Oppenheimer
Enterprise Fund
Prospectus dated December 18, 1996
Oppenheimer Enterprise Fund is a mutual fund with the investment objective of
capital appreciation. Current income is not an objective. The Fund seeks its
investment objective by investing primarily in equity securities of small U.S.
and foreign companies that are believed to have favorable growth prospects.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of growth companies with a market capitalization of
up to $500 million, although the Fund intends to emphasize investments within
this 65% range in equity securities of companies with a market capitalization of
up to $200 million. In an uncertain investment environment, temporary defensive
investment methods may be stressed. The Fund may also use certain hedging
instruments to seek to reduce the risks of market fluctuations that affect the
value of the securities the Fund holds, or to attempt to seek increased total
return. The Fund may borrow money from banks to buy securities, which is a
speculative investment method known as "leverage".
Some of the Fund's investment techniques may be considered speculative.
These techniques may increase the risks of investing in the Fund and also
increase the Fund's operating costs. Please refer to "Investment Objective and
Policies" for more information about the types of securities the Fund invests in
and refer to "Investment Risks" for a discussion of the risks of investing in
the Fund.
Effective April 1, 1996, the Fund's Distributor will not accept orders
to purchase shares of the Fund, except as otherwise described in this
Prospectus. See "How to Buy Shares" on page __ for details.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it for
future reference. You can find more detailed information about the Fund in the
December 18, 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).
logo OppenheimerFunds
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.
1
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
9 Investment Objective and Policies
10 Investment Risks
12 Investment Techniques and Strategies
16 How the Fund is Managed
18 Performance of the Fund
ABOUT YOUR ACCOUNT
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
36 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
38 How to Sell Shares
By Mail
By Telephone
40 How to Exchange Shares
41 Shareholder Account Rules and Policies
43 Dividends, Capital Gains and Taxes
A1 Appendix A: Special Sales Charge Arrangements
2
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its fiscal year ended August 31, 1996.
|X| 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 45, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge on 5.75% None None
Purchases(as a % of
offering price)
Maximum Deferred Sales Charge None(1) 5% in the 1% if shares
(as a % of the lower of the
first year, are redeemed
of the original offering price declining to within 12
or redemption proceeds) 1% in the months of
sixth year purchase(2)
and
eliminated
thereafter(2)
Maximum Sales Charge on None None None
Reinvested Dividends
Redemption Fee None(3) None(3) None(3)
Exchange Fee None None None
</TABLE>
(1) If you invest $1 million or more ($500,000 or more forpurchases by
"Retirement Plans," as defined in Class A Contingent Deferred Charge" on page
27) in Class A shares, you may have to pay a sales charge of up to 1% if you
sell your shares within 18 calendar months from the end of the calendar month
during which you purchased those shares. See "How to Buy Shares - Buying Class A
Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to
Buy Shares Buying Class C Shares" below, for more information on contingent
deferred sales charges. (3) There is a $10 transaction fee for redemptions paid
by Federal Funds wire, but not for redemptions paid by ACH transfer through
AccountLink. See "How to Sell Shares."
|X| 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.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Class A Class B Class C
Shares Shares Shares
Management Fees 0.75% 0.75% 0.75%
12b-1 Plan Fees
0.22% 1.00% 1.00%
Other Expenses
0.69% 0.69% 0.68%
Total Fund Operating Expenses
1.66% 2.44% 2.43%
The Fund commenced operations November 7, 1995. The numbers for Class A,
Class B and Class C shares in the chart above are based on the Fund's expenses
in its fiscal year ended August 31, 1996. These amounts are shown as a
percentage of the average net assets of each class of the Fund's shares for that
period, and have been annualized. The actual expenses for each class of shares
in the Fund's future years may be more or less than the numbers in the chart,
depending on a number of factors, including the actual value of the Fund's
assets represented by each class of shares.
The "12b-1 Plan Fees" for Class A shares are the service fees. For
Class B and Class C shares, the "12b-1 Plan Fees" are the service fees and
asset-based sales charges. The service fee for each class is 0.25% of average
annual net assets of the class and the asset-based sales charge for Class B and
Class C shares is 0.75%. These plans are described in greater detail in "How to
Buy Shares."
|X| 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,
and 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 table 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 and 3 years:
1 year 3 years 5 years 10 years*
Class A Shares $73 $107 $143 $243
Class B Shares $75 $106 $150 $239
Class C Shares $35 $76 $130 $277
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $73 $107 $143 $243
Class B Shares $25 $76 $130 $239
Class C Shares $25 $76 $130 $277
*In the first example, expenses include the Class A initial sales charge and
applicable Class B or Class C contingent deferred sales charge. In the second
example, Class A expenses include the initial sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. The Class B
expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into Class A shares
after 6 years. Because of the effect of the asset-based sales charge and the
contingent deferred sales charge on Class B and Class C shares, long-term Class
B and Class C shareholders could pay the economic equivalent of an amount
greater than the maximum front-end sales charge permitted under applicable
regulatory requirements. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment returns of
the Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete information can
be found. You should carefully read the entire Prospectus before making a
decision about investing in the Fund. Keep the Prospectus for reference after
you invest, particularly for information about your account, such as how to sell
or exchange shares.
|X| What is the Fund's Investment Objective? The Fund's investment
objective is capital appreciation; current income is not an objective.
|X| What Does the Fund Invest In? The Fund seeks its investment
objective by investing primarily in equity securities (such as common and
preferred stock, convertible securities and other securities having equity
features) of small U.S. and foreign companies that are believed to have
favorable growth prospects. Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of growth companies with a
market capitalization of up to $500 million at the time of purchase, although
the Fund intends to emphasize investments within this 65% range in equity
securities of companies with a market capitalization of up to $200 million.
These investments are more fully explained in "Investment Objective and
Policies," starting on page 9.
|X| 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 $60 billion in assets as of November
30, 1996. The Manager is paid an advisory fee by the Fund, based on its net
assets. The Fund's portfolio manager, Jay W. Tracey, III, is employed by the
Manager and is primarily responsible for the selection of the Fund's securities.
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 16 for more information about the Manager and its fees.
|X| How Risky Is the Fund? All investments carry risks to some degree. The
Fund is designed for investors who are willing to accept greater risks of loss
in the hopes of greater gains, and is not intended for those who desire assured
income and preservation of capital. The Fund emphasizes investments in small
growth companies. These investments, due to potentially limited liquidity and
price volatility, may involve greater risks than more traditional equity
investments. The Fund's investments in stocks are subject to changes in their
value from a number of factors, such as general stock market movements or
changes in value of particular stocks because of an event affecting the issuer.
These changes affect the value of the Fund's investments and its price per
share. The Fund's investments in foreign securities are subject to additional
risks not associated with domestic investments, such as the risk of adverse
currency fluctuation and risks associated with investment in underdeveloped
countries and markets. Hedging instruments and derivative investments involve
certain risks, as discussed under "Hedging" and "Derivative Investments," below.
The Fund may borrow money from banks to buy securities, a practice known as
leverage that is subject to certain risks discussed below under "Borrowing for
Leverage."
The Fund may be viewed as an aggressive growth fund, and is generally
expected to be more volatile than the other stock funds, the income and growth
funds, and the more conservative income funds in the Oppenheimer funds spectrum.
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 9 for a more complete discussion.
|X| How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the Fund's
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How To Buy Shares" on page 22 for more
details.
|X| Will I Pay a Sales Charge to Buy Shares? The Fund offers 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, respectively, of buying
them. 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 22 for more details,
including a discussion about which class may be appropriate for you.
|X| How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page 38. The Fund also offers
exchange privileges to other Oppenheimer funds, described in "How to Exchange
Shares" on page 40.
Financial Highlights
The table on the following page presents selected financial information
about the Fund, including per share data, expense ratios and other data for the
period from November 7, 1995 (commencement of operations) through August 31,
1996. 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 August 31, 1996 appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Financial Highlights
Class A Class B Class C
------- ------- -------
Period Period Period
Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31,
1996(1) 1996(1) 1996(1)
================================================================================================================
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.00 $10.00 $10.00
--------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.05) (.14) (.14)
Net realized and unrealized gain 5.53 5.53 5.53
------ ------ ------
Total income from investment operations 5.48 5.39 5.39
--------------------------------------------------------------------------------------------
Net asset value, end of period $15.48 $15.39 $15.39
====== ====== ======
============================================================================================
Total Return, at Net Asset Value(2) 54.80% 53.90% 53.90%
============================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $44,421 $20,606 $4,846
--------------------------------------------------------------------------------------------
Average net assets (in thousands) $30,655 $14,123 $3,472
--------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment loss (0.59)% (1.37)% (1.35)%
Expenses(4) 1.66% 2.44% 2.43%
--------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 155.6% 155.6% 155.6%
Average brokerage commission rate(6) $0.0579 $0.0579 $0.0579
</TABLE>
1. For the period from November 7, 1995 (commencement of
operations) to August 31, 1996.
2. Assumes a hypothetical initial investment on the business
day before the first day of the fiscal period (or
commencement of operations), 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.
3. Annualized.
4. The expense ratio reflects the effect of gross expenses
paid indirectly by the Fund.
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
August 31, 1996 were $119,556,759 and $65,626,188,
respectively.
6. Total brokerage commissions paid on applicable purchases
and sales of portfolio securities for the period divided by
the total number of related shares purchased and sold.
See accompanying Notes to Financial Statements.
<PAGE>
Investment Objective and Policies
Objective. The Fund invests its assets to seek capital appreciation for its
shareholders; current income is not an objective.
Investment Policies and Strategies. The Fund seeks its investment objective by
investing primarily in equity securities, such as common and preferred stock and
other securities having equity features such as convertible securities, warrants
and rights (subject to certain restrictions), of small U.S. and foreign
companies, described below, that are believed to have favorable growth
prospects.
Under normal market conditions, as a matter of non-fundamental policy,
the Fund will invest at least 65% of its total assets in equity securities of
growth companies with a market capitalization of up to $500 million at the time
of purchase ("small-cap" companies), although it is the Fund's intention to
emphasize investments within this 65% range in equity securities of small-cap
growth companies with a market capitalization of up to $200 million. Market
capitalization is generally defined as the value of a company as determined by
the total current market value of its issued and outstanding common stock. The
balance of the Fund's total assets may be invested in other securities, such as
equity securities of companies with a market capitalization of $500 million or
more and other securities described below.
In investing the Fund's assets, the Manager evaluates the merits of
securities primarily through the exercise of its own investment analysis,
including its evaluation of general and industry economic and market trends, the
history of the issuer's operations, prospects for the industry of which the
issuer is part, the issuer's financial condition and the issuer's pending
product development and developments by competitors, as well as fundamental
securities valuation factors and securities price trends. The Fund may try to
hedge against losses in the value of its portfolio securities by using hedging
strategies described below. The Fund's portfolio manager may employ special
investment techniques in selecting securities for the Fund, which are also
described below. Additional information may be found about them under the same
headings in the Statement of Additional Information.
Small-cap growth companies may offer greater opportunities for capital
appreciation than large, more established companies. However, investors should
be aware that the very nature of investing in small companies involves greater
risk than is customarily associated with investing in established companies. The
Fund is designed for investors who are willing to accept greater risks of loss
in the hopes of greater gains, and is not intended for those who desire assured
income and conservation of capital. Certain risks of investing in small-cap
growth companies are described below.
|X| 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.
|X| What are "Small-Cap" Growth Companies? In selecting investments for the
Fund, the Manager will emphasize small companies (with a market capitalization
as described above) that it believes will have the potential to achieve
long-term earnings growth rates substantially in excess of the growth of
earnings of other companies. Typically, these are companies whose goods or
services have relatively favorable long-term prospects for increasing demand, or
companies that develop new products, services or markets and normally retain a
relatively large part of their earnings for research, development and investment
in capital assets. Also included are companies in the natural resources fields
or those developing commercial applications for new scientific knowledge having
a potential for technological innovations, such as computer software,
telecommunications equipment and services, biotechnology, and new consumer
products. The Fund may also invest from time to time in cyclical industries,
such as insurance and forest products, when the Manager believes that they
present opportunities for capital growth. Growth type issuers in which the Fund
may invest include emerging growth companies, which are companies that often
provide new products or services that enable them to capture a dominant or
important market position, or have a special area of expertise, or take
advantage of changes in demographic factors in a more profitable way than other
companies. The rate of growth of such companies at times may be dramatic.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for investors who are
investing for the long term. It is not intended for investors seeking assured
income or preservation of capital. While the Manager tries to reduce risks by
diversifying investments, by carefully researching securities before they are
purchased, and in some cases by using hedging techniques, changes in overall
market prices can occur at any time, and because the income earned on securities
is subject to change, there is no assurance that the Fund will achieve its
investment objective. When you redeem your shares, they may be worth more or
less than what you paid for them.
|X| "Small-Cap" Growth Companies.
Investment in small-cap growth companies may involve greater risks than is
customarily associated with investment in more established companies. Small-cap
growth companies may have limited product lines, markets or financial resources
and less depth in management as compared to more established companies. The
securities of small-cap growth companies could have limited liquidity (which
means that the Fund might have difficulty selling the securities at an
acceptable price when it wants to) and the prices of these securities may be
subject to greater price volatility. Realizing the full potential of small-cap
growth companies frequently takes time. As a result, the Fund should be
considered a long-term investment vehicle.
o 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.
o Foreign Securities Have Special Risks. While foreign securities offer
special investment opportunities, there are also special risks. The change in
value of a foreign currency against the U.S. dollar will result in a change in
the U.S. dollar value of securities denominated in that foreign currency.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors. More information about the
risks and potential rewards of investing in foreign securities is contained in
the Statement of Additional Information .
o 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 than what is required for
normal portfolio management. If the Manager uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other investments
or if it could not close out a position because the market for the future or
option was illiquid.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is exercised on
an investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if the
investment has increased in value above the call price. If 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.
