approximately 5.30% of the Fund's outstanding Class A shares); Guarantee
& Trust Co. TR IRA Rollover FBO Rosalie L. Rakoff, P.O. Box 8963,
Wilmington, DE 19899-8963, who owned beneficially 3,659 Class B shares
(approximately 8.47% of the Fund's outstanding Class B shares); RPSS TR
IRA FBO Virginia S. Schmucker, 617 Glenwood St., N.W., North Canton, OH
44720-3539, who owned beneficially 3,397 Class B shares (approximately
7.87% of Class B shares outstanding); RPS TR IRA FBO Paul J. Leonard, 610
Sideling Ct., NE, Vienna, VA 22180-3533, who owned beneficially 2,549.575
Class B shares (approximately 5.9% of Class B shares outstanding); RPSS
TR IRA FBO Blaise P. Aluise, 50 Greenock Rd., Delmar, NY 12054,3527, who
owned beneficially 6,951.340 Class C shares (approximately 52.67% of the
Fund's outstanding Class C shares); Oppenheimer & Co., Inc., FBO 033-
80057-13, P.O. Box 3484, Church Street Station, New York, NY 10008-3484,
which owned of record 1,444 Class C shares (approximately 10.94% of Class
C shares outstanding); and Donaldson Lufkin Jenrette Securities
Corporation, Inc., P.O. Box 2052, Jersey City, NJ 07303-9998, which owned
of record 1,164.882 Class C shares (approximately 8.82% of Class C shares
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 may also
serve as officers of the Fund, and three of whom (Ms.Macaskill and Messrs.
Galli and Spiro) serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including Portfolio Managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. A management fee is payable
monthly to the Manager under the terms of the investment advisory
agreement between the Fund and the Manager and is computed on the
aggregate net assets of the Fund as of the close of business each day.
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 Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. For the Fund's fiscal years ended September 30, 1993,
1994 and 1995, the management fees paid by the Fund to the Manager were
$1,580,012, $1,555,894 and $1,238,423, respectively.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has voluntarily
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution plan 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 change or eliminate 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 one or more 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 the General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares but is not obligated to sell a specific number of shares. Expenses
normally attributable to sales (other than those paid under Class A, Class
B and Class C Distribution and Service Plans, 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, 1993, 1994 and 1995, the aggregate
amount of sales charges on sales of the Fund's Class A shares was
$4,353,366, $1,033,737 and $398,139, respectively, of which the
Distributor and retained in the aggregate amounts of $960,768, $262,284
and $114,956, in those respective years. Class B and Class C shares were
not publicly offered during the fiscal year ended September 30, 1995, and
no contingent deferred sales charges were collected. For additional
information about distribution of the Fund's shares and the expenses
connected with such activities, please refer to "Distribution and Service
Plans," below.
- The Transfer Agent. The Fund's Transfer Agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder
servicing agent for the Fund on an "at-cost" basis. It also acts as the
shareholder servicing agent for the other Oppenheimer funds.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreements. 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 or base its selection on "posted" rates,
but is expected to beware of the current sales rates of eligible brokers
to minimize the commissions paid to the extent consistent with the
provisions of the advisory agreement and the interests and policies of the
Fund as established by its Board of Trustees. Purchases of securities
from underwriters include a commission of concession paid by the issuer
to the underwriter and purchases from dealers include a spread between the
bid and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers 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 generally made by the
Manager's portfolio traders based upon new recommendations from the
Manager's portfolio managers. In certain instances, portfolio managers
may directly place trades and allocate brokerage, also subject to the
provisions of the advisory agreement and the procedures and rules
described above. In either case, brokerage is allocated under the
supervision of the Manager's executive officers and the Manager.
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 or for certain fixed-income agency transactions in the
secondary market and are otherwise paid only if it appears likely that a
better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each
account.
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 Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was not executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and 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, 1993, 1994 and
1995, total brokerage commissions paid by the Fund (not including spreads
or concessions on principal transactions on a net trade basis) were
$414,002, $858,996 and $1,698,126, respectively. During the fiscal year
ended September 30, 1995, $1,361,802 was paid to brokers as commissions
in return for research services; the aggregate dollar amount of those
transactions was $254,966,711. 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 each class of Fund shares may be
advertised. An explanation of how total returns are calculated for each
class and the components of those calculations is set forth below. No
total return calculations are presented below for Class B and Class C
shares because no shares of those classes were publicly issued during the
Fund's fiscal year ended September 30, 1995.
The Fund's advertisement of its performance data must, under
applicable SEC rules, 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 class, if less) ending as of the most recently-ended calendar
quarter prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of other
funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with
other investments. An investment in the Fund is not insured; its returns
and share prices are not guaranteed and normally will fluctuate on a daily
basis. When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period are not a
prediction or representation by the Fund of future returns on its shares.
The returns of each class of shares of the Fund are affected by portfolio
quality, portfolio maturity, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
- Average Annual Total Returns. The Fund's "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"), according to the following formula:
( ERV ) 1/n
(-----) -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 for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
applicable contingent deferred sales charge (of 5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% for
the fifth year, 1.0% in the sixth year and none thereafter) is applied as
described in the Prospectus. For Class C shares, the payment of the 1%
contingent deferred sales charge is applied to the investment result for
the one-year period (or less). 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 Class A shares of the Fund for the one
and five year periods ended September 30, 1995 and for the period December
30, 1987 (commencement of operations) to September 30, 1995 were (12.18%),
7.90% and 7.49%, respectively. The cumulative "total return" on Class A
shares for the period December 30, 1987 (commencement of operations) to
September 30, 1995 was 74.99%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative "total return at net asset value" for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The average annual total
return at net asset value for the Fund's Class A shares for the one year
period ended September 30, 1995 was (6.82)%. The cumulative total return
at net asset value for the period December 30, 1987 (commencement of
operations) to September 30, 1995 was 85.67%.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A or Class B shares. However, when
comparing total return of an investment in Class A or Class B shares of
the Fund, a number of factors should be considered before using such
information as a basis for comparison with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes 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 return that
include the reinvestment of capital gain distributions and income
dividends but does not take sales charges or taxes into consideration.