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 detailed information about these practices, including
limitations on their use that may help reduce some of the risks.
|X| Investing in Small, Unseasoned Companies. The Fund may invest in
securities of small, unseasoned companies. These are companies that have been in
operation less than three years, including the operations of any of their
predecessors. The securities of such companies may have limited liquidity and
the prices of such securities may be volatile. The Fund currently intends to
invest no more than 10% of its total assets in securities of small, unseasoned
issuers.
|X| Temporary Defensive Investments. When stock market prices are
falling or in other unusual economic or business circumstances, the Fund may
invest all or a portion of its assets in defensive securities. Securities
selected for defensive purposes may include investment grade debt securities
(securities rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's"),
a nationally recognized statistical rating organization, or at least "BBB" by
Standard & Poor's Corporation ("Standard & Poor's"), also a nationally
recognized statistical rating organization, or, if unrated, judged by the
Manager to be of comparable quality to securities rated within such grades), and
preferred stocks, cash or cash equivalents, such as U.S. Treasury Bills and
other short-term obligations of the U.S. Government, its agencies or
instrumentalities, or commercial paper rated "A-1" or better by Standard &
Poor's or "P-1" or better by Moody's.
|X| Portfolio Turnover. A change in the securities held by the Fund is
known as "portfolio turnover." Although the Fund may buy and sell securities
regardless of the length of time they have been held, the Fund generally will
not engage in short-term trading to try to achieve its investment objective.
Portfolio turnover affects brokerage costs as well as a fund's ability to
qualify as a "regulated investment company" under the Internal Revenue Code for
tax deductions for any dividends and capital gains distributions the Fund pays
to shareholders.
|X| Borrowing for Leverage. The Fund may borrow money in an amount up to
one-third of its total assets from banks to buy securities. The Fund will borrow
only if it can do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." Leveraging 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 the net asset value of funds that don't borrow, since the Fund pays
interest on borrowings and interest expense affects the Fund's share price.
Under the Investment Company Act, the Fund can borrow only if it maintains at
least a 300% ratio of assets to borrowings at all times. Borrowing for leverage
is subject to regulatory limits described in more detail in "Borrowing for
Leverage" in the Statement of Additional Information.
|X| Warrants and Rights. Warrants basically are options to purchase
stock at set prices that are valid for a limited period of time. Rights are
similar to warrants but normally have a short duration and are distributed
directly by the issuer to its shareholders. The Fund may invest up to 5% of its
net assets in warrants. That 5% excludes warrants the Fund has acquired in units
or that are attached to other securities. No more than 2% of the Fund's assets
may be invested in warrants that are not listed on the New York or American
Stock Exchanges.
|X| Special Situations. The Fund may invest in securities of companies
that are in "special situations" that the Manager believes may present
opportunities for capital growth. A "special situation" may be an event such as
a proposed merger, reorganization, or other unusual development that is expected
to occur and which may result in an increase in the value of a company's
securities, regardless of general business conditions or the movement of the
market as a whole. There is a risk that the price of the security may decline if
the anticipated development fails to occur.
|X| 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, currency or
commodity. In the broadest sense, exchange-traded options and futures contracts
(discussed in "Hedging," below) may be considered "derivative investments." The
Fund may not purchase or sell physical commodities; however, the Fund may
purchase and sell foreign currency in hedging transactions. This shall not
prevent the Fund from buying or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities.
There are special risks in investing in derivative investments. The
company issuing the instrument may fail to pay the amount due on the maturity of
the instrument. Also, the underlying investment or security on which the
derivative is based might not perform the way the Manager expected it to
perform. The performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All of this can
mean that the Fund will realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may trade in the
over-the-counter market and may be illiquid. Please see "Illiquid and Restricted
Securities", below.
|X| 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 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. 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 may be 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 defensive reasons.
o Futures. The Fund may buy and sell futures contracts that relate to
(1) stock indices (referred to as Stock Index Futures), (2) other securities
indices (together with Stock Index Futures, referred to as Financial Futures),
(3) interest rates (these are referred to as Interest Rate Futures) or (4)
foreign currencies (these are referred to as Forward Contracts). These types of
Futures are described in "Hedging With Options and Futures Contracts" in the
Statement of Additional Information.
o Put and Call Options. The Fund may buy and sell certain kinds of put
options (puts) and call options (calls). A call or put option may not be
purchased if the value of all the Fund's put and call options would exceed 5% of
the Fund's total assets.
The Fund may buy calls on securities, securities indices, foreign
currencies, Interest Rate Futures or Financial Futures. The Fund may buy calls
to terminate its obligation on a call the Fund previously wrote. The Fund may
write (that is, sell) call options. When the Fund writes a call, it receives
cash (called a premium). Each call the Fund writes must be "covered" while the
call is outstanding. That means the Fund owns the investment on which the call
was written . The Fund may write calls on Futures contracts it owns, but these
calls must be covered by securities or other liquid assets the Fund owns and
segregates to enable it to satisfy its obligations if the call is exercised.
After writing any call, not more than 25% of the Fund's total assets may be
subject to calls.
The Fund may buy and sell put options. The Fund can buy those puts that
relate to securities the Fund owns, securities indices, foreign currencies, or
Interest Rate Futures or Financial Futures (whether or not the Fund holds the
particular Future in its portfolio). Writing puts requires the segregation of
liquid assets to cover the put. The Fund will not write a put if it will require
more than 25% of the Fund's total assets to be segregated to cover the put
obligation.
The Fund may buy or sell foreign currency puts and calls only if they
are traded on a securities or commodities exchange or over-the-counter market,
or are quoted by recognized dealers in those options.
o Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to 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 may also use "cross-hedging" where
the Fund hedges against changes in currencies other than a currency in which a
security it holds is denominated.
|X| 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 a 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 that cannot be sold publicly
until it is registered under the Securities Act of 1933. The Fund will not
invest more than 10% of its net assets in illiquid or restricted securities (the
Board may increase that limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are eligible
for resale to qualified institutional purchasers. The Manager monitors holdings
of illiquid securities on an ongoing basis and at times the Fund may be required
to sell some holdings to maintain adequate liquidity.
|X| Loans of Portfolio Securities. To raise cash for liquidity purposes,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions approved by the Board of Trustees. The Fund must receive
collateral for such a loan. After any loan, the value of the securities loaned
cannot exceed 25% 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 its total assets
in the coming year.
|X| Repurchase Agreements. The Fund may enter into repurchase
agreements to generate income for liquidity purposes to meet anticipated
redemptions, or pending the investment of proceeds from sales of Fund shares or
settlement of purchases of portfolio investments. Repurchase agreements must be
fully collateralized. However, if the vendor of the securities fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing of the
collateral, and losses if there is any delay in its ability to do so. 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. The Fund will not enter into a
repurchase transaction that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity of more than seven days.
|X| Short Sales "Against-the-Box". 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 security sold
short. No more than 15% of the Fund's net assets will be held as collateral for
such short sales at any one time.
Other Investment Restrictions
The Fund has certain investment restrictions that are fundamental
policies. Under these restrictions, the Fund cannot do any of the following:
o The Fund cannot invest in securities of a single issuer (except the
U.S. Government or its agencies or instrumentalities) if immediately thereafter
(a) more than 5% of the Fund's total assets would be invested in securities of
that issuer, or (b) the Fund would then own more than 10% of that issuer's
voting securities.
o The Fund cannot make short sales of securities except "short
sales against-the-box."
o The Fund cannot invest 25% or more of its total assets in securities
of companies in any one industry (for purposes of this restriction, obligations
of the U.S. government, its agencies or instrumentalities are not considered to
be part of any single industry).
Unless the prospectus states that a percentage restriction applies on
an ongoing basis, it applies only at the time the Fund makes an investment, and
the Fund need not sell securities to meet the percentage limits if the value of
the investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in March 1995 as a
Massachusetts business trust. The Fund is an open-end, diversified management
investment company, with an unlimited number of authorized shares of beneficial
interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
provides more information about them and the officers of the Fund. Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
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 on matters submitted to the vote of shareholders. Shares
of each class may have separate voting rights on matters in which interests of
one class are different from interests of another class, and only shares of a
particular class vote as a class on matters that affect that class alone. Shares
are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
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 sets forth the fees paid by the Fund to the Manager, and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including a subsidiary) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $60 billion as of November 30, 1996,
and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
|X| Portfolio Manager. The portfolio manager of the Fund is Jay W.
Tracey, III, a Vice President of the Manager. He is the person principally
responsible for the day-to-day management of the Fund's portfolio. Mr. Tracey
has also served as an officer and portfolio manager for other Oppenheimer funds
since October 1991 except during the period from February 1994 to September
1994, during which time Mr. Tracey was a managing director of Buckingham Capital
Management. Prior to initially joining the Manager in October 1991, he was a
Senior Vice President of Founders Asset Management, Inc. (a mutual fund
adviser), prior to which he was a securities analyst and portfolio manager for
Berger Associates, Inc. (investment adviser).
|X| Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager a monthly fee at the following annual rates, which may be
higher than the rates paid by some other mutual funds, and which decline on
additional assets as the Fund grows: 0.75% of the first $200 million of average
annual net assets, 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 average annual net assets
in excess of $800 million. The Fund's management fee for its fiscal year ended
August 31, 1996 was 0.75% of average annual net assets for its Class A, Class B
and Class C shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional Information.
There is also information about the Fund's brokerage policies and practices
in "Brokerage Policies of the Fund" in the Statement of Additional Information.
That section discusses how brokers and dealers are selected for the Fund's
portfolio transactions. When deciding which brokers to use, the Manager is
permitted by the Investment Advisory Agreement to consider whether brokers have
sold shares of the Fund or any other funds for which the Manager serves as
investment adviser.
|X| The Distributor. The Fund's shares are sold through dealers and
brokers 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.
|X| 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. 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 dividends are received in cash or
shares are sold or purchased). The Fund's performance data may be useful to help
you see how well your investment has done and to compare it to market indices,
as we have done below.
It is important to understand that the Fund's total returns represent past
performance and should not be considered to be predictions of future returns or
performance. More detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary , depending on market conditions, the
composition of the portfolio, expenses and which class of shares you purchase.
|X| Total Returns. There are different types of "total returns" used to
measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
the Fund's actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted.
However, total returns may also be quoted "at net asset value," without
considering the effect of the sales charge, and those returns would be less if
sales charges were deducted.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1996, followed by a
graphical comparison of the Fund's performance to appropriate broad-based market
indices.
o Management's Discussion of Performance. During the past fiscal year,
the Fund's positive performance was affected by low U.S. inflation, falling
interest rates and moderate economic growth on the stock markets. The Manager
sought to identify innovative companies, with a focus on the companies'
management. The Fund's new investments included stock of companies in healthcare
technology and services, computer software, and specialty financial services.
The Fund's portfolio and its portfolio manager's strategies are subject to
change.
o Comparing the Fund's Performance to the Market. The graphs below show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund from November 7, 1995 (inception of the Fund) held until its fiscal
year-end August 31, 1996. The graphs assume that all dividends and capital gains
distributions were reinvested in additional shares. The graphs reflect the
deduction of the 5.75% maximum initial sales charge on Class A shares and the
applicable contingent deferred sales charge on Class B and Class C shares.
The Fund's performance is compared to the performance of the Standard &
Poor's ("S&P") 500 Index and the Russell 2000 Index. The S&P 500 Index is a
broad based index of equity securities widely regarded as the general measure of
the performance of the U.S. equity securities market. The Russell 2000 Index is
a capitalization-weighted index of 2,000 U.S. issuers whose common stocks are
traded on the New York and American Stock Exchanges and NASDAQ, and is widely
recognized as a measure of the performance of "mid-capitalization" stocks.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs below shows the effect of taxes. Moreover, index performance data
does not reflect any assessment of the risk of the investments included in the
index. The Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark for the
Fund's performance, it must be noted that the Fund's investments are not limited
to the securities in the indices shown.
A Comparison of Change in Value of $10,000
Hypothetical Investments in: Class A, Class B and Class C
Shares of Oppenheimer Enterprise Fund, S&P 500 Index
and Russell 2000 Index
GRAPH
Cumulative Total Return of Class A Shares of the Fund at 8/31/96
Life(1)
------------------------------------
45.90%
GRAPH
Cumulative Total Return of Class B Shares of the Fund at 8/31/96
Life(2)
------------------------------------
48.90%
GRAPH
Cumulative Total Return of Class C Shares of the Fund at 8/31/96
Life(3)
------------------------------------
52.90%
- -----------------------
The cumulative total returns and the ending account values in the graphs reflect
reinvestment of all dividends and capital gains distributions. 1. The inception
date of the Fund (Class A shares) was 11/7/95. Cumulative total return is shown
net of the applicable 5.75% maximum initial sales charge. 2. Class B shares of
the Fund were first publicly offered on 11/7/95. The cumulative total return and
ending account value in the graph are shown net of the applicable 5% contingent
deferred sales charge for the period. 3. Class C shares of the Fund were first
publicly offered on 11/7/95. The cumulative total return and ending account
value in the graph are shown net of the applicable 1% contingent deferred sales
charge for the period.