From time to time the Fund may include in advertisement and sales
literature performance information about the Fund cited in other
newspapers and periodicals such as the New York Times, which may include
performance quotations from other sources including Lipper and
Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C 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) based upon risk-adjusted
investment return. Investment return measures a fund's or Class' three,
five and ten-year average annual total returns (when available) in excess
of 90-day U.S. Treasury bill returns after considering sales charges and
expenses. Risk measures fund performance below 90-day U.S. Treasury bill
monthly returns. Risk and return are combined to produce star rankings
reflecting performance relative to the average fund in a given fund's
category. Five stars is the "highest" ranking (top 10%), four stars is
"above average" (next 22.5%), three stars is "average" (next 35%), two
stars is "below average" (next 22.5%) and one star is "lowest" (bottom
10%). The current ranking is a weighted average of 3, 5 and 10 year
rankings (if available). Morningstar ranks the Class A, Class B and Class
C shares of the Fund in relation to other equity funds. Rankings are
subject to change.
The total return on an investment in the Fund's Class A, Class B or
Class C shares may be compared with performance for the same period of the
Morgan Stanley World Index, an unmanaged index of issuers on the stock
exchanges of 20 foreign countries and the United States and widely
recognized as a measure of global stock market performance. The
performance of such Index includes a factor for the reinvestment of
dividends but does not reflect expenses or taxes. The performance of the
Fund's Class A, Class B or Class C shares may also be compared in
publications to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the Oppenheimer
funds, other than the performance rankings of the Oppenheimer funds
themselves. These ratings or rankings of shareholder/investor services
may compare the Oppenheimer funds' services to those of other mutual fund
families selected by the rating or ranking services, and may be based upon
the opinions of the rating or ranking service itself, using its own
research or judgment, or based upon surveys of investors, brokers,
shareholders or others. in relation to other equity funds.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, and
Distribution and Service Plans for Class B and Class C shares under Rule
12b-1 of the Investment Company Act pursuant to which the Fund makes
payments to the Distributor in connection with the distribution and/or
servicing of the shares of that class, as described in the Prospectus.
Each Plan has been approved by a vote of (i) the Board of 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 of each class. For the Class B and Class C Distribution and
Service Plans, that vote was cast by the Manager as the sole initial
shareholder of Class B and Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such 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. Any Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. Neither Plan may not be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares automatically convert into
Class A shares after six years, the Fund is required to obtain the
approval of Class B as well as Class A shareholders for a proposed
material amendment to the Class A Plan that would materially increase
payments under the Plan. Such approval must be by a "majority" of the
Class A and Class B shares (as defined in the Investment Company Act,
voting separately by class. All material amendments must be approved by
the Independent Trustees.
While the Plans are 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 each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any such payment. The report for the Class B or Class C
Plan shall also include the distribution costs for that quarter and such
costs for previous fiscal periods that are carried forward, as explained
in the Prospectus and below. Those reports, 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. Each 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 any such selection or nomination is approved by a
majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
maximum rate allowed under the Plans and set no minimum amount. For the
fiscal year ended September 30, 1995, payments under the Class A Plan
totalled $357,190, all of which was paid by the Distributor to Recipients,
including $15,436 paid to MML Investor Services, Inc., an affiliate of the
Distributor.
Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent
fiscal years. Payments received by the Distributor under the Plan for
Class A shares will not be used to pay any interest expense, carrying
charges, or other financial costs, or allocation of overhead by the
Distributor.
The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year Class
B and Class C shares are outstanding, and thereafter on a quarterly basis,
as described in the Prospectus. The services rendered by Recipients in
connection with personal services and the maintenance of Class B
shareholder accounts may include but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund and processing share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services in
connection with the rendering of personal services and/or the maintenance
of accounts, as the Distributor or the Fund may reasonably request. The
advance payment is based on the net asset value of the Class B and Class
C shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B or Class C shares
are redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor.
Although the Class B and Class C Plans permit the Distributor to
retain both the asset-based sales charge and the service fee on Class B
shares, or to pay Recipients the service fee on a quarterly basis without
payment in advance, the Distributor intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B or Class C Plan by the
Board. Initially, the Board has set no minimum holding period. All
payments under the Class B and Class C Plans are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and service fees. The Distributor anticipates that it will take
a number of years for it to recoup (from the Fund's payments to the
Distributor under the Class B Plan and recoveries of the contingent
deferred sales charge collected on redeemed Class B shares) the Class B
sales commissions paid to authorized brokers or dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without paying a front-end sales load and
at the same time permit the Distributor to compensate Recipients in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor retains the asset-based sales charge on Class B shares. As
to Class C shares, the Distributor retains the asset-based sales charge
during the first year shares are outstanding, and pays the asset-based
sales charge as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Under the Class B and Class C Plans, the
asset-based sales charge is paid to compensate the Distributor for its
services, described below, to the Fund.
Under the Class B and Class C Plans, the distribution assistance and
administrative support services rendered by the Distributor in connection
with the distribution of Class B and Class C shares may include: (i)
paying service fees and sales commissions to any broker, dealer, bank or
other person or entity that sells and services the Fund's Class B or Class
C shares, (ii) paying compensation to and expenses of personnel of the
Distributor who support distribution of Class B or Class C shares by
Recipients, (iii) obtaining financing or providing such financing from its
own resources, or from an affiliate, for interest and other borrowing
costs of the Distributor's unreimbursed expenses incurred in rendering
distribution assistance for Class B or Class C shares, and (iv) paying
certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor
to choose the method of purchasing shares that is more beneficial to the
investor depending on the amount of the purchase, the length of time the
investor expects to hold shares and other relevant circumstances.
Investors should understand that the purpose and function of the deferred
sales charge and asset-based sales charge with respect to Class B and
Class C shares are the same as those of the initial sales charge with
respect to Class A shares. Any salesperson or other person entitled to
receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The
Distributor normally will not accept any order for $500,000 or $1 million
or more of Class B or Class C shares, respectively, on behalf of a single
investor (not including dealer "street name" or omnibus accounts) because
generally it will be more advantageous for that investor to purchase Class
A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on such shares will be
reduced by incremental expenses borne solely by those classes, including
the asset-based sales charge to which both classes of shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (a) Distribution and
Service Plan fees, (b) incremental transfer and shareholder servicing
agent fees and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the
"Exchange") on each day the Exchange is open, by dividing the value of the
Fund's net assets attributable to a class by the total number of shares
of that class that are outstanding. The Exchange normally closes at 4:00
P.M., New York time, but may close earlier on some days (for example, in
case of weather emergencies or on days falling before a holiday). The
Exchange's most recent annual holiday schedule 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. Trading in (debt) securities and foreign
securities at times when the New York Stock Exchange is closed, including
weekends and holidays, or after the close of the Exchange on a regular
business day. The Fund may invest a substantial portion of its assets in
foreign securities primarily listed on foreign exchanges or foreign over-
the-counter markets that may trade on Saturdays or customary U.S. business
holidays on which the Exchange is closed. Because the Fund's net asset
values will not be calculated on those days, the Fund's net asset values
per share may be significantly affected on such days when shareholders
cannot 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 U.S. 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 actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued as
in (i) above, if available, or at the mean between "bid" and "asked"
prices obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a remaining
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
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having
a maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have
a remaining maturity of 60 days or less are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (vi) money market-type debt
securities having a maturity of less than one year when issued that having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures; and
(viii) 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 as provided by a reliable bank, dealer or pricing service.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the Exchange.