Past performance is not predictive of future performance. Graphs may not be
drawn to the same scale.
ABOUT YOUR ACCOUNT
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.
Effective April 1, 1996, the Fund's Distributor, OppenheimerFunds
Distributor, Inc., will not accept any orders to purchase shares of the Fund,
whether such orders are submitted by brokers, dealers or other financial
institutions, or directly by investors, or by exchange requests from a
shareholder owning shares of another Oppenheimer fund (or by a broker of record
acting on behalf of a shareholder), except as set forth below. Additional shares
may be purchased by reinvestment of dividends and/or capital gains distributions
paid by the Fund to persons who were shareholders of the Fund as of March 31,
1996, and who elected to reinvest dividends and/or capital gains distributions
prior to April 1, 1996. Persons who owned shares of the Fund prior to April 1,
1996, may purchase additional shares of the Fund in amounts not exceeding $5,000
per account per month for those accounts that existed prior to April 1, 1996
(for accounts held in nominee or "street" name, that limit applies to the
accounts of the underlying clients or customers, including participants in
employee benefit or retirement plans held in the name of a trustee or plan
administrator).
|X| Class A Shares. If you buy Class A shares, you may pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 27). If you purchase Class A shares as part of an investment of at least $1
million (at least $500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you sell any
of those shares within 18 months of buying them, you may pay a contingent
deferred sales charge.
|X| Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares," below.
|X| Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "Buying Class C Shares," below.
|X| 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, considering 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,
guidelines 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.
|X| How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on Class B or Class C shares for
which no initial sales charge is paid.
o Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not 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 six years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A 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 investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares, or $1 million or more of
Class C shares, from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of the expected
lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore you should
analyze your options carefully.
|X| 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.
Additionally, dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges described
below and in the Statement of Additional Information.
|X| 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
Class B and Class C contingent deferred sales charges and asset-based sales
charges is the same as the purpose of the front-end sales charge on sales of
Class A shares: 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:
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25; and subsequent purchases of at least
$25 can be made by telephone through AccountLink.
o Under pension, profit-sharing and 401(k) plans and Individual
Retirement Accounts (IRAs), you can make an initial investment of as little as
$250 (if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares
by reinvesting dividends 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.
|X| 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 through an
Asset Builder Plan under the OppenheimerFunds AccountLink service. The
Distributor may appoint certain servicing agents as the Distributor's agent to
accept purchase (and redemption) orders. When you buy shares, be sure to specify
Class A, Class B or Class C shares. If you do not choose, your investment will
be made in Class A shares.
|X| Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
|X| Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for you.
|X| 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, and to transmit dividends and distributions.
Shares are purchased for your account through 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.
|X| 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.
|X| 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, or its designated agent, must receive your
order by the time of day the New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references to
time in this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock Exchange
is open (which is a "regular business day").
If you buy shares through a dealer, 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 may
reject any purchase order for the Fund's shares, in its sole discretion.
Special Sales Charge Arrangements for Certain Persons. Appendix A 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 Commission
Sales Charge Sales Charge as Percentage
as Percentage of as Percentage of of Offering
Amount of Purchase Offering Price Amount Invested Price
- ------------------ ---------------- ---------------- -------------
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.
|X| Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more;
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan (not
including Section 457 plans), employee benefit plan, group retirement plan (see
"How to Buy Shares Retirement Plans" in the Statement of Additional Information
for further details), an employee's 403(b)(7) custodial plan account, SEP IRA,
SARSEP, or SIMPLE plan (all of these plans are collectively referred to as
"Retirement Plans"), that: (1) buys shares costing $500,000 or more or (2) has,
at the time of purchase, 100 or more eligible participants, or (3) certifies
that it projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are
made (1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for these purchases, or (2)
by a direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases
in an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million. That commission will be
paid only on those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be paid to the
dealer, broker or financial institution on Class A shares purchased with the
redemption proceeds of shares of a mutual fund offered as an investment option
in a Retirement Plan in which Oppenheimer funds are also offered as investment
options under a special arrangement with the Distributor if the purchase occurs
more than 30 days after the addition of the Oppenheimer funds as an investment
option to the Retirement Plan.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge may be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital
gains distributions) or (2) the original offering price (which is the original
net asset value) of the redeemed shares. However, the Class A contingent
deferred sales charge will not exceed the aggregate amount of the commissions
the Distributor paid to your dealer on all 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.
|X| 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. Until January 1,
1997, 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 at reduced sales charge rates in one or more of the following
ways:
|X| Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class B
shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also count Class A
and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold that
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.
|X| Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A shares 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.
|X| 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:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
o dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients (those clients may be charged a transaction fee by their dealer,
broker, bank or adviser for the purchase or sale of
Fund shares);
o employee benefit plans purchasing shares through a shareholder agent
which the Distributor has appointed as its agent to accept those purchase
orders;
o (1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares for their
own accounts or the accounts of their clients, (2) Retirement Plans and deferred
compensation plans and trusts used to fund those Plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases, and (3) clients of such investment advisors or financial
planners who buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account of their
investment advisor or financial planner on the books and records of the broker,
agent or financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap
Advisors or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commence by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates acts as
sponsor;
o shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor;
o 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; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time 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);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program; or
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA.
|X| 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 accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed 0.25% of the average annual net assets of Class A shares of the
Fund. The Distributor uses all of those fees to compensate dealers, brokers,
banks and other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original offering
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges", below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
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.
|X| Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
|X| 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. This Plan is
described below under "Buying Class C Shares - Distribution and Service Plans
for Class B and Class C shares."
|X| Waivers of Class B Sales Charges. The Class B contingent deferred
sales charge will not apply to shares purchased in certain types of
transactions, nor will it apply to shares redeemed in certain circumstances, as
described below under "Buying Class C Shares - Waivers of Class B and Class C
Sales Charges."
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
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.
|X| Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and Class C shares
to compensate the Distributor for its services and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares that are outstanding for 6 years or less and on Class C shares. The
Distributor also receives a service fee of 0.25% per year under each Plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the 0.25% service fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer. After the shares have been held for a year, the Distributor pays the
service fees to dealers on a quarterly basis.
The asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that 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 and Class C shares.
The Distributor currently pays sales commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plans for Class B and C shares. Therefore, those expenses may be carried
over and paid in future years. At August 31, 1996, the end of the Class B and
Class C Plan year, the Distributor had incurred unreimbursed expenses under the
Plan of $688,429 for Class B shares and $74,784 for Class C shares, equal to
3.34% of the Fund's net assets represented by Class B shares on that date, and
1.54% of the Fund's net assets represented by Class C shares on that date, which
have been carried over into the present Plan year.
If either Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for certain expenses it incurred before the plan was terminated.
|X| Waivers of Class B and Class C Sales Charges. The Class B and Class
C contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
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 if the Transfer Agent is notified that these
conditions apply to the redemption:
42
o distributions to participants or beneficiaries from Retirement Plans,
if the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the requests; or
o 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 in
the following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with
43
the Manager or the Distributor for that purpose;
o shares issued in plans of reorganization to which the
Fund is a party; or
o shares redeemed in involuntary redemptions as described
above.
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.
|X| 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.
|X| PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone phone.
44
PhoneLink may be used on already-established Fund accounts after you obtain a
Personal Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer fund account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
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:
|X| Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at least
$50 on a monthly, quarterly, semi-annual or annual basis. The checks may be sent
to you or sent automatically to your bank account on AccountLink. You may even
set up certain types of withdrawals of up to $1,500 per month by telephone. You
should consult the Application and Statement of Additional Information for more
details.
|X| Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange 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 fund account is $25. These exchanges are subject to the exchange
terms 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
45
Fund or Class A shares of other Oppenheimer funds without paying a sales charge.
This privilege applies to Class A shares that you purchased with an initial
sales charge and to Class A or B shares on which you paid a contingent deferred
sales charge when you redeemed them. This privilege does not apply to Class C
shares. You must be sure to ask the Distributor for this privilege when you send
your 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:
o Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SAR/SEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons
and other employers
o 401(k) prototype retirement plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the net asset value next calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis, as described above. If
46
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.
|X| 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.
|X| Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and must
include a signature guarantee in the following situations (there may be other
situations also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record on
your statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
|X| Where Can I Have My Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that
includes:
47
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling, o
The signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or Express Mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. Shares held in an OppenheimerFunds retirement plan or
under a share certificate may not be redeemed by telephone.
o To redeem shares through a service representative, call 1-
800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that bank account.
|X| Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
48
available within 30 days of changing the address on an account.
|X| Telephone Redemptions Through AccountLink or Wire. 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.
Shareholders may also have the Transfer Agent send redemption proceeds
of $2,500 or more by Federal Funds wire to a designated commercial bank account
if the bank is a member of the Federal Reserve wire system. There is a $10 fee
for each Federal Funds wire. To place a wire redemption request, call the
Transfer Agent at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or paid on
the proceeds of shares that have been redeemed and are awaiting transmittal by
wire. To establish wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Please call your dealer for more information about this procedure. Brokers or
dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available
for sale in your state of residence
o The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
o You must hold the shares you buy when you establish your
49
account for at least 7 days before you can exchange them; after the account
is open 7 days, you can exchange shares every regular business day
o You must meet the minimum purchase requirements for the fund you purchase
by exchange o Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in 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:
|X| 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."
|X| Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852- 8457 or by using
PhoneLink for automated exchanges, by calling 1- 800-533-3310. Telephone
exchanges may be made only between accounts that are registered with the same
name(s) and address. Shares held under certificates may not be exchanged by
telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a service
representative at 1-800-525-7048. Exchanges of shares involve a redemption of
the shares of the fund you own and a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that 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
50
on some days. However, either fund may delay the purchase of shares of the fund
you are exchanging into up to 7 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.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a result,
those exchanges may be subject to notice requirements, delays and other
limitations that do not apply to shareholders who exchange their shares directly
by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
|X| 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
51
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.
|X| The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in the
Fund's best interest to do so.
|X| Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone exchange and redemption privileges
automatically apply to each owner of the account and the dealer representative
of record for the account unless refused on the new account Application or, if
not refused, will apply until the Transfer Agent receives cancellation
instructions from an owner of the account.
|X| The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. 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.
|X| Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time to
time, the Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
|X| Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
52
Securities Clearing Corporation are responsible for obtaining their clients'
permission to perform those transactions and are responsible to their clients
who are shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
|X| The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, 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.
|X| 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.
|X| 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.
|X| 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.
|X| "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
53
you sign your application, or if you violate Internal Revenue Service
regulations on tax reporting of income.
|X| 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.
|X| To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for Class A, Class B
and Class C shares from net investment income, if any, 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 August 31st).
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 on
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.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the year. Short-term capital
gains are treated as dividends for tax purposes. There can be no assurance that
the Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
54
OppenheimerFunds retirement accounts, all distributions are reinvested. For
other accounts, you have four options:
|X| Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.
|X| Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or sent to your bank account on AccountLink.
|X| Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
|X| 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 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.
|X| "Buying a Dividend": When a fund declares a dividend, its share
price is reduced by the amount of the distribution. If you buy shares on or just
before the date on which the dividend is declared, 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.
|X| Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is the
difference between the price you paid for the shares and the price you received
when you sold them.
|X| 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
55
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.
56
APPENDIX A
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent sales charge rates and waivers for Class A, Class B
and Class C shares of the Fund described elsewhere in this Prospectus are
modified as described below for those shareholders of (i) Quest for Value Fund,
Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund,
Quest for Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 22, 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 acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was (i) 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
|X| Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
57
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 27 to 28 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
|X| Special Class A Contingent Deferred Sales Charge Rates
Class A 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 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
58
the subsequent six months. 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.
|X| Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not
subject to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the following investors
who were shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is not or
was not permitted to receive a sales load or redemption fee imposed on a
shareholder with whom that dealer has a fiduciary relationship under the
Employee Retirement Income Security Act of 1974 and regulations adopted under
that law.
o Participants in Qualified Retirement Plans that purchased shares of
any of the Former Quest for Value Funds pursuant to a special "strategic
alliance" with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
59
|X| Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired by exchange from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged, if those shares were purchased prior to
March 6, 1995: in connection with (i) distributions to participants or
beneficiaries of plans qualified under Section 401(a) of the Internal Revenue
Code or from custodial accounts under Section 403(b)(7) of the Code, Individual
Retirement Accounts, deferred compensation plans under Section 457 of the Code,
and other employee benefit plans, and returns of excess contributions made to
each type of plan, (ii) withdrawals under an automatic withdrawal plan holding
only either Class B or Class C shares if the annual withdrawal does not exceed
10% of the initial value of the account, and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum value of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995
In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of the Fund
acquired 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 Class C shares) where the annual withdrawals do
not exceed 10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required
60
minimum account value. A shareholder's account will be credited with the amount
of any contingent deferred sales charge paid on the redemption of any Class A,
Class B or Class C shares of the Fund described in this section if 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.
61
APPENDIX TO PROSPECTUS OF
OPPENHEIMER ENTERPRISE FUND
Graphic material included in Prospectus of Oppenheimer
Enterprise Fund: "Comparison of Change in Value of $10,000
Hypothetical Investments In: Oppenheimer Enterprise Fund, S&P 500
and Russell 2000 Index."
Linear graphs will be included in the Prospectus of Oppenheimer
Enterprise Fund (the "Fund") depicting the initial account value and subsequent
account values of a hypothetical $10,000 investment in each class of shares of
the Fund from November 7, 1995 (inception of the Fund), held until its fiscal
year ended August 31, 1996. The graphs assume that all dividends and capital
gains distributions were reinvested in additional shares. In each graph, the
respective class of shares of the Fund will be compared over the same time
period with the same investment in the S&P 500 Index and the Russell 2000 Index.
Additional information with respect to the foregoing, including a description of
each of the S&P 500 Index and the Russell 2000 Index, is set forth in the
Prospectus under "Performance of the Fund Management's Discussion of
Performance."
<TABLE>
<CAPTION>
Fiscal Oppenheimer S&P 500 Russell
Year Ended Enterprise Fund Index 2000 Index
- ---------- --------------- ------- ----------
<S> <C> <C> <C>
Class A
11/7/95 $ 9,425 $10,000 $10,000
08/31/96 $14,590 $11,713 $11,398
Class B
11/7/95 $10,000 $10,000 $10,000
08/31/96 $14,890 $11,713 $11,398
Class C
11/7/95 $10,000 $10,000 $10,000
08/31/96 $15,290 $11,713 $11,398
</TABLE>
62
Oppenheimer Enterprise Fund
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 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 representation 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 offer in such
state.
PR0885.001.1296 Printed on recycled paper
Oppenheimer Enterprise Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December 18, 1996
This Statement of Additional Information of Oppenheimer Enterprise Fund
(the "Fund") is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated December 18,
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.
<TABLE>
<CAPTION>
Contents
<S> <C>
Page
About the Fund
Investment Objective and Policies....................................................................... 2
Investment Policies and Strategies................................................................. 2
Other Investment Techniques and Strategies......................................................... 5
Other Investment Restrictions...................................................................... 14
How the Fund is Managed................................................................................. 15
Organization and History........................................................................... 15
Trustees and Officers of the Fund.................................................................. 16
The Manager and Its Affiliates..................................................................... 21
Brokerage Policies of the Fund.......................................................................... 23
Performance of the Fund................................................................................. 24
Distribution and Service Plans.......................................................................... 27
About Your Account
How To Buy Shares....................................................................................... 29
How To Sell Shares...................................................................................... 36
How To Exchange Shares.................................................................................. 40
Dividends, Capital Gains and Taxes...................................................................... 42
Additional Information About the Fund................................................................... 44
Financial Information About the Fund
Financial Statements.................................................................................... 45
Independent Auditors' Report............................................................................ 46
Appendix: Corporate Industry Classifications............................................................ A-1
</TABLE>
-1-
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 meanings as those terms have in the Prospectus.
|X| Securities of "Growth-Type" Issuers. Many "growth-type" issuers,
including emerging growth companies, may be small and unseasoned. Their
securities, which the Fund may purchase when they are offered to the public for
the first time, may have a limited trading market, which may adversely affect
the Fund's ability to sell them when it wants to do so and can result in their
shares being priced lower than otherwise might be the case. While the Manager
will undertake to select promising emerging companies carefully for the Fund's
investments, there is no guarantee that such investments will achieve their
potential. Investment in these issuers is subject to restrictions contained in
the Prospectus and this Statement of Additional Information.
|X| Borrowing For Leverage. From time to time the Fund may increase its
ownership of securities by borrowing from banks on an unsecured basis and
investing the borrowed funds, subject to the restrictions in the Prospectus. Any
such borrowing will be made only from banks and, pursuant to the requirements of
the Investment Company Act, will be made only to the extent that the value of
the Fund's assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings, including the proposed borrowing. If the value of
the Fund's assets, when computed in that manner, should fail to meet the 300%
asset coverage requirement, the Fund is required within three days to reduce its
bank debt to the extent necessary to meet that requirement. To do so, the Fund
may have to sell a portion of its investments at a time when it would not
otherwise want to sell the securities. Interest on money the Fund borrows is an
expense the Fund would not otherwise incur, so that during periods of
substantial borrowings, its expenses may increase more than expenses of Funds
that do not borrow. This speculative factor is known as "leverage."
|X| Foreign Securities. "Foreign securities" include equity and debt
securities of U.S. corporations denominated in non-U.S. currencies, companies
organized under the laws of countries other than the United States and debt
securities of foreign governments, that are traded on foreign securities
exchanges or in the foreign over-the-counter markets. Securities of foreign
issuers that are represented by American Depository Receipts or that are listed
on a U.S. securities exchange or traded in the U.S. over-the-counter markets are
not considered "foreign securities" for the purpose of the Fund's investment
allocations, because they are not subject to many of the special considerations
and risks, discussed below, that apply to foreign securities traded and held
abroad.
Investing in foreign securities offers the Fund potential benefits not
available from investing solely in securities of domestic issuers, such as 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
-2-
foreign stock markets that do not move in a manner parallel to U.S. markets. If
the Fund's portfolio securities are held abroad, the countries in which such
securities may be held and the sub-custodians or depositories 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. In
buying foreign securities, the Fund may convert U.S. dollars into foreign
currency, but only to effect securities transactions on foreign securities
exchanges and not to hold such currency as an investment.
o Risks of Foreign Investing. Investing in foreign securities involves
special additional risks and considerations not typically associated with
investing in securities of issuers traded in the U.S. These include: 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 in 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 against foreign issuers; 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 or nationalization
of assets, 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.
|X| Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the Fund
may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are eligible
for sale to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933, provided that those securities have been determined to
be liquid by the Board of Trustees of the Fund or by the Manager under
Board-approved guidelines. Those guidelines take into account the trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid.
-3-
|X| Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved vendor.
An "approved vendor" is a U.S. commercial bank or the U.S. branch of a foreign
bank, or a broker-dealer which has been designated a primary dealer in
government securities and which must meet the credit requirements set by the
Fund's Board of Trustees from time to time. The repurchase price exceeds the
purchase price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The majority
of these transactions run from day to day, and delivery pursuant to the resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is in effect, the value
of the collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will impose
creditworthiness requirements to confirm that the vendor is financially sound
and will continuously monitor the collateral's value.
|X| Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus, if the loan is
collateralized under applicable regulatory guidelines. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the market value of the loaned securities
and must consist of cash, bank letters of credit, U.S. Government securities, 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 portfolio 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 such lending, the Fund might experience risks of delay
in receiving additional collateral, or risks of delay in recovery of the loaned
securities, or loss of rights in the collateral should the borrower fail
financially. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least the minimum amount
of interest required by the lending guidelines established by its Board of
Trustees. The Fund will not lend its portfolio securities to any officer,
trustee, employee or affiliate of the Fund or its Manager. 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 business days' notice or
in time to vote on any important matter.
|X| Derivative Investments. The Fund may invest in different types of
derivative investments. "Index-linked" or "commodity-linked" notes are debt
securities of companies that call for interest payments and/or payment on the
maturity of the note in different terms than the typical note where the borrower
agrees to make fixed interest payments and/or to pay a fixed sum on the maturity
of the note. Principal and/or interest payments on an index-linked note depend
on the performance of one or more market indices, such as the S & P 500 Index or
a weighted index of commodity futures, such as crude oil, gasoline and natural
gas. The Fund may invest in "debt exchangeable for common stock" of an issuer or
"equity-linked" debt securities of an issuer. At maturity, the principal amount
of the debt security is exchanged for common stock of the issuer or is payable
in an amount based on the issuer's common stock price at the time of maturity.
In either
-4-
case there is a risk that the amount payable at maturity will be less than the
expected principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically,
these are short-term or intermediate-term debt securities having a value at
maturity, and/or an interest rate, determined by reference to one or more
foreign currencies. The currency-indexed securities purchased by the Fund may
make payments based on a formula. The payment of principal or periodic interest
may be calculated as a multiple of the movement of one currency against another
currency, or against an index. These investments may entail increased risk to
principal and increased price volatility.
Other Investment Techniques and Strategies
o Hedging with
Options and Futures Contracts. As described in the Prospectus, the Fund may
employ one or more types of Hedging Instruments. Hedging Instruments may be used
to attempt to: (1) protect against possible declines in the market value of the
Fund's portfolio resulting from downward trends in the securities markets, (2)
protect unrealized gains in the value of the Fund's securities which have
appreciated, (3) facilitate selling securities for investment reasons, (4)
establish a position in the securities markets as a temporary substitute for
purchasing particular debt securities, or (5) reduce the risk of adverse
currency fluctuations.
The Fund may use 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.
To do, the Fund may: (1) purchase Futures or (2) purchase calls on such Futures
or securities . Normally, the Fund would then purchase the equity securities and
terminate the hedging position. When hedging to protect against declines in the
dollar value of a foreign currency-denominated security, the Fund may: (1)
purchase puts on that foreign currency or on foreign currency Futures, (2) write
calls on that currency or on such Futures, or (3) enter into Forward Contracts
at a lower rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's activities in the underlying cash market. At
present, the Fund does not intend to enter into Futures, Forward Contracts and
options on Futures if, after any such purchase, the sum of margin deposits on
Futures and premiums paid on Futures options exceeds 5% of the value of the
Fund's total assets. In the future, the Fund may employ Hedging Instruments and
strategies that are not presently contemplated but which may be developed, to
the extent such investment methods are consistent with the Fund's investment
objective, legally permissible and adequately disclosed . Additional Information
about the Hedging Instruments the Fund may use is provided below.
o Writing Covered Call Options. The Fund may write (that is, sell)
call options ("calls"). All calls written by the Fund must be "covered" while
the call is outstanding (that means, the Fund must own the securities subject to
the call or other securities acceptable for applicable escrow requirements).
Calls on Futures (discussed below) must be covered by deliverable securities or
by liquid assets segregated to satisfy the Futures contract.
When the Fund writes a call on a security 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. The Fund has retained
the risk of loss should the price of the underlying security decline during the
call period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call the Fund has
written is more or less than the price of the call the Fund has 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,
and when distributed by the Fund are taxable as ordinary income. If the Fund
could not effect a closing purchase transaction due to
lack of a market, it would have to hold the callable investments 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 identifying to its custodian bank an equivalent dollar
amount of deliverable securities or liquid assets that are to be segregated. The
Fund will segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances would
an exercise notice require the Fund to deliver a futures contract; it would
simply put the Fund in a short futures position, which is permitted by the
Fund's hedging policies.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
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, the 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.
** 1 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 date, and the Fund will
lose its 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).
Buying a put on an investment it does not own, either a put on an index
or a put on a Stock Index Future not held by the Fund, permits the Fund either
to resell the put or 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 its expiration date. In the event of a decline in the stock market,
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. When the Fund purchases a put on an
index, or on a Future not held by it, the put protects the Fund to the extent
that the index moves in a similar pattern to the securities held. In the case of
a put on an index or Future, settlement is in cash rather than by delivery by
the Fund of the underlying investment.
o Options on Indices and Futures. 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 in individual securities
or futures contracts. When the Fund buys a call on an index or Future, it pays a
premium. During the call period, upon exercise of a call by the Fund, a seller
of a corresponding call on the
-5-
same investment will pay the Fund an amount of cash to settle the call if the
closing level of the 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 index 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 an index or 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 to the Fund an amount of cash to
settle the put if the closing level of the index or 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.
o Stock Index Futures. The Fund may buy and sell Stock Index Futures.
No monetary amount is paid or received upon the purchase or sale of a Stock
Index Future or a foreign currency exchange contract ("Forward Contract"),
discussed below. This is 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 stocks included in the index and fluctuates
with the changes in the market value of these 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
futures obligations.
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"). The initial margin will be
deposited with the Funds's Custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the future is marked to market (that is, as the
value on the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be made 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 loss or gain is then realized for tax
purposes. Although Stock Index Futures by their terms call for cash settlement
or delivery of cash, in most cases the obligation is fulfilled by entering into
an offsetting position. All futures transactions are effected through a
clearinghouse associated with the exchange on which to contracts are traded.
{* 1 moved from here; text not shown}
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The Fund
may enter into a Forward Contract in order to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency.
There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. To attempt to limit its exposure to loss under Forward
Contracts in a particular foreign currency, the Fund limits its use of these
contracts to the amount of its net assets denominated in that currency or
denominated in a closely-correlated foreign currency. Forward contracts include
standardized foreign currency futures contracts which are traded on exchanges
and are subject to procedures and regulations applicable to other Futures. The
Fund may also enter into a forward contract to sell a foreign currency
denominated in a currency other than that in which the underlying security is
denominated. This is done in the expectation that there is a greater correlation
between the foreign currency of the forward contract and the foreign currency of
the underlying investment than between the U.S. dollar and the foreign currency
of the underlying investment. This technique is referred to as "cross hedging."