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 Exchange 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, if necessary. Foreign currency, including
forward contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank, dealer
or pricing service. Foreign securities priced in a foreign currency as
well as foreign currency having their value converted to U.S.dollars at
the closing price in the London foreign exchange market as provided by a
reliable bank, dealer or pricing service.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds, when last
sale information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
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, as determined by a pricing service approved by the Board
of Trustees or by the Manager or, if there are no sales that day, in
accordance with (i), above. Forward currency contracts are valued at the
closing price in the London foreign exchange market as provided by a
reliable bank, dealer or pricing service. 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
received was more or less than the cost of the closing transaction. If
the Fund exercises a put it holds, the amount the Fund receives on its
sale of the underlying investment is reduced by the amount of premium paid
by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of the Exchange. The Exchange normally closes at 4:00 P.M. but may
close earlier on certain days. If the Federal Funds are received on a
business day after the close of the Exchange, the shares will be purchased
and dividends will begin to accrue on the next regular business day. The
proceeds of ACH transfers are normally received by the Fund 3 days after
the transfers are initiated. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from delays in
ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction of expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain circumstances
described in the Prospectus because the Distributor or dealer or broker
incurs little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, grandparents, parents, parents-
in-law, siblings, a sibling's spouse and a spouse's siblings.
- The Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt 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 Target Fund
Oppenheimer Growth 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 Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Value Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Rochester Fund Municipals*
Rochester Fund Series - The Bond Fund For Growth*
Rochester Portfolio Series - Limited-Term New York Municipal Fund*
_______________________
*Shares of the Fund are not presently exchangeable for shares of these
funds.
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 Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent (referred to as a "Letter")
is an investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares of the Fund and
of other Oppenheimer funds during a 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 of shares which, when
added to the investor's holdings of shares of those funds, will equal or
exceed the amount specified in the Letter. Purchases made by reinvestment
of dividends or distributions of capital gains and purchases made at net
asset value without sales charge do not count toward satisfying the amount
of the Letter. A Letter enables an investor to count the Class A and
Class B shares purchased under the Letter to obtain the reduced sales
charge rate on purchases of Class A shares of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the
Letter will be made at the public offering price (including the sales
charge) that applies to a single lump-sum purchase of shares in the amount
intended to be purchased under the Letter. 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.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the Letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual total purchases. If total eligible
purchases during the Letter of Intent period exceed the intended purchase
amount and exceed the amount needed to qualify for the next sales charge
rate reduction set forth in the 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 specified under the Letter is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the public offering
price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's
account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter) include (a)
Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge, (b) Class B shares acquired subject
to a contingent deferred sales charge, and (c) Class A or Class B shares
acquired by reinvestment of dividends and distributions or acquired in
exchange for either (i) Class A shares of one of the other Oppenheimer
funds that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent deferred
sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "How to Exchange Shares," and
the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
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 determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay
the redemption proceeds in whole or in part by a distribution "in kind"
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value 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 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 Class A shares or
Class B shares of the Fund that you purchased by reinvesting dividends or
distributions or on which you paid a contingent deferred sales charge when
you redeemed them. The reinvestment privilege does not apply to Class C
shares. The reinvestment may be made without sales charge only in Class
A shares of the Fund or any of the other Oppenheimer funds into which
shares of the Fund are exchangeable as described below, at the net asset
value next computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Distributor for that privilege at the
time of reinvestment. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending
on the timing and amount of the reinvestment. Under the Internal Revenue
Code, if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the
Oppenheimer funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss
or increase the gain recognized from the redemption. However, in that
case the sales charge would be added to the basis of the shares acquired
by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to
shares redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of transfer to
the name of another person or entity (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 proprieties described in the Prospectus under
"How to Buy Shares" for the imposition of Class B or Class C contingent
deferred sales charge, will be followed in determining the order in which
shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans
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 maintaining a plan account
in their own name) in OppenheimerFunds-sponsored prototype pension,
profit-sharing or 401(k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified 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 per share will be the
net asset value next computed after the Distributor receives the order
placed by such dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of the New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closed (normally that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed
by a broker-dealer under this procedure, payment will be made within three
business days after the shares have been redeemed upon the Distributor's
receipt of the required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the redemption
document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
or 12 months, respectively, because of the imposition of the Class B or
Class C contingent deferred sales charge on such withdrawals (except where
the Class B or Class C contingent deferred sales charge is waived as
described in the Prospectus under "Waivers of Class B and Class C Sales
Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below 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 Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- 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 thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment. It may not be desirable to purchase additional Class A shares
while making withdrawals because of sales charges that apply to purchases
when made. Accordingly, a shareholder normally may not maintain an
automatic withdrawal plan while simultaneously making regular purchases
of Class A shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the 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 a particular class of
Oppenheimer funds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
the Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All of the Oppenheimer
funds offer Class A, B and C shares except Oppenheimer Money Market Fund,
Inc., Centennial Tax Exempt Trust, Centennial Government Trust, Centennial
New York Tax Exempt Trust, Centennial California Tax Exempt Trust,
Centennial America Fund, L.P. and Daily Cash Accumulation Fund Inc., which
only offer Class A shares and Oppenheimer Main Street California Tax
Exempt Fund which only offers Class A and Class B shares (Class B and
Class C shares of Oppenheimer Cash Reserves are generally available only
by exchange from the same class of shares of other Oppenheimer funds or
through OppenheimerFunds sponsored 401 (k) plans). A list of funds
showing which funds offer which classes can be obtained by calling the
Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of Oppenheimer
funds subject to a contingent deferred sales charge).
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for Class A shares of
any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares purchased subject to a contingent deferred
sales charge. However, shares of Oppenheimer Money Market Fund, Inc.
purchased with the redemption proceeds of shares of other mutual funds
(other than funds managed by the Manager or its subsidiaries) redeemed
within the 12 months prior to that purchase may subsequently be exchanged
for shares of other Oppenheimer funds without being subject to an initial
or contingent deferred sales charge, whichever is applicable. To qualify
for that privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if requested, must
supply proof of entitlement to this privilege. No contingent deferred
sales charge is imposed on exchanges of shares of either class purchased
subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares acquired by exchange
if they are redeemed within 6 years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge
is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
should take into account the effect of any exchange on the applicability
and rate of any contingent deferred sales charge that might be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 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 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, the shareholder must either have
an existing account in, or obtain, open an account in, 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 Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Shares purchased through dealers or brokers
normally are paid for by the third business day following the placement
of the purchase order. Shares redeemed through the regular redemption
procedure will be paid dividends through and including the day on which
the redemption request is received by the Transfer Agent in proper form.
Dividends will be declared on shares repurchased by a dealer or broker for
four business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
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 that 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 shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the investments held by the Fund in its
portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C," above. Dividends are calculated in the same manner, at the same time
and on the same day for shares of each class. However, dividends on Class
B and Class C shares are expected to be lower as a result of the asset-
based sales charge on Class B and Class C shares, and Class B and Class
C dividends will also differ in amount as a consequence of any difference
in net asset value between Class A, Class B and Class C shares.
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.
If the Fund has more than 50% of its total assets invested in foreign
securities at the end of its fiscal year, it may elect the application of
Section 853 of the Internal Revenue Code to permit shareholders to take
a credit (or, at their option, a deduction) for foreign taxes paid by the
Fund. Under Section 853, shareholders would be entitled to treat the
foreign taxes withheld from interest and dividends paid to the Fund from
its foreign investments as a credit on their federal income taxes. As an
alternative, shareholders could, if to their advantage, treat the foreign
tax withheld as a deduction from gross income in computing taxable income
rather than as a tax credit. In substance, the Fund's election would
enable shareholders to benefit from the same foreign tax credit or
deduction that would be received if they had been the record owners of the
Fund's foreign securities and had paid foreign taxes on the income
received.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company during its last fiscal year, and intends
to qualify in current and future years, but reserves the right not to do
so. The Internal Revenue Code contains a number of complex tests relating
to such qualification to determine whether the Fund will qualify, and the
Fund might not meet those tests in a particular year. For example, the
Fund derives 30% or more of its gross income from the sale of securities
held less than three months, it may fail to qualify (see "Investment
Objective and Policies-Tax Aspects of Hedging Instruments" in the
Statement of Additional Information). If it did not so qualify, the Fund
would be treated for tax purposes as an ordinary corporation and receive
no tax deduction for payments of dividends and distributions made to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other Oppenheimer funds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. To elect
this option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from shares of other Oppenheimer funds 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. The Fund's cash
balance in excess of $100,000 are not protected by Federal Deposit
Insurance. Such uninsured balances may at times be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Global Emerging
Growth Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Global Emerging Growth Fund as of September 30,
1995, 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 seven-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. Our procedures included
confirmation of securities owned as of September 30, 1995 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 Emerging Growth Fund as of September 30,
1995, 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 seven-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 LLP
- ----------------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
October 20, 1995
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.2%
- --------------------------------------------------------------------------------------------
BASIC MATERIALS--0.5%
- --------------------------------------------------------------------------------------------
METALS--0.5% Kurimoto Ltd. 60,000 $ 644,703
------------------------------------------------------------
Ugine SA 700 45,192
----------
689,895
- --------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--11.5%
- --------------------------------------------------------------------------------------------
AUTOS & HOUSING--1.3% C & P Homes, Inc.(1) 1,563,600 975,186
------------------------------------------------------------
Thai Stanley Electric Co., Ltd. 300,000 825,357
----------
1,800,543
- --------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--1.6% Cinar Films, Inc., Cl. B(1) 107,200 1,326,600
------------------------------------------------------------
Filmes Lusomundo SA 70,000 861,625
----------
2,188,225
- --------------------------------------------------------------------------------------------
MEDIA--2.3% Benpres Holdings Corp., GDR(1)(3) 33,300 224,775
------------------------------------------------------------
Television Broadcasts Ltd. 270,000 1,086,072
------------------------------------------------------------
TV 4 AB 50,000 1,046,597
------------------------------------------------------------
Wattachak Co. Ltd. 500,000 941,984
----------
3,299,428
- --------------------------------------------------------------------------------------------
RETAIL: GENERAL--1.6% Singer Co. NV (The) 40,000 1,065,000
------------------------------------------------------------
Sonae Industria E. Investimentos 50,000 1,174,030
----------
2,239,030
- --------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--4.7% Giordano International Ltd. 1,000,000 918,317
- --------------------------------------------------------------------------------------------
Moebel Walther AG, Preference 3,000 1,517,975
------------------------------------------------------------
Prodega AG 1,350 1,997,304
- --------------------------------------------------------------------------------------------
VBH Verein Baubesch Handel 7,000 2,144,843
----------
6,578,439
- --------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--8.8%
- --------------------------------------------------------------------------------------------
FOOD--2.1% Molinos Rio de la Plata SA, Cl. B 150,000 907,614
------------------------------------------------------------
PT Fast Food Indonesia 505,000 579,435
------------------------------------------------------------