The success of cross hedging is dependent on many factors, including the ability
of the Manager to correctly identify and monitor the correlation between foreign
currencies and the U.S. dollar. To the extent that the correlation is not
identical, the Fund may experience losses or gains on both the underlying
security and the cross currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund owns
or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although Forward Contracts limit the risk of loss due to a decline in
the value of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts to the
extent that the Fund would be
-6-
obligated to deliver an amount of foreign currency in excess of the value of the
Fund's assets denominated in that currency, or enter into a "cross hedge,"
unless it is denominated in a currency or currencies that the Manager believes
will have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of Covered
Calls and Hedging Instruments" below for a discussion of the tax treatment of
foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a substantial
decline against the U.S. dollar, it may enter into a forward sale contract to
sell an amount of that foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency, or when
the Fund believes that the U.S. dollar may suffer a substantial decline against
a foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount. In this situation the Fund may, in
the alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount where the Fund believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will identify and segregate liquid securities of the
Fund having a value equal to the aggregate amount of the Fund's commitments
under forward contracts to cover its short positions. If the value of the
segregated securities declines, additional cash or securities will be segregated
on a daily basis so that the value of the segregated assets will equal the
amount of the Fund's commitments with respect to such contracts. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and
-7-
bear the expense of such purchase), if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency the Fund is obligated to deliver. The
projection of short-term currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be accurately predicted, causing the Fund to sustain losses on these contracts
and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, the Fund must evaluate the credit
and performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the facilities of the
-8-
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 from the Fund 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.
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 call, 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 in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investments.
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 the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in 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.
o 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 on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies
-9-
with the requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit
the percentage of the Fund's assets that may be used for Futures margin and
related options premiums for a bona fide hedging position. However, under the
Rule the Fund must limit its aggregate initial futures margin and related option
premiums to no more than 5% of the Fund's total assets for hedging strategies
that are not considered bona fide hedging strategies under the Rule. Under the
Rule, the Fund also must use short Futures and Futures options positions solely
for "bona fide hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by each of the 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
exchanges or 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 advisor as the Fund, or an advisor
that is an affiliate of the Fund's advisor. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions. Due to
requirements under the Investment Company Act of 1940 (the "Investment Company
Act"), when the Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its Custodian in an amount equal to the market value of
the securities underlying such Future, less the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That qualification
enables the Fund to "pass through" its income and realized capital gains to
shareholders without the Fund 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 that 30% cap, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (1) 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;
(2) purchasing options which expire in less than three months; (3) effecting
closing transactions with respect to calls or puts written or purchased less
than three months previously; (4) exercising puts or calls held by the Fund for
less than three months; or (5) 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 mark-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
timing and character of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, generally gains or losses attributable
to fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
o Risks of Hedging With Options and Futures. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk in
using short hedging by selling Futures to attempt to protect against decline in
value of the Fund's portfolio securities (due to an increase in interest rates)
that the prices of such Futures will correlate imperfectly with the behavior of
the cash (i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First, all
participants in the futures 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 depend on
participants entering into offsetting transactions rather than making or taking
-10-
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
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 securities being hedged if the historical volatility of the prices of
such securities being hedged is more than the historical volatility of the
applicable index. It is also possible that where the Fund has used Hedging
Instruments in a short hedge, the market may advance and the value of securities
held in the Fund's portfolio may decline. If this occurred, the Fund would lose
money on the Hedging Instruments and also experience a decline in value in its
securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio of securities will
tend to move in the same direction as the indices upon which the Hedging
Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying Futures and/or calls on such Futures or on
securities , it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of concerns as
to 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 securities purchased.
Other Investment Restrictions
The Fund's most significant investment restrictions are described in
the Prospectus. The following are also fundamental policies, and together with
the Fund's fundamental policies described in the Prospectus, cannot be changed
without the approval of a "majority" of the Fund's outstanding voting
securities. Such a "majority" vote is defined in the Investment Company Act as
the vote of the holders of the lesser of (1) 67% or more of the shares present
or represented by proxy at a shareholders meeting, if the holders of more than
50% of the outstanding shares are present or represented by proxy; or (2) more
than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
(a) underwrite securities of other companies, except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities held in its
portfolio;
(b) purchase securities on margin; however, the Fund may make margin
deposits in connection with any of the hedging instruments permitted by any of
its other fundamental policies;
-11-
(c) lend money except in connection with the acquisition of that portion of
publicly- distributed debt securities which the Fund's investment policies and
restrictions permit it to purchase (see "Investment Objective and Policies");
the Fund may also make loans of portfolio securities and enter into repurchase
agreements (see "Loans of Portfolio Securities" and "Repurchase Agreements" in
the Prospectus);
(d) mortgage, hypothecate or pledge any of its assets; however, this does
not prohibit the escrow arrangements contemplated by the put and call activities
of the Fund or other collateral or margin arrangements in connection with any of
the hedging instruments permitted by any of its other policies;
(e) invest in or hold securities of any issuer if officers and Trustees
or Directors of the Fund or the Manager individually owning more than 0.5% of
the securities of such issuer together own more than 5% of the securities of
such issuer;
(f) invest in other open-end investment companies, or invest more than
5% of the value of its net assets in closed-end investment companies, including
small business investment companies, nor make any such investments at commission
rates in excess of normal brokerage commissions;
(g) invest in companies for the purpose of acquiring control or management
thereof;
(h) invest in interests in oil, gas or other mineral exploration or
development programs; or (i) invest in real estate or in interests in real
estate, but may purchase readily marketable securities of companies holding real
estate or interests therein.
For purposes of the Fund's policy not to concentrate its assets
described in the Prospectus, the Fund has adopted the industry classifications
set forth in the Appendix to this Statement of Additional Information. This is
not a fundamental policy.
The Fund also may, as a matter of fundamental policy and
notwithstanding any other fundamental investment policy or limitation, invest
all of its assets in the securities of a single open-end management investment
company for which the Manager or a subsidiary or successor is adviser or
sub-adviser, with substantially the same fundamental investment objective(s),
policies and limitations as the Fund. This would permit the Fund to adopt a
"master-feeder" structure in which the Fund and other "feeder" funds would
invest all of their assets in a single pooled "master fund" in an effort to take
advantage of potential efficiencies. The Fund has no present intention of
adopting a "master-feeder" structure, and would be required to update its
Prospectus and this Statement of Additional Information prior to its doing so.
In connection with the registration of its shares in certain states,
the Fund has made the following undertakings. These undertakings, which are
non-fundamental policies of the Fund, shall terminate if the Fund ceases to
qualify its shares for sale in that state or if the state's applicable rules or
regulations are amended. The Fund has undertaken that: (i) it will not invest in
securities of other investment companies, except by purchase in the open market
where no commission or profit to a sponsor or dealer results from the purchase
other than the customary broker's commission or except when the purchase is part
of a plan of merger, consolidation, reorganization or acquisition; (ii) it will
not invest in oil, gas or other mineral leases; (iii) it will not purchase or
sell property, including real estate limited partnership interests; (iv) in the
event the Fund adopts a "master-feeder" structure as set forth above, upon such
conversion it will comply with the Guidelines for Registration of Master
-12-
Fund/Feeder Funds as adopted by the NASAA membership; and (v) it will not invest
more than 15% of its total assets in the securities of issuers (a) which,
together with any predecessors, have a record of less than three years
continuous operation and (b) which are restricted as to disposition (including
Rule 144A securities).
With respect to investment restriction "(f)" above, to the extent the
Fund does make investments in other investment companies, the Fund's
shareholders may be subject indirectly to that company's management fees and
costs, in addition to the management fees and costs directly borne by the Fund.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder meeting is
called by the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of the
outstanding shares of the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon the written
request of the record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued at
$25,000 or more or holding at least 1% of the Fund's outstanding shares,
whichever is less, stating that they wish to communicate with other shareholders
to request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may take
such other action as set forth under Section 16(c) of the Investment Company
Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
set forth below. The address for 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 Discovery
-13-
Fund, Oppenheimer Fund, Oppenheimer Growth Fund, Oppenheimer Municipal Bond
Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund
(formerly "Oppenheimer Target Fund"), Oppenheimer U.S. Government Trust,
Oppenheimer New York Municipal Fund, Oppenheimer California Municipal Fund,
Oppenheimer Multi-State Municipal Trust, Oppenheimer Asset Allocation Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global Fund, Oppenheimer
Global Growth & Income Fund, Oppenheimer Global Emerging Growth Fund,
Oppenheimer International Growth Fund, Oppenheimer Developing Markets Fund,
Oppenheimer Multi-Sector Income Trust and Oppenheimer World Bond Fund
(collectively, the "New York-based Oppenheimer funds"), except that Ms.
Macaskill is not a director of Oppenheimer Money Market Fund, Inc. Ms. Macaskill
and Messrs. Spiro, Donohue, Bishop, Bowen, Farrar and Zack hold the same
respective offices with the New York-based Oppenheimer funds as with the Fund.
As of December 16, 1996, the Trustees and officers of the Fund as a group owned
less than 1% of the outstanding Class A shares of the Fund; no Trustee or
officer of the Fund owned Class B or Class C shares of the Fund. That 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 the officers of the
Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age: 71
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: 63
Vice Chairman of the Manager ; formerly he held the following positions:
Vice President and Counsel of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; Executive Vice President & General Counsel of
the Manager and OppenheimerFunds Distributor, Inc. (the "Distributor"), a
director of the Manager and 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
and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers, Inc.
(Publishers of Psychology Today and Mother Earth News) and Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age: 48
-14-
President, CEO and a Director of the Manager; Chairman and a Director of SSI and
SFSI; President and a Director of OAC and 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: 67
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University),
National Building Museum; a member of the Trustees Council, Preservation League
of New York State and the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 69
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 Board of ICL, Inc. (information systems),
President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research), and a director of Lumbermen
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age: 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics 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 trustee, New York State and
Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 65
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (consulting and publishing); a
director of XYAN, Inc. (printing), Professional Staff Limited and American
Scientific Resources, Inc.; a trustee of Mystic Seaport Museum, International
House, Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age: 84
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; Emeritus Founding 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.
-15-
Donald W. Spiro, Vice Chairman and Trustee;* Age: 71
Chairman Emeritus and a director of the Manager; formerly Chairman of the
Manager and the Distributor.
Pauline Trigere, Trustee; Age: 84
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: 66
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, 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), IMC Global, Inc. (chemicals and animal
feed) and Texas Instruments, Inc. (electronics); 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.
Jay W. Tracey, III, Vice President and Portfolio Manager; Age: 43
Vice President of the Manager; Vice President and portfolio manager of other
Oppenheimer funds; from February 1994 through September 1994, he was a Managing
Director of Buckingham Capital Management prior to which (in descending
chronological order) he was portfolio manager and Vice President of the Fund and
other Oppenheimer funds and a Vice President of the Manager; he was Senior Vice
President of Founders Asset Management, Inc. (a mutual fund adviser); and prior
to which he was a securities analyst and portfolio manager for Berger
Associates, Inc. (investment adviser).
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President and General Counsel of the Manager and the Distributor;
President and a director of Centennial; Executive Vice President, General
Counsel and a director of HarbourView, SSI, SFSI, and Oppenheimer Partnership
Holdings, Inc.; President and a director of Oppenheimer Real Asset Management,
Inc.; General Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate General Counsel
of the Manager and the Distributor, 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 director
and an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Treasurer; Age: 60
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
and Assistant Secretary and a director of Centennial; Vice President, Treasurer
and Secretary of SSI and SFSI; Treasurer of OAC; Vice President and Treasurer of
Oppenheimer Real Asset Management, Inc.; Chief Executive Officer, Treasurer and
Director of MultiSource Services, Inc. (a broker-dealer); and an officer of
other Oppenheimer funds.
-16-
Robert G. Zack, Assistant Secretary; Age: 48
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: 38
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly 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: 31
3410 South Galena Street, Denver, Colorado 80231
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager.
- --------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
|X| 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 remaining Trustees of the
Fund received the compensation shown below from the Fund , during its fiscal
year ended August 31, 1996 and from all of the New York-based Oppenheimer funds
(including the Fund) for which they served as Trustee or Director. Compensation
is paid for services in the positions below their names:
Total
Retirement Compensation
Benefits From All
Aggregate Accrued as Nw York-based
Compensation Part of Oppenheimer
Name and Position From the Fund(1) Fund Expenses(1) Funds(2)
Leon Levy, $20 None $141,000
Chairman and Trustee
Benjamin Lipstein $12 None $86,200
Study Committee Chairman,
-17-
Audit Committee Member
and Trustee
Elizabeth B. Moynihan $12 None $86,200
Study Committee Member
and Trustee
Kenneth A. Randall $10 None $78,400
Audit Committee Chairman
and Trustee
Edward V. Regan $10 None $68,800
Proxy Committee Chairman,(3)
Audit Committee Member
and Trustee
Russell S. Reynolds, Jr. $8 None $52,100
Proxy Committee Member(3)
and Trustee
Sidney M. Robbins $14 None $122,100
Study Committee Advisory
Member, Audit Committee
Advisory Member and Trustee
Pauline Trigere, Trustee $8 None $52,100
Clayton K. Yeutter $8 None $52,1000
Proxy Committee Member(3)
and Trustee
- ----------------------
(1)For the fiscal year ended August 31, 1996.
(2)For the 1995 calendar year (prior to the inception of the Proxy Committee)
during which the New York-based Oppenheimer funds listed in the first paragraph
of this section, including Oppenheimer Mortgage Income Fund and Oppenheimer Time
Fund (which ceased operations following the acquisition of their assets by
certain other Oppenheimer funds) but excluding Oppenheimer International Growth
Fund, which had not yet commenced operations.
(3)Committee position held during a portion of the period shown. The Study,
Audit and Proxy Committees meet for all New York-based Oppenheimer funds and all
fees are allocated among the funds by the Board. Committee position held during
a portion of the period shown. The Study , Audit and Proxy Committees meet for
all New York-based Oppenheimer funds and all fees are allocated among the funds
by the Board.