Universal Robina Corp. 2,900,000 1,391,286
----------
2,878,335
- --------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--3.6% Biota Holdings Ltd.(1) 600,000 697,417
------------------------------------------------------------
Gilead Sciences, Inc.(1) 50,000 1,100,000
------------------------------------------------------------
Matrix Pharmaceutical, Inc.(1) 60,000 840,000
------------------------------------------------------------
Tiger Medicals Ltd. 493,000 721,638
------------------------------------------------------------
Watson Pharmaceuticals, Inc.(1) 40,000 1,640,000
---------
4,999,055
</TABLE>
6 Oppenheimer Global Emerging Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTHCARE/SUPPLIES Circon Corp.(1) 60,000 $1,207,500
& SERVICES--2.2% ---------------------------------------------------------------
Oxford GlycoSystems Group PLC(1)(2) 515,132 407,650
---------------------------------------------------------------
Quintiles Transnational Corp.(1)(2) 28,950 1,537,245
----------
3,152,395
- -----------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.9% Srithai Superware Co. Ltd. 175,000 1,318,777
- -----------------------------------------------------------------------------------------------
ENERGY--2.8%
- -----------------------------------------------------------------------------------------------
ENERGY SERVICES & Compagnie Generale de Geophysique SA(1) 15,000 635,418
- -----------------------------------------------------------------------------------------------
PRODUCERS--2.7% Transocean AS(1) 195,000 3,163,817
----------
3,799,235
- -----------------------------------------------------------------------------------------------
OIL-INTEGRATED--0.1% Elf Gabon SA 1,100 156,594
- -----------------------------------------------------------------------------------------------
FINANCIAL--10.0%
- -----------------------------------------------------------------------------------------------
BANKS--3.5% Banco de Galicia Y Buenos Aires,
Series B(1) 200,000 900,113
---------------------------------------------------------------
Industrial Finance Corp. 400,000 1,228,068
---------------------------------------------------------------
Philippine National Bank(1) 100,000 1,045,863
---------------------------------------------------------------
PT Bank Danamon 500,000 849,515
---------------------------------------------------------------
Shinhan Bank Ltd.(1) 41,000 907,316
----------
4,930,875
- -----------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--2.0% Inversiones Y Representacion(1) 250,000 595,075
---------------------------------------------------------------
Manhattan Card Co. Ltd. 2,500,000 1,067,058
---------------------------------------------------------------
Ssangyong Investment & Securities
Co., Ltd.(1) 50,000 1,119,500
-----------
2,781,633
- -----------------------------------------------------------------------------------------------
INSURANCE--4.5% Mapfre Vida Seguros 15,000 813,377
---------------------------------------------------------------
Marschollek, Lautenschlaeger und
Partner AG 3,000 1,937,527
---------------------------------------------------------------
National Mutual Asia Ltd. 1,500,000 1,154,363
---------------------------------------------------------------
Reinsurance Australia Corp. Ltd. 1,250,000 2,311,516
-----------
6,216,783
- -----------------------------------------------------------------------------------------------
INDUSTRIAL--31.5%
- -----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--7.6% Kokusai Electric Co. 60,000 1,374,556
---------------------------------------------------------------
LEM Holdings SA 4,300 1,646,579
---------------------------------------------------------------
Nippon Densan Corp. 40,000 1,297,516
---------------------------------------------------------------
Sanyo Engineering & Construction, Inc. 100,000 1,064,369
---------------------------------------------------------------
Sheldahl, Inc.(1) 45,000 866,250
---------------------------------------------------------------
Tabai Espec Corp. 65,000 981,753
---------------------------------------------------------------
Ushio, Inc. 100,000 1,115,053
---------------------------------------------------------------
Yamatake-Honeywell Co., Ltd. 70,000 979,219
---------------------------------------------------------------
Yokogawa Electric Corp. 150,000 1,345,666
-----------
10,670,961
</TABLE>
7 Oppenheimer Global Emerging Growth Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL SERVICES--11.6% Adia SA(1) 7,000 $1,279,319
---------------------------------------------------------------
BIS SA(1) 35,000 3,549,787
---------------------------------------------------------------
IHC Caland NV 60,000 1,706,310
---------------------------------------------------------------
Ionics, Inc.(1) 50,000 2,081,250
---------------------------------------------------------------
Raito Kogyo Co. Ltd. 60,000 1,252,914
---------------------------------------------------------------
Samsung Engineering & Construction (New),
GDR(1)(3) 1,849 25,523
---------------------------------------------------------------
Samsung Engineering & Construction,
GDR(1) 60,000 476,517
---------------------------------------------------------------
Samsung Engineering & Construction,
GDR(1) 30,797 364,056
---------------------------------------------------------------
Sanifill, Inc.(1) 30,000 982,500
---------------------------------------------------------------
Tae Young Corp.(1) 15,000 1,025,124
---------------------------------------------------------------
Tetra Tech, Inc.(1) 50,000 1,162,500
---------------------------------------------------------------
Tetra Technologies, Inc.(1) 45,000 618,750
---------------------------------------------------------------
United Waste Systems, Inc.(1) 40,000 1,670,000
-----------
16,194,550
- -----------------------------------------------------------------------------------------------
MANUFACTURING--10.3% Bobst Bearers AG 500 774,554
---------------------------------------------------------------
Gildemeister AG(1) 20,000 2,358,484
---------------------------------------------------------------
GP Batteries International Ltd. 300,000 840,000
---------------------------------------------------------------
Lumonics, Inc.(1) 105,000 1,130,341
---------------------------------------------------------------
Measurex Corp. 33,200 1,137,100
---------------------------------------------------------------
Plettac AG 5,000 1,331,742
---------------------------------------------------------------
Powerscreen International PLC 300,000 1,709,315
---------------------------------------------------------------
SIG Schweizerische Industrie-Gesellschaft
Holding AG 500 1,057,396
---------------------------------------------------------------
Traub AG(1) 16,000 2,063,322
---------------------------------------------------------------
Valmet Corp., Cl. A 60,000 1,957,602
-----------
14,359,856
- -----------------------------------------------------------------------------------------------
TRANSPORTATION--2.0% International Container Terminal
Services, Inc.(1) 1,500,000 949,912
---------------------------------------------------------------
Lisnave-Estaleiros Navais de
Lisbona SA(1) 200,000 868,314
---------------------------------------------------------------
Mayne Nickless Ltd. 200,000 946,495
-----------
2,764,721
- -----------------------------------------------------------------------------------------------
TECHNOLOGY--25.3%
- -----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--9.6% Baan Co. NV(1) 20,000 900,000
---------------------------------------------------------------
CSK Corp. 75,000 2,257,982
---------------------------------------------------------------
Enix Corp. 50,000 1,920,932
---------------------------------------------------------------
Pairgain Technologies, Inc.(1) 70,000 2,415,000
---------------------------------------------------------------
Read-Rite Corp.(1) 35,000 1,277,500
---------------------------------------------------------------
Square Co. Ltd. 35,000 1,419,158
---------------------------------------------------------------
Structural Dynamics Research Corp.(1) 100,000 1,856,250
---------------------------------------------------------------