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 these benefits cannot be
determined as of this time nor can the
-18-
Fund estimate the number of years of credited service that will be used to
determine those benefits.
|X| Major Shareholders. As of December 16, 1996, no person 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 except the following: Merrill
Lynch Fenner & Smith Inc., 4800 Deer Lake Drive East, 3rd Floor, Jacksonville,
Florida 32246-6484, which was the record owner of 57,358.00 Class C shares
(equal to 19.51% of the Class C shares then outstanding) and Dain Bosworth Inc.
FBO Patricia A. Krust IRA, 600 South State, Apartment 115, Bellingham,
Washington 98225, which was the record owner of 17,823.315 Class C shares (equal
to 6.06% of the Class C shares then outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund, and
three of whom (Ms. Macaskill and Messrs. Spiro and Galli) 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, which 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.
|X| The Investment Advisory Agreement. A management fee is payable
monthly to the Manager under the terms of the investment advisory agreement
between the Manager and the Fund, and is computed on the aggregate net assets of
the Fund as of the close of each business day. The investment advisory agreement
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 period from November 7, 1995 (commencement of operations) to August 31,
1996, the management fees paid by the Fund to the Manager totalled $294,228.
The advisory agreement contains no expense limitation. However,
independently of the
-19-
Agreement, the Manager has undertaken that the total expenses of the Fund in any
fiscal year, exclusive of taxes, interest, brokerage commissions, distribution
assistance payments and any extraordinary non-recurring expenses, including
litigation shall not exceed the most stringent state regulatory limitation on
fund expenses applicable to the Fund. At present, the most stringent limitation
is imposed by California and limits expenses (with specified exclusions) to 2.5%
of the first $30 million of average annual net assets, 2.0% of the next $70
million of average net assets and 1.5% of average net assets in excess of $100
million. The payment of the management fee will be reduced so that at no time
will there be accrued but unpaid liability under the above expense limitation.
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
during which expenses are limited. The Manager reserves the right to amend or
terminate this expense undertaking at any time. Due to changes in federal
securities laws, such state regulatory limitations no longer apply, and the
Manager hereby withdraws this voluntary undertaking.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties, or reckless disregard
for its obligations and duties thereunder, the Manager is not liable for any
loss sustained by reason of good faith errors or omissions in connection with
any matters to which the Agreement relates. The Agreement permits the Manager to
act as investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for which
it may act as investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Fund, the right of the Fund to use the
name "Oppenheimer" as part of its name may be withdrawn.
|X| The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales, (excluding payments under the Distribution and Service Plans but
including advertising and the cost of printing and mailing prospectuses, other
than those furnished to existing shareholders), are borne by the Distributor.
During the Fund's fiscal period November 7, 1995 (commencement of operations) to
August 31, 1996, the aggregate sales charges on sales of the Fund's Class A
shares were $552,815, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $122,988. During this period, contingent deferred
sales charges collected on the Fund's Class B and Class C shares totalled
$20,035 and $1,237, respectively, all of which the Distributor retained.
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.
|X| The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer
Agent, is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and administrative
functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager
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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 such
broker-dealers, including "affiliated" brokers, as that term is defined in the
Investment Company Act, as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding but is expected to be aware of the current rates of eligible
brokers and to minimize the commissions paid to the extent consistent with the
interest and policies of the Fund as established by its Board of Trustees.
Purchases of securities from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers include a
spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged if a good faith determination is made by the
Manager that the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may also consider
sales of shares of the Fund and other investment companies managed by the
Manager or its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement, and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the investment advisory agreement
and the procedures and rules described above. In either case, brokerage is
allocated under the supervision of the Manager's executive officers.
Transactions in securities other than those for which an exchange is the primary
market are generally done with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed securities
or for certain fixed-income agency transactions in the secondary market and are
otherwise paid only if it appears likely that a better price or execution can be
obtained. When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transaction
in the securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts managed
by the Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each account.
Option commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
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,
-21-
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 the Manager that: (1) the trade is not from or for the broker's
own inventory; (2) the trade was executed by the broker on an agency basis at
the stated commission; and (3) 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 by enabling the Manager
to obtain market information for the valuation of securities held in the Fund's
portfolio or being considered for purchase. The Board of Trustees, including the
"independent" Trustees of the Fund (those Trustees of the Fund who are not
"interested persons" as defined in the Investment Company Act, and who have no
direct or indirect financial interest in the operation of the advisory agreement
or the Distribution and Service 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 year ended August 31, 1996, total brokerage
commissions paid by the Fund (not including spreads or concessions on principal
transactions on a net trade basis) was $24,405. During the fiscal year ended
August 31, 1996, $660 was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was $248,332. 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 a class of shares of the Fund may be advertised. An explanation of
how these total returns are calculated for each class and the components of
those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the average
annual total returns for each advertised class of shares of the Fund for the 1,
5, and 10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information
-22-
as a basis for comparison with other investments. An investment in the Fund is
not insured; its returns and share prices are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares may be worth
more or less than their original cost. Returns for any given past period are not
a prediction or representation by the Fund of future returns. The total returns
of each class of shares of the Fund are affected by portfolio quality, the type
of investments the Fund holds and its operating expenses allocated to the
particular class.
|X| Average Annual Total Returns. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|X| Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year,
and none thereafter) is applied to the investment result for the period shown
(unless the total return is shown at net asset value, as described below). For
Class C shares, payment of the 1.0% 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 cumulative total return on
an investment in Class A, Class B and Class C shares of the Fund for the period
November 7, 1995 (commencement of operations) for the fiscal year ended August
31, 1996 were 45.90%, 48.90% and 52.90%, respectively.
|X| 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
-23-
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends and capital
gains distributions. The cumulative total return at net asset value on an
investment in Class A, Class B and Class C shares of the Fund for the period
November 7, 1995 (commencement of operations) held until the fiscal year-end on
August 31, 1996 were 54.80%, 53.90% and 53.90%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However, when
comparing total return of an investment in shares of the Fund with that of other
alternatives, investors should understand that as the Fund is an aggressive
equity fund seeking capital appreciation, its shares are subject to greater
market risks and volatility than shares of funds having other investment
objectives, and that the Fund is designed for investors who are willing to
accept greater risk of loss in the possibility of realizing greater gains.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or 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, (ii) all other small company growth funds
and (iii) all other growth funds in a specific size category. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gain distributions and income dividends but do not take sales charges or
taxes into consideration.
From time to time, the Fund may include in its advertisements 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.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B shares 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 (domestic stock, international
stock, taxable bond, municipal bond and hybrid) based on risk-adjusted
investment return. Investment return measures a fund's 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 investment
return are combined to produce star rankings reflecting performance relative to
the average fund in a fund's category. Five stars is the "highest" ranking (top
10%), 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%). Morningstar ranks the Class A, B and C shares of the Fund in relation to
other small company 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 the performance for the same period of the
Russell 2000 Index, a widely recognized index of "small-capitalization" stocks.
The index consists of unmanaged groups of common stocks
-24-
and the performance of the index includes a factor for the reinvestment of
income dividends, but does not reflect reinvestment of capital gains, expenses
or taxes. The performance of the Fund's Class A, Class B 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 Transfer Agent) or the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' services to those
of other mutual fund families selected by the rating or ranking services and may
be based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and Distribution
and Service Plans for Class B and Class C shares of the Fund under Rule 12b-1 of
the Investment Company Act pursuant to which the 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 shares of each class, such votes having been cast
by the Manager as the then sole initial shareholder.
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 its continuance is specifically approved
at least annually by the Fund's Board of Trustees and its Independent Trustees
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. 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.
None of the Plans may be amended to increase materially the amount of payments
to be made unless such amendment is approved by shareholders of the class
affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
by a Securities and Exchange Commission rule to obtain the approval of Class B
as well as Class A shareholders for a proposed amendment to the Class A Plan
that would materially increase the amount to be paid by Class A shareholders
under the Class A Plan. Such approval must be by a
-25-
"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 the
payments were made and the identity of each Recipient that received any such
payment. 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 selection or nomination is
approved by a majority of the 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 fees at the maximum rate
and set no minimum amount.
For the fiscal period ended August 31, 1996, payments under the Class A
Plan totalled $56,100, of which $1,282 was paid by the Distributor to an
affiliate. 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 charge, or other
financial costs, or allocation of overhead by the Distributor.
The Class B and Class C Plans allow the service fee payment to be paid
by the Distributor to Recipients in advance for the first year such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of 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 such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. For the fiscal period ended August 31, 1996, payments under the
Class B Plan totalled $115,103, of which $110,782 was retained. During this
period, payments under the Class C Plan totalled $ 28,304, of which $25,804 was
retained.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on such shares,
or to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
-26-
time to time under the Class B Plan and the 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 Conduct
Rules of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund during that period. Such payments
are made in recognition that the Distributor (i) pays sales commissions to
authorized brokers and dealers at the time of sale and pays service fees as
described in the Prospectus, (ii) may finance such commissions and/or the
advance of the service fee payment to Recipients under those Plans, or may
provide such financing from its own resources, or from an affiliate, (iii)
employs personnel to support distribution of shares, and (iv) may bear the costs
of sales literature, advertising and prospectuses (other than those furnished to
current shareholders), state "blue sky" registration fees and 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 an investor to choose the method
of purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that the purpose
and function of the deferred sales charge and asset-based sales charge with
respect to Class B and Class C shares are the same as those of the initial sales
charge with respect to Class A shares. Any salesperson or other person entitled
to receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than another. The Distributor
normally will not accept any order for $500,000 or more of Class B shares or $1
million or more of Class C shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund instead.
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 a tax adviser, to the
effect that the conversion of 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
-27-
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 either
class are allocated pro rata to the shares of each class, based on the
percentage of the net assets of such class to the Fund's total assets, and then
equally to each outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit fees, (iii)
printing and mailing costs of shareholder reports, Prospectuses, Statements of
Additional Information and other materials for current shareholders, (iv) fees
to Independent 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 (i) Distribution
and/or Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class rather
than to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per share
of Class A, Class B and Class C shares of the Fund are determined as of the
close of business of the New York Stock Exchange on each day that the New York
Stock Exchange is open by dividing the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The New York Stock
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 New York Stock Exchange's most recent annual announcement (which
is subject to change) states that it will close on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It may also close on other days. The Fund may invest a
substantial portion of its assets in foreign securities primarily listed on
foreign exchanges which may trade on Saturdays or customary U.S. business
holidays on which the New York Stock Exchange is closed. Because the Fund's net
asset value will not be calculated on those days, the Fund's net asset values
per share of Class A, Class B and Class C shares may be significantly affected
at times 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 sale prices of the preceding trading day or closing bid prices
that day); (ii) securities traded on a foreign securities exchange are valued
generally at the last sales price available to the pricing service approved by
the Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded at its last trading session on or
immediately preceding the valuation date, or at
-28-
the mean between "bid" and "ask" prices obtained from the principal exchange or
two active market makers in the security on the basis of reasonable inquiry;
(iii) long-term debt securities having a remaining maturity in excess of 60 days
are valued based on the mean between the "bid" and "ask" prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or obtained
by the Manager from two active market makers in the security on the basis of
reasonable inquiry; (iv) debt instruments having a maturity of more than 397
days when issued, and non-money market type instruments having a maturity of 60
days or less are valued at the mean between the "bid" and "ask" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market debt securities
that had a maturity of less than 397 days when issued, that have a remaining
maturity of 60 days or less are valued at cost, adjusted for amortization of
premiums and accretion of discounts; and (vi) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value determined under the Board's procedures . If the Manger is unable to
locate two market makers willing to give quotes (see (ii), (iii) and (iv)
above), the security may be priced at the mean between the "bid" and "ask"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "ask" price is available).
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved. The Manager may use pricing services approved by the Board of Trustees
to price U.S. Government Securities for which last sale information is not
generally available. The Manager will monitor the accuracy of such pricing
services, which may include comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of the New York
Stock Exchange. Events affecting the values of foreign securities traded in
securities markets that occur between the time their prices are determined and
the close of the New York Stock Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the Manager,
under procedures established by the Board of Trustees, determines that the
particular event is likely to effect a material change in the value of such
security. Foreign currency, including forward contracts, will be valued at the
closing price in the London foreign exchange market that day as provided by a
reliable bank, dealer or pricing service. The values of securities denominated
in foreign currency will be converted to U.S. dollars at the closing price in
the London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the principal
exchange on which
-29-
they are traded, or on NASDAQ, as applicable, as determined by a pricing service
approved by the Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading day if it is
within the spread of the closing bid and asked prices on the principal exchange
or on NASDAQ on the valuation date, or, if not, value shall be the closing bid
price on the principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall be valued at
the mean between bid and asked prices obtained by the Manager from two active
market makers (which in certain cases may be the bid price if no asked price is
available).
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 the shares. Dividends will begin to accrue on shares purchased
by the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of the New York
Stock Exchange. The New York Stock Exchange normally closes at 4:00 P.M., but
may close earlier on certain days. If Federal Funds are received on a business
day after the close of the New York Stock 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 Letter
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, aunts, uncles, nieces and nephews, a sibling's spouse and a
spouse's siblings.
|X| 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 Municipal Bond
Fund
-30-
Oppenheimer New York
Municipal Fund
Oppenheimer California
Municipal Fund
Oppenheimer Intermediate
Municipal Fund
Oppenheimer Insured
Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida
Municipal Fund
Oppenheimer Pennsylvania
Municipal Fund
Oppenheimer New Jersey
Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Developing
Markets Fund
Oppenheimer Capital Appreciation Fund
(formerly named "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 Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government
Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth 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 International Growth Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Bond Fund Series - Oppenheimer Bond Fund
for Growth
Rochester Portfolio Series - Limited Term
New York Municipal Fund*
Rochester Fund Municipals*
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.
-31-
* Shares of the Fund are not presently exchangeable for shares of this Fund.
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).
|X| Letter of Intent. A Letter of Intent (referred to as a "Letter") is
the investor's statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund (and other
Oppenheimer funds) during a 13-month period (the "Letter of Intent period"),
which may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to make
the aggregate amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount specified in
the Letter. Purchases made by reinvestment of dividends or distributions of
capital gains and purchases made at net asset value without sales charge do not
count toward satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A share of the Fund (and other
Oppenheimer funds) that applies under the Right of Accumulation to current
purchases of Class A shares. Each purchase of Class A shares under the Letter
will be made at the public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate
-32-
reduction set forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be used to
purchase additional shares for the investor's account at the net asset value per
share in effect on the date of such purchase, promptly after the Distributor's
receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of Intent
period will be deducted. It is the responsibility of the dealer of record and/or
the investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. Such sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If such difference in sales charges is not paid within twenty days after
a request from the Distributor or the dealer, the Distributor will, within sixty
days of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the redemption
proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares acquired subject to a contingent deferred sales
charge, and (c) Class A or B shares acquired in exchange for either (i) Class A
shares of one of the other Oppenheimer funds that were acquired subject to a
Class A initial
-33-
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 "Exchange Privilege," and the escrow will be
transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "How To Sell
Shares," in the Prospectus. Asset Builder Plans also enable shareholders of
Oppenheimer 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.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans, and SIMPLE
plans) for employees of a corporation or a sole proprietorship, members and
employees of a partnership or association or other organized group of persons
(the members of which may include other groups), if the group has made
-34-
special arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund through a single
investment dealer, broker or other financial institution designated by the
group.
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.
|X| Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $500 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
|X| Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board of
Trustees of the Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. 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 its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares purchased
subject to an initial sales charge, or (ii) Class B shares on which the
shareholder paid a contingent deferred sales charge when redeemed. This
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,
-35-
depending on the timing and amount of the reinvestment. Under the Internal
Revenue Code, if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the shareholder's basis in
the shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain recognized
from the redemption. However, in that case the sales charge would be added to
the basis of the shares acquired by the reinvestment of the redemption proceeds.
The Fund may amend, suspend or cease offering this reinvestment privilege at any
time as to shares redeemed after the date of such amendment, suspension or
cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge at the time of transfer to the name of another person or
entity (whether the transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred shares will
remain subject to the contingent deferred sales charge, calculated as if the
transferee shareholder had acquired the transferred shares in the same manner
and at the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed at the time
of transfer, the priorities described in the Prospectus under "How to Buy
Shares" for the imposition of the Class B or the Class C contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, 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 pension, profit-sharing plans or 401(k) plans may not
directly redeem or exchange shares held for their accounts 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 on behalf of their
-36-
customers. The shareholder should contact the broker or dealer to arrange this
type of redemption. The repurchase price per share will be the net asset value
next computed after the Distributor receives the order placed by the dealer or
broker, except that if the Distributor receives a repurchase order from a dealer
or broker after the close of the New York Stock Exchange on a regular business
day, it will be processed at that day's net asset value if the order was
received by the dealer or broker from its customers prior to the time the New
York Stock 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 because of the imposition of the
contingent deferred sales charge on such withdrawals (except where the Class B
or the Class C contingent deferred sales charge is waived as described in the
Prospectus under "Waivers of Class B 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.
|X| 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
-37-
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first and shares acquired with reinvested dividends and capital
gains distributions will be redeemed next, followed by shares acquired with a
sales charge, to the extent necessary to make withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted. Payments
made under withdrawal plans should not be considered as a yield or income on
your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or omitted by the Transfer Agent in good faith to administer the
Plan. Certificates will not be issued for shares of the Fund purchased for and
held under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also terminate a Plan upon receipt of evidence satisfactory to it of the
death or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend-reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the Class A shares in
certificated form. Shares certificates are not issued for Class B or Class C
shares. Upon written request from the Planholder, the Transfer Agent will
determine the number of Class A shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged only for
shares of the same class of other Oppenheimer funds. At present, Rochester Fund
Municipals and Limited Term New York Municipal Fund are not "Eligible Funds" for
purposes of the exchange privilege in the Prospectus. Shares of the Oppenheimer
funds that have a single class without a class designation are deemed "Class A"
shares for this purpose. All of the Oppenheimer funds offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, 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 current list showing which funds offer which class can be obtained by
calling the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds, including Rochester Fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds except Rochester Fund Municipals and Limited
Term New York Municipals. Exchanges to Class M shares of Oppenheimer Bond Fund
for Growth are permitted from Class A shares of Oppenheimer Money Market Fund,
Inc., or Oppenheimer Cash Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into Class M
shares are permitted.
Class A shares of the Oppenheimer funds may be exchanged at net asset value
for shares of
-38-
any Money Market Fund. Shares of any Money Market Fund purchased without a sales
charge may be exchanged for shares of Oppenheimer funds offered with a sales
charge upon payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a contingent deferred sales
charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased with
the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 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.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment arrangements
have been made with the Distributor may be exchanged at net asset value for
shares of any of the Oppenheimer funds. No contingent deferred sales charge is
imposed on exchanges of shares of any class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange of
Class A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 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 owning shares of more than one
class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account
-39-
in, or obtain and acknowledge receipt of a prospectus of, the fund to which the
exchange is to be made. For full or partial exchanges of an account made by
telephone, any special account features such as Asset Builder Plans, Automatic
Withdrawal Plans, Checkwriting, if available, and retirement plan contributions
will be switched to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for example,
during periods of substantial market fluctuations), shareholders might not be
able to request exchanges by telephone and would have to submit written exchange
requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January 1
through December 31 of that year and 98% of its capital gains realized in the
period from November 1 of the prior year through October 31 of the current year,
or else the Fund must pay an excise tax on the amounts not distributed. While it
-40-
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 distribution. The Fund qualified 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 in which 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 "Tax Aspects of Covered Calls and Hedging Instruments,"
above). If it did not so qualify, the Fund would be treated for tax purposes as
an ordinary corporation and receive no tax deduction for payments made to
shareholders.
Dividends, distributions and 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.
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.
-41-
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities, collecting income on the portfolio securities and handling
the delivery of such securities to and from the Fund. The Manager has
represented to the Fund that the banking relationships between the Manager and
the Custodian have been and will continue to be unrelated to and unaffected by
the relationship between the Fund and the Custodian. It will be the practice of
the Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
-42-
Independent Auditors' Report
===============================================================================
The Board of Trustees and Shareholders of Oppenheimer Enterprise Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Enterprise Fund as of August 31, 1996, and the
related statement of operations for the period then ended, the statement of
changes in net assets for the period then ended and the financial highlights for
the period from November 7, 1995 (commencement of operations) to August 31,
1996. 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 audit.
We conducted our audit 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
August 31, 1996 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 audit provides 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 Enterprise Fund as of August 31, 1996, the results of its operations
for the period then ended, the changes in its net assets for the period then
ended, and the financial highlights for the period from November 7, 1995
(commencement of operations) to August 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
September 23, 1996
<TABLE>
<CAPTION>
Statement of Investments August 31, 1996
Market Value
Shares See Note 1
====================================================================================================================================
<S> <C> <C> <C>
Common Stocks--96.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--30.5%
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing--12.2%
Alrenco, Inc.(1) 67,700 $ 1,523,250
----------------------------------------------------------------------------------------------------------------
Belmont Homes, Inc.(1) 50,000 1,075,000
----------------------------------------------------------------------------------------------------------------
Boyds Wheels, Inc.(1) 100,000 1,200,000
----------------------------------------------------------------------------------------------------------------
Cavalier Homes, Inc. 60,000 1,155,000
----------------------------------------------------------------------------------------------------------------
Diamond Home Services, Inc.(1) 60,000 1,860,000
----------------------------------------------------------------------------------------------------------------
NHP, Inc.(1) 40,000 770,000
----------------------------------------------------------------------------------------------------------------
Team Rental Group, Inc.(1) 50,000 925,000
--------------
8,508,250
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--7.1%
Casa Ole Restaurants, Inc.(1) 100,000 1,312,500
----------------------------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 45,000 1,074,375
----------------------------------------------------------------------------------------------------------------
Golden Bear Golf, Inc.(1) 30,000 607,500
----------------------------------------------------------------------------------------------------------------
Schlotzsky's, Inc.(1) 60,000 705,000
----------------------------------------------------------------------------------------------------------------
Silver Diner, Inc.(1) 80,000 390,000
----------------------------------------------------------------------------------------------------------------
Silver Diner, Inc.(1)(2) 50,000 231,562
----------------------------------------------------------------------------------------------------------------
Suburban Lodges of America, Inc.(1) 13,000 305,500
----------------------------------------------------------------------------------------------------------------
Taco Cabana, Inc., Cl. A(1) 50,000 356,250
--------------
4,982,687
- ------------------------------------------------------------------------------------------------------------------------------------
Media--2.8%
Raster Graphics, Inc.(1) 80,000 880,000
----------------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., Cl. A(1) 12,000 507,000
----------------------------------------------------------------------------------------------------------------
Wireless One, Inc.(1) 40,000 580,000
--------------
1,967,000
- ------------------------------------------------------------------------------------------------------------------------------------
Retail: General--2.6%
North Face, Inc. (The)(1) 40,000 980,000
----------------------------------------------------------------------------------------------------------------
Sport-Haley, Inc.(1) 60,000 810,000
--------------
1,790,000
- ------------------------------------------------------------------------------------------------------------------------------------
Retail: Specialty--5.8%
Cost Plus, Inc.(1) 30,000 810,000
----------------------------------------------------------------------------------------------------------------
Marks Bros. Jewelers, Inc.(1) 60,000 1,440,000
----------------------------------------------------------------------------------------------------------------
NuCo2, Inc.(1) 30,000 780,000
----------------------------------------------------------------------------------------------------------------
Party City Corp.(1) 50,000 1,050,000
--------------
4,080,000
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--25.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--4.7%
Diagnostic Health Services, Inc.(1) 140,000 883,750
----------------------------------------------------------------------------------------------------------------
EuroMed, Inc.(1) 65,000 390,000
----------------------------------------------------------------------------------------------------------------
Global Pharmaceutical Corp.(1) 40,000 350,000
----------------------------------------------------------------------------------------------------------------
IRIDEX Corp.(1) 100,000 950,000
----------------------------------------------------------------------------------------------------------------
Norland Medical Systems, Inc.(1) 40,000 720,000
--------------
3,293,750
</TABLE>
6 Oppenheimer Enterprise Fund
<PAGE>
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Healthcare/Supplies &
Services--20.3%
Apogee, Inc.(1) 240,000 $ 1,545,000
----------------------------------------------------------------------------------------------------------------
Biopsys Medical, Inc.(1) 29,000 413,250
----------------------------------------------------------------------------------------------------------------
Calypte Biomedical Corp.(1) 80,000 800,000
----------------------------------------------------------------------------------------------------------------
Capstone Pharmacy Services, Inc.(1) 100,000 1,187,500
----------------------------------------------------------------------------------------------------------------
Cardiovascular Dynamics, Inc.(1) 70,000 1,050,000
----------------------------------------------------------------------------------------------------------------
Carriage Services, Inc.(1) 60,000 1,095,000
----------------------------------------------------------------------------------------------------------------
EP MedSystems, Inc.(1) 100,000 550,000
----------------------------------------------------------------------------------------------------------------
First Commonwealth, Inc.(1) 29,000 688,750
----------------------------------------------------------------------------------------------------------------
General Surgical Innovations, Inc.(1) 50,000 500,000
----------------------------------------------------------------------------------------------------------------
HumaScan, Inc.(1) 150,000 937,500
----------------------------------------------------------------------------------------------------------------
IMPATH, Inc.(1) 50,000 575,000
----------------------------------------------------------------------------------------------------------------
Intercardia, Inc.(1) 38,000 819,375
----------------------------------------------------------------------------------------------------------------
Life Medical Sciences, Inc.(1) 70,000 555,625
----------------------------------------------------------------------------------------------------------------
Meridian Diagnostics, Inc. 80,000 1,130,000
----------------------------------------------------------------------------------------------------------------
Novoste Corp.(1) 60,000 570,000
----------------------------------------------------------------------------------------------------------------
QIAGEN NV(1) 15,000 3 58,125
----------------------------------------------------------------------------------------------------------------
Res-Care, Inc.(1) 35,000 634,375
----------------------------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 50,000 750,000
--------------
14,159,500
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Services &
Producers--4.6%
3-D Geophysical, Inc.(1) 75,000 675,000
----------------------------------------------------------------------------------------------------------------
FX Energy, Inc.(1) 100,000 831,250
----------------------------------------------------------------------------------------------------------------
HarCor Energy, Inc.(1) 70,000 306,250
----------------------------------------------------------------------------------------------------------------
NUMAR Corp.(1) 45,000 691,875
----------------------------------------------------------------------------------------------------------------
Trico Marine Services, Inc.(1) 30,500 716,750
--------------
3,221,125
- ------------------------------------------------------------------------------------------------------------------------------------
Oil-Integrated--1.0%
Dailey Petroleum Services Corp.(1) 80,000 730,000
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial--4.3%
Investors Financial Services Corp. 45,000 1,018,125