Transaction Systems Architects,
Inc., Cl. A(1) 30,000 802,500
---------------------------------------------------------------
Wind River Systems(1) 25,000 587,500
----------
13,436,822
</TABLE>
8 Oppenheimer Global Emerging Growth Fund
<PAGE>
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRONICS--7.4% Advantest Corp. 25,000 $ 1,485,048
---------------------------------------------------------------------------------------------
Alphatec Electronics Co. Ltd. 50,000 685,804
---------------------------------------------------------------------------------------------
ASM Pacific Technology 500,000 478,560
---------------------------------------------------------------------------------------------
Austria Mikro Systeme International AG 3,000 524,374
---------------------------------------------------------------------------------------------
Aval Data Corp. 40,000 892,042
---------------------------------------------------------------------------------------------
Enplas Corp. 50,000 1,094,779
---------------------------------------------------------------------------------------------
OKI Electric Industry Co.(1) 200,000 1,861,125
---------------------------------------------------------------------------------------------
SDL, Inc.(1) 25,000 706,250
---------------------------------------------------------------------------------------------
Shinkawa Ltd. 35,000 1,415,610
---------------------------------------------------------------------------------------------
Siliconware Precision Industries Co., GDR(1) 75,000 1,275,000
-----------
10,418,592
- --------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS- Glenayre Technologies, Inc.(1) 30,000 2,160,000
TECHNOLOGY--8.3%
---------------------------------------------------------------------------------------------
Korea Mobile Telecommunications Corp. 3,000 2,757,241
---------------------------------------------------------------------------------------------
MobileMedia Corp., Cl. A(1) 60,000 1,620,000
---------------------------------------------------------------------------------------------
Nippon Comsys Corp. 100,000 1,307,653
---------------------------------------------------------------------------------------------
SR Telecom, Inc. 120,000 1,302,954
---------------------------------------------------------------------------------------------
Technology Resources Industries Berhad(1) 300,000 782,706
---------------------------------------------------------------------------------------------
Teltrend, Inc.(1) 50,000 1,650,000
------------
11,580,554
- --------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.8%
- --------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7% Central Costanera SA, Cl. B 400,000 1,040,131
- --------------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--3.1% Pakistan Telecommunications, GDR(1)(3) 10,000 1,050,000
---------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA, ADR 40,000 1,880,268
---------------------------------------------------------------------------------------------
Telefonica del Peru SA, Cl. B 700,020 1,339,575
------------
4,269,843
------------
Total Common Stocks (Cost $112,468,315) 131,765,272
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.7%
- --------------------------------------------------------------------------------------------------------------------------
Cambridge Antibody Technology Ltd., Cv. (Cost $3,300,000)(1)(4) 100,000 3,720,681
UNITS
- --------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. Cl. A. Wts., Exp. 12/97 40,110 --
---------------------------------------------------------------------------------------------
Protein Polymer Technologies, Inc. Wts., Exp. 1/97 100,000 9,376
------------
Total Rights, Warrants and Certificates (Cost $383,662) 9,376
FACE
AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--4.8% Repurchase agreement with First Chicago Capital Markets,
6.35%, dated 9/29/95, to be repurchased at $6,673,530
on 10/2/95, collateralized by U.S. Treasury Nts., 4.25%-8.75%,
11/30/95-8/15/00, with a value of $4,547,490, U.S. Treasury
Bills maturing 12/28/95-3/28/96, with a value of $1,032,415,
and U.S. Treasury Bonds, 8.50%-13.25%, 5/15/14-2/15/20,
with a value of $1,236,190 (Cost $6,670,000) $6,670,000 6,670,000
9 Oppenheimer Global Emerging Growth Fund
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS, AT VALUE (COST $122,821,977) 101.7% $142,165,329
- --------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.7) (2,342,343)
------ ------------
NET ASSETS 100.0% $139,822,986
</TABLE>
------ ------------
------ ------------
1. Non-income producing security.
2. Identifies issues considered to be illiquid--See Note 7 of Notes to
Financial Statements.
3. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $1,300,298 or 0.93% of the Fund's
net assets, at September 30, 1995.
4. 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 September
30, 1995. The aggregate fair value of all securities of affiliated
companies as of September 30, 1995 amounted to $3,720,681. Transactions
during the period in which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
BALANCE SEPTEMBER 30, 1994 GROSS ADDITIONS GROSS REDUCTIONS BALANCE
SEPTEMBER 30, 1995
-------------------------- --------------- ---------------- --------------------------
SHARES COST SHARES COST SHARES COST SHARES COST
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Cambridge Antibody Technology
Ltd., Cv. 100,000 $3,300,000 -- $ -- -- $ -- 100,000 $3,300,000
- --------------------------------------------------------------------------------------------------------------------------------
Noble China, Inc.(5) 146,600 660,529 153,400 743,091 300,000 1,403,620 -- --
- --------------------------------------------------------------------------------------------------------------------------------
Synaptic Pharmaceutical Corp.,
Cv. Series 3 500,000 2,000,000 -- -- 500,000 2,000,000 -- --
---------- -------- ---------- ----------
$5,960,529 $743,091 $3,403,620 $3,300,000
---------- -------- ---------- ----------
---------- -------- ---------- ----------
</TABLE>
5. Not an affiliate as of September 30, 1994, but was an affiliate during
the period. Distribution of investments by country of issue, as a
percentage of total investments at value, is as follows:
<TABLE>
<CAPTION>
COUNTRY MARKET VALUE PERCENT
----------------------------------------------------------
<S> <C> <C>
United States $ 43,490,021 30.6%
----------------------------------------------------------
Japan 23,710,079 16.7
----------------------------------------------------------
Germany 11,353,893 8.0
----------------------------------------------------------
Switzerland 6,755,151 4.8
----------------------------------------------------------
Korea, Republic of (South) 6,675,275 4.7
----------------------------------------------------------
Thailand 4,999,989 3.5
----------------------------------------------------------
Hong Kong 4,704,370 3.3
----------------------------------------------------------
Philippines 4,587,022 3.2
----------------------------------------------------------
France 4,386,991 3.1
----------------------------------------------------------
Australia 3,955,429 2.8
----------------------------------------------------------
Argentina 3,442,934 2.4
----------------------------------------------------------
Norway 3,163,817 2.2
----------------------------------------------------------
Portugal 2,903,969 2.0
----------------------------------------------------------
Canada 2,433,295 1.7
----------------------------------------------------------
Great Britain 2,116,965 1.5
----------------------------------------------------------
Finland 1,957,602 1.4
----------------------------------------------------------
Netherlands 1,706,310 1.2
----------------------------------------------------------
Singapore 1,561,638 1.1
----------------------------------------------------------
Indonesia 1,428,950 1.0
----------------------------------------------------------
Peru 1,339,575 0.9
----------------------------------------------------------
Taiwan 1,275,000 0.9
----------------------------------------------------------
Pakistan 1,050,000 0.7
----------------------------------------------------------
Sweden 1,046,597 0.7
----------------------------------------------------------
Spain 813,377 0.6
----------------------------------------------------------
Malaysia 782,706 0.6
----------------------------------------------------------
Austria 524,374 0.4
------------ ------
Total $142,165,329 100.0%
------------ ------
------------ ------
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Global Emerging Growth Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value--see accompanying statement:
Unaffiliated companies (cost $119,521,977) $138,444,648
Affiliated companies (cost $3,300,000) 3,720,681
------------------------------------------------------------------------------------------------
Cash 4,507
------------------------------------------------------------------------------------------------
Receivables:
Investments sold 3,121,277
Dividends and interest 133,266
Shares of beneficial interest sold 112,171
------------------------------------------------------------------------------------------------
Other 55,189
------------
Total Assets 145,591,739
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Net unrealized depreciation on forward foreign currency exchange contracts--Note 5 613,180
------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,273,276
Shares of beneficial interest redeemed 553,253
Service plan fees--Note 6 84,226
Shareholder reports 78,634
Trustees' fees--Note 1 74,253
Transfer and shareholder servicing agent fees 54,314
Other 37,617
------------
Total liabilities 5,768,753
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $139,822,986
------------
------------
- ---------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $162,692,626
NET ASSETS
------------------------------------------------------------------------------------------------
Accumulated net investment loss (130,131)
------------------------------------------------------------------------------------------------
Accumulated net realized loss from investments, written options and foreign
currency transactions (41,479,582)
------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 18,740,073
------------
Net assets--applicable to 7,756,141 shares of beneficial interest outstanding $139,822,986
------------
------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
$18.03
- ---------------------------------------------------------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus sales charge of 5.75% of offering price)
$19.13
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Global Emerging Growth Fund
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest $ 1,177,285
---------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $137,189) 1,536,944
------------
Total income 2,714,229
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 6 1,238,423
---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 6 403,425
---------------------------------------------------------------------------------------
Service plan fees--Note 6 357,190
---------------------------------------------------------------------------------------
Shareholder reports 223,152
---------------------------------------------------------------------------------------
Custodian fees and expenses 203,733
---------------------------------------------------------------------------------------
Legal and auditing fees 53,095
---------------------------------------------------------------------------------------
Trustees' fees and expenses 35,615
---------------------------------------------------------------------------------------
Insurance expense 18,724
---------------------------------------------------------------------------------------
Registration and filing fees 2,150
---------------------------------------------------------------------------------------
Other 71,491
------------
Total expenses 2,606,998
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 107,231
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain (loss) from:
GAIN (LOSS) ON INVESTMENTS, Investments:
OPTIONS WRITTEN AND Unaffiliated companies (41,972,759)
FOREIGN CURRENCY Affiliated companies (509,171)
Closing of option contracts written--Note 4 43,393
Foreign currency transactions 1,507,754
------------
Net realized loss (40,930,783)
---------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 27,845,796
Translation of assets and liabilities denominated in foreign currencies (400,334)
------------
Net change 27,445,462
Net realized and unrealized loss on investments, options written
and foreign currency (13,485,321)
- -----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(13,378,090)
------------
------------
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Global Emerging Growth Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS Net investment income (loss) $ 107,231 $ (2,001,550)
-----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments, options written and foreign
currency transactions (40,930,783) 3,525,707
-----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
and translation of assets and liabilities denominated in foreign currencies 27,445,462 (21,014,383)
------------ ------------
Net decrease in net assets resulting from operations (13,378,090) (19,490,226)
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Distributions from net realized gain on investments, options
DISTRIBUTIONS TO written and foreign currency transactions ($.169 per share) -- (1,561,312)
SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net decrease in net assets resulting from beneficial interest
TRANSACTIONS transactions--Note 2 (10,093,708) (15,350,295)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total decrease (23,471,798) (36,401,833)
-----------------------------------------------------------------------------------------------------------
Beginning of period 163,294,784 199,696,617
------------ ------------
End of period (including accumulated net investment loss
of $130,131 and $172,940, respectively) $139,822,986 $163,294,784
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Global Emerging Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991(2) 1990 1989 1988(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $ 19.35 $ 21.64 $ 20.25 $ 26.90 $ 11.81 $ 12.09 $10.63 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .01 (.01) (.10) (.17) (.03) (.02) (.10) .14
Net realized and unrealized
gain (loss) on investments,
options written and
foreign currency (1.33) (2.11) 1.69 (6.47) 15.12 (.26) 1.69 .49
-------- -------- -------- -------- -------- ------- ------ ------
Total income (loss) from
investment operations (1.32) (2.12) 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,
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 $ 18.03 $ 19.35 $ 21.64 $ 20.25 $ 26.90 $ 11.81 $12.09 $10.63
-------- -------- -------- -------- -------- ------- ------ ------
-------- -------- -------- -------- -------- ------- ------ ------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(3) (6.82)% (9.91)% 7.79% (24.70)% 127.78% (2.32)%
15.21% 6.30%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $139,823 $163,295 $199,697 $129,634 $103,352 $16,217 $3,872 $1,921
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $148,378 $190,984 $194,184 $166,144 $ 50,989 $ 8,716 $2,343 $1,394
- -----------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 7,756 8,437 9,226 6,400 3,841 1,373 320 181
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .07% (1.05)% (.80)% (.71)% (.18)% (.37)% (.70)% 1.41%(4)
Expenses 1.76% 1.77% 1.59% 1.39% 1.50% 1.78% 2.40% 2.06%(4)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 160.3% 54.7% 41.0% 2.6% 11.2% 16.6% 17.1% 1.7%
</TABLE>
1. 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.
2. Per share amounts calculated based on the weighted average number of
shares outstanding during the period.
3. 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. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended September 30, 1995 were
$220,834,060 and $209,019,328, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Global Emerging Growth 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 Corpo ration (the Manager). The following is a
summary of significant accounting policies consistently followed by the
Fund.