----------------------------------------------------------------------------------------------------------------
Rockford Industries, Inc.(1) 40,000 755,000
----------------------------------------------------------------------------------------------------------------
Winthrop Resources Corp. 50,000 1,237,500
--------------
3,010,625
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--12.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services--10.3%
CORT Business Services Corp.(1) 35,000 700,000
----------------------------------------------------------------------------------------------------------------
Data Processing Resources Corp.(1) 15,000 277,500
----------------------------------------------------------------------------------------------------------------
DYNAMEX, INC.(1) 100,000 825,000
<PAGE>
----------------------------------------------------------------------------------------------------------------
ICT Group, Inc.(1) 15,000 243,750
----------------------------------------------------------------------------------------------------------------
PC Service Source, Inc.(1) 25,000 350,000
----------------------------------------------------------------------------------------------------------------
Right Management Consultants, Inc.(1) 5,000 120,625
----------------------------------------------------------------------------------------------------------------
Service Experts, Inc.(1) 100,000 1,637,500
----------------------------------------------------------------------------------------------------------------
Stericycle, Inc.(1) 75,000 731,250
----------------------------------------------------------------------------------------------------------------
Superior Services, Inc.(1) 50,000 812,500
</TABLE>
<TABLE>
<CAPTION>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Services
(continued)
Unidigital, Inc.(1) 90,000 $ 573,750
----------------------------------------------------------------------------------------------------------------
Vincam Group, Inc.(1) 30,000 900,000
--------------
7,171,875
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--1.8%
Genesee & Wyoming, Inc., Cl. A(1) 50,000 1,250,000
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--19.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware--2.8%
CHS Electronics, Inc.(1) 40,000 480,000
----------------------------------------------------------------------------------------------------------------
Encad, Inc.(1) 30,000 870,000
----------------------------------------------------------------------------------------------------------------
MicroTouch Systems, Inc.(1) 40,000 590,000
--------------
1,940,000
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Software--13.7%
ANSYS, Inc.(1) 80,000 910,000
----------------------------------------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 9,500 182,875
----------------------------------------------------------------------------------------------------------------
Gensym Corp.(1) 30,000 637,500
----------------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A(1) 50,000 781,250
----------------------------------------------------------------------------------------------------------------
Integrated Measurement Systems, Inc.(1) 30,000 517,500
----------------------------------------------------------------------------------------------------------------
Mecon, Inc.(1) 35,000 833,438
----------------------------------------------------------------------------------------------------------------
OrCAD, Inc.(1) 31,500 346,500
----------------------------------------------------------------------------------------------------------------
Planning Sciences International PLC, Sponsored ADR(1) 31,000 426,250
----------------------------------------------------------------------------------------------------------------
Siebel Systems, Inc.(1) 20,000 822,500
----------------------------------------------------------------------------------------------------------------
Software 2000, Inc.(1) 50,000 556,250
----------------------------------------------------------------------------------------------------------------
SPSS, Inc.(1) 10,000 238,750
----------------------------------------------------------------------------------------------------------------
SQA, Inc.(1) 30,000 712,500
----------------------------------------------------------------------------------------------------------------
Verilink Corp.(1) 30,000 772,500
----------------------------------------------------------------------------------------------------------------
Versant Object Technology Corp.(1) 40,000 660,000
----------------------------------------------------------------------------------------------------------------
Visigenic Software, Inc.(1) 90,000 1,192,500
----------------------------------------------------------------------------------------------------------------
9,590,313
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics--2.5%
BENCHMARQ Microelectronics, Inc.(1) 50,000 537,500
----------------------------------------------------------------------------------------------------------------
Mackie Designs, Inc.(1) 28,000 255,500
<PAGE>
----------------------------------------------------------------------------------------------------------------
Ultrak, Inc.(1) 40,000 950,000
--------------
1,743,000
--------------
Total Common Stocks (Cost $56,526,193) 67,438,125
Face
Amount
====================================================================================================================================
Repurchase Agreement--5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 5.25%, dated 8/30/96,
to be repurchased at $4,002,333 on 9/3/96, collateralized by U.S. Treasury
Nts., 5.50%--9.25%, 6/30/98--3/31/01, with a value of $4,126,661
(Cost $4,000,000) $4,000,000 4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $60,526,193) 102.2% 71,438,125
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.2) (1,565,586)
----- --------------
Net Assets 100.0% $ 69,872,539
===== ==============
</TABLE>
1. Non-income producing security
2. Identifies issues considered to be illiquid--See Note 5 of Notes to
Financial Statements.
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities August 31, 1996
===================================================================================================================================
<S> <C> <C>
Assets Investments, at value (cost $60,526,193)--see accompanying statement $ 71,438,125
---------------------------------------------------------------------------------------------------------------
Cash 83,218
---------------------------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 138,069
Interest and dividends 1,167
---------------------------------------------------------------------------------------------------------------
Other 16,762
------------
Total assets 71,677,341
===================================================================================================================================
Liabilities Payables and other liabilities:
Investments purchased 1,631,127
Shares of beneficial interest redeemed 60,853
Distribution and service plan fees 27,530
Shareholder reports 23,793
Trustees' fees 6,505
Transfer and shareholder servicing agent fees 5,825
Other 49,169
------------
Total liabilities 1,804,802
===================================================================================================================================
Net Assets $ 69,872,539
============
===================================================================================================================================
Composition of Paid-in capital $ 56,700,270
Net Assets ---------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (2,168)
---------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 2,262,505
---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 10,911,932
------------
Net assets $ 69,872,539
============
===================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of $44,421,134
and 2,870,373 shares of beneficial interest outstanding) $15.48
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $16.42
<PAGE>
---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $20,605,760 and 1,339,024 shares of beneficial interest outstanding) $15.39
---------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $4,845,645 and 314,939 shares of beneficial interest outstanding) $15.39
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Operations For the Period from November 7, 1995 (commencement of operations) to August 31, 1996
===================================================================================================================================
<S> <C> <C>
Investment Income Interest $ 402,125
---------------------------------------------------------------------------------------------------------------
Dividends 6,300
------------
Total income 408,425
===================================================================================================================================
Expenses Management fees--Note 4 294,228
---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 56,100
Class B 115,103
Class C 28,304
---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 119,738
---------------------------------------------------------------------------------------------------------------
Shareholder reports 75,272
---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 14,116
Class B 6,607
Class C 1,542
---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 20,309
---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 11,777
---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,968
---------------------------------------------------------------------------------------------------------------
Other 5,617
------------
Total expenses 766,681
Less expenses paid indirectly (15,107)
------------
Net expenses 751,574
===================================================================================================================================
Net Investment Loss (343,149)
===================================================================================================================================
Realized and Net realized gain on investments 2,595,623
Unrealized Gain ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 10,911,932
------------
Net realized and unrealized gain 13,507,555
===================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 13,164,406
============
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Period Ended
August 31,
<PAGE>
1996(1)
===================================================================================================================================
<S> <C> <C>
Operations Net investment loss $ (343,149)
---------------------------------------------------------------------------------------------------------------
Net realized gain 2,595,623
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 10,911,932
------------
Net increase in net assets resulting from operations 13,164,406
===================================================================================================================================
Beneficial Net increase in net assets resulting from beneficial interest
Interest transactions--Note 2:
Transactions Class A 35,949,485
Class B 16,853,753
Class C 3,904,895
===================================================================================================================================
Net Assets Total increase 69,872,539
---------------------------------------------------------------------------------------------------------------
Beginning of period --
------------
End of period (including accumulated net investment loss of $2,168) $ 69,872,539
============
1. For the period from November 7, 1995 (commencement of operations) to August 31, 1996.
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Financial Highlights
Class A Class B Class C
------- ------- -------
Period Period Period
Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31,
1996(1) 1996(1) 1996(1)
================================================================================================================
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.00 $10.00 $10.00
--------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.05) (.14) (.14)
Net realized and unrealized gain 5.53 5.53 5.53
------ ------ ------
Total income from investment operations 5.48 5.39 5.39
--------------------------------------------------------------------------------------------
Net asset value, end of period $15.48 $15.39 $15.39
====== ====== ======
============================================================================================
Total Return, at Net Asset Value(2) 54.80% 53.90% 53.90%
============================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $44,421 $20,606 $4,846
--------------------------------------------------------------------------------------------
Average net assets (in thousands) $30,655 $14,123 $3,472
--------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment loss (0.59)% (1.37)% (1.35)%
Expenses(4) 1.66% 2.44% 2.43%
--------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 155.6% 155.6% 155.6%
Average brokerage commission rate(6) $0.0579 $0.0579 $0.0579
</TABLE>
1. For the period from November 7, 1995 (commencement of
operations) to August 31, 1996.
2. Assumes a hypothetical initial investment on the business
day before the first day of the fiscal period (or
commencement of operations), with all dividends and
<PAGE>
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.
3. Annualized.
4. The expense ratio reflects the effect of gross expenses
paid indirectly by the Fund.
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
August 31, 1996 were $119,556,759 and $65,626,188,
respectively.
6. Total brokerage commissions paid on applicable purchases
and sales of portfolio securities for the period divided by
the total number of related shares purchased and sold.
See accompanying Notes to Financial Statements.
Notes to Financial Statements
================================================================================
1. Significant
Accounting Policies
Oppenheimer Enterprise 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 objective is to seek capital
appreciation, primarily through investment in equity securities. The Fund's
investment adviser is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class B and Class C shares may be subject
to a contingent deferred sales charge. All three classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting rights with respect to
matters affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
<PAGE>
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
``non--money market'' debt securities are valued by a portfolio pricing service
approved by the Board of 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.
- --------------------------------------------------------------------------------
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 the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
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
<PAGE>
fees paid to each trustee during the years of service. During the period ended
August 31, 1996, a provision of $2,168 was made for the Fund's projected benefit
obligations, resulting in an accumulated liability of $2,168 at August 31, 1996.
Notes to Financial Statements (Continued)
================================================================================
1. Significant
Accounting Policies
(continued)
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Organization Costs. The Manager advanced $13,000 for organization and start-up
costs of the Fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Manager's initial investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the
Fund for any unamortized expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares outstanding at the time of such
redemption.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from the 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 period ended August 31, 1996, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1996, amounts have been reclassified to reflect a decrease in accumulated net
investment loss of $340,981, a decrease in accumulated net realized gain on
investments of $333,118, and a decrease in paid-in capital of $7,863.
- --------------------------------------------------------------------------------
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. Realized gains and losses on investments and options written
and unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes.
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
Period Ended August 31, 1996(1)
----------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Class A:
Sold 3,497,248 $ 45,306,140
Redeemed (626,875) (9,356,655)
--------- ------------
Net increase 2,870,373 $ 35,949,485
========= ============
- --------------------------------------------------------------------------------
Class B:
Sold 1,532,771 $ 19,742,737
Redeemed (193,747) (2,888,984)
--------- ------------
Net increase 1,339,024 $ 16,853,753
========= ============
- --------------------------------------------------------------------------------
Class C:
Sold 395,954 $ 5,114,214
Redeemed (81,015) (1,209,319)
--------- ------------
Net increase 314,939 $ 3,904,895
========= ============
1. For the period from November 7, 1995 (commencement of operations) to August
31, 1996.
================================================================================
3. Unrealized Gains and
Losses on Investments
At August 31, 1996, net unrealized appreciation on investments of $10,911,932
was composed of gross appreciation of $12,380,992, and gross depreciation of
$1,469,060.
<PAGE>
================================================================================
4. Management Fees
And Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 0.75% of
the first $200 million of aggregate net assets, 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 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 period ended August 31, 1996, commissions (sales charges paid by
investors) on sales of Class A shares totaled $552,815, of which $122,988 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and
Class C shares totaled $604,547 and $41,302, of which $8,752 was paid to an
affiliated broker/dealer for Class B. During the period ended August 31, 1996,
OFDI received contingent deferred sales charges of $20,035 and $1,237,
respectively, upon redemption of Class B and Class C shares as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the period ended August 31, 1996, OFDI paid $1,282 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans for
Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class
B shares that are outstanding for 6 years or less and on Class C shares, as
compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. If the Plans are terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
<PAGE>
sales charge to OFDI for certain expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of 0.25% per year as compensation
for costs incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. Both fees are computed on the
average annual net assets of Class B and Class C shares, determined as of the
close of each regular business day. During the period ended August 31, 1996,
OFDI retained $110,782 and $25,804, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. At August 31, 1996, OFDI had incurred unreimbursed expenses of $688,429
for Class B and $74,784 for Class C.
================================================================================
5. Illiquid and Restricted
Securities
At August 31, 1996, 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. A security may also be considered
illiquid if its valuation has not changed for a certain period of time. The Fund
intends to invest no more than 10% of its net assets (determined at the time of
purchase and reviewed from time to time) in illiquid or restricted securities.
The aggregate value of these securities subject to this limitation at August 31,
1996 was $231,562, which represents 0.33% of the Fund's net assets. Information
concerning these securities is as follows:
Cost Valuation Per Unit
Security Acquisition Date Per Unit As of August 31, 1996
- --------------------------------------------------------------------------------
Silver Diner, Inc. 7/10/96 $5.50 $4.63
<PAGE>
Appendix
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts
Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas 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
A-1
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
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
885SAI