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values
based on the closing bid or asked price or the last sale price on the
prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board
of Trustees. Such securities which cannot be valued by the approved
portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Trustees
to determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Forward contracts are valued based
on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank
or dealer. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the
prior trading date if it is within the spread between the closing bid and
asked prices. If the last sale price is outside the spread, the closing
bid 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 effect of changes in foreign currency exchange rates on
investments is separately identified from 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. The market value of the underlying
securities is required to be at least 102% of the resale price at the time
of purchase. If the seller of the agreement defaults and the value of the
collateral declines, or if the seller enters an insolvency proceeding,
realization of the value of the collateral by the Fund may be delayed or
limited.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain
on investments not offset by loss carryovers, to shareholders. Therefore,
no federal income or excise tax provision is required. At September 30,
1995, the Fund had available for federal income tax purposes an unused
capital loss carryover of approximately $14,363,000, which expires between
1999 and 2003.
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 year ended September 30, 1995, a provision of $2,732 was made for the
Fund's projected benefit obligations and a payment of $1,689 was made to
a retired trustee, resulting in an accumulated liability of $63,991 at
September 30, 1995.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
During the year ended September 30, 1995, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the year ended September 30, 1995, amounts have been reclassified to
reflect an increase in accumulated net investment loss of $64,422, a
decrease in paid-in capital of $48,346, and a decrease in accumulated net
realized loss on investments of $112,768.
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, 1995 Year Ended September 30, 1994
----------------------------- -----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 1,148,488 $ 19,774,392 2,216,798 $ 48,631,842
Distributions reinvested -- -- 63,096 1,414,325
Issued in connection with the
acquisition of Oppenheimer Global
Environment Fund--Note 8 1,540,515 27,636,869 -- --
Redeemed (3,370,269) (57,504,969) (3,068,893) (65,396,462)
---------- ------------ ---------- ------------
Net decrease (681,266) $(10,093,708) (788,999) $(15,350,295)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At September 30, 1995, net unrealized appreciation on investments and
options written of $19,343,352 was composed of gross appreciation of
$23,986,253, and gross depreciation of $4,642,901.
4. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write covered put and
call options on portfolio securities in order to produce incremental
earnings or protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio
holdings. When an option is written, the Fund receives a premium and
becomes obligated to sell or purchase the underlying security at a fixed
price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized
appreciation or depreciation is recorded. The Fund will realize a gain or
loss upon the expiration or closing of the option transaction. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option, or the cost of the security for
a purchased put or call option is adjusted by the amount of premium
received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and
the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the security decreases and the
option is exercised. The risk in buying an option is that the Fund pays
a premium whether or not the option is exercised. The Fund also has the
additional risk of not being able to enter into a closing transaction if
a liquid secondary market does not exist.
Written call option activity for the year ended September 30, 1995
was as follows:
<TABLE>
<CAPTION>
Number Amount
of Options of Premiums
- ------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at September 30, 1994 250 $57,843
- ------------------------------------------------------------------------------
Options canceled in closing purchase transactions 250 57,843
--- -------
Options outstanding at September 30, 1995 -- $ --
--- -------
--- -------
</TABLE>
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency
risks. They may also be used to tactically shift portfolio currency risk.
The Fund generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In
addition, the Fund may enter into such contracts as a hedge against
changes in foreign currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on
a daily basis as provided by a reliable bank or dealer. The Fund will
realize a gain or loss upon the closing or settlement of the forward
transaction.
In this report, securities held in segregated accounts to cover net
exposure on outstanding forward contracts are noted in the Statement of
Investments where applicable. The net amount due to or owed by the Fund
on outstanding contracts (unrealized appreciation or depreciation on
forward contracts) is reported in the Statement of Assets and Liabilities.
Realized and unrealized gains and losses are reported with all other
foreign currency gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the
terms of the contract and unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
At September 30, 1995, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
AMOUNT VALUATION AS OF APPRECIATION
CONTRACTS TO PURCHASE EXCHANGE DATE (000'S) SEPTEMBER 30, 1995
(DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen (JPY) 10/2/95--10/3/95 213,609 JPY $ 2,165,841 $ 12,411
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
AMOUNT VALUATION AS OF APPRECIATION
CONTRACTS TO SELL EXCHANGE DATE (000'S) SEPTEMBER 30, 1995
(DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
French Francs (FRF) 10/31/95 1,815 FRF $ 369,531 $ (1,799)
- ----------------------------------------------------------------------------------------------------
Indonesian Rupiah (IDR) 10/3/95 416,728 IDR 183,905 --
- ----------------------------------------------------------------------------------------------------
Japanese Yen (JPY) 10/2/95--3/28/96 1,553,327 JPY 15,972,881 (623,572)
- ----------------------------------------------------------------------------------------------------
Thailand Baht (THB) 10/3/95 277 THB 276,760 (220)
----------- ---------
$16,803,077 (625,591)
----------- ---------
----------- ---------
$(613,180)
---------
---------
</TABLE>
- ------------------------------------------------------------------------------
6. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 1% on the
first $50 million of average annual 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, 1995, commissions (sales charges paid
by investors) on sales of Fund shares totaled $398,139, of which $114,956
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 year ended September 30, 1995, OFDI
paid $15,436 to an affiliated broker/dealer as reimbursement for personal
service and maintenance expenses.
7. ILLIQUID AND RESTRICTED SECURITIES
At September 30, 1995, investments in securities included issues that are
illiquid or restricted. The securities are often purchased in private
placement transactions, are not registered under the Securities Act of
1933, may have contractual restrictions on resale, and 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 illiquid and restricted securities. The aggregate
value of these securities subject to this limitation at September 30, 1995
was $1,944,895, which represents 1.39% of the Fund's net assets.
Information concerning these securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPT. 30, 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oxford GlycoSystems Group PLC 5/21/93 $ 1.94 $ .79
- ----------------------------------------------------------------------------------------
Quintiles Transnational Corp. 8/2/93 $17.27 $53.10
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain
unregistered securities are determined to be liquid and are not included
within the 10% limitation specified above.
8. ACQUISITION OF OPPENHEIMER GLOBAL ENVIRONMENT FUND
On November 18, 1994, the Fund acquired all of the net assets of
Oppenheimer Global Environment Fund, pursuant to an Agreement and Plan of
Reorganization approved by the Oppenheimer Global Environment Fund
shareholders on November 4, 1994. The Fund issued 1,540,515 shares of
beneficial interest, in exchange for the net assets of $27,636,869
(including net unrealized appreciation of $2,684,431), resulting in
combined net assets of $174,971,153 on November 18, 1994. The exchange
qualified as a tax-free reorganization for federal income tax purposes.
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Transmission
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
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
