OPPENHEIMER
ENTERPRISE FUND
Prospectus dated December 15, 1997
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.
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
15, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
[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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
<PAGE>
CONTENTS
ABOUT THE FUND
3 EXPENSES
5 A BRIEF OVERVIEW OF THE FUND
7 FINANCIAL HIGHLIGHTS
9 INVESTMENT OBJECTIVE AND POLICIES
10 INVESTMENT RISKS
12 INVESTMENT TECHNIQUES AND STRATEGIES
16 HOW THE FUND IS MANAGED
16 PERFORMANCE OF THE FUND
ABOUT YOUR ACCOUNT
22 HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares
37 SPECIAL INVESTOR SERVICES
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
39 HOW TO SELL SHARES
By Mail
By Telephone
41 HOW TO EXCHANGE SHARES
42 SHAREHOLDER ACCOUNT RULES AND POLICIES
44 DIVIDENDS, CAPITAL GAINS AND TAXES
A-1 APPENDIX A: SPECIAL SALES CHARGE ARRANGEMENTS
2
<PAGE>
ABOUT THE FUND
EXPENSES
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
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, 1997.
|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
23 through 37, for an explanation of how and when these charges apply.
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- ------------------------------------------------------------------------------
Maximum Sales Charge 5.75% None None
on Purchases(as a %
of offering price)
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Maximum Deferred None(1) 5% in the first 1% if
Sales Charge (as a % year, declining shares are
of the lower of the to 1% in the redeemed
original offering price sixth year and within 12
or redemption eliminated months of
proceeds) thereafter(2) purchase(2)
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Maximum Sales Charge None None None
on Reinvested
Dividends
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Redemption Fee None None None
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Exchange Fee None None None
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 27) in Class A shares, you may have to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 calendar months if you
purchased Fund shares by exchanging shares of other Oppenheimer funds that were
purchased prior to May 1, 1997) from the end of the calendar month during which
you purchased those shares. See "How to Buy Shares - Buying Class A Shares,"
below.
(2) See "How to Buy Shares- Buying Class B Shares" and "How to Buy Shares Buying
Class C Shares," below for more information on the contingent deferred sales
charge.
|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%
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12b-1 Plan Fees 0.21% 1.00% 1.00%
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Other Expenses 0.54% 0.52% 0.52%
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Total Fund Operating Expenses 1.50% 2.27% 2.27%
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, 1997. These
amounts are shown as a percentage of the average net assets of each class of the
Fund's shares for that period. 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 which is a
maximum of 0.25% of average annual net assets of that class. 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 Class A and Class B shares 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, 3, 5 and 10 years:
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
- ------------------------------------------------------------------------------
Class A Shares $72 $102 $135 $226
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Class B Shares $73 $101 $142 $223
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Class C Shares $33 $71 $122 $261
If you did not redeem your investment, it would incur the following
expenses:
1 YEAR 3 YEARS 5 YEARS 10 YEARS*
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Class A Shares $72 $102 $135 $226
- ------------------------------------------------------------------------------
Class B Shares $23 $71 $122 $223
- ------------------------------------------------------------------------------
Class C Shares $23 $71 $122 $261
*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 $75 billion in assets as of September 30, 1997.
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 39. The Fund also offers
exchange privileges to other Oppenheimer funds, described in "How to Exchange
Shares" on page 41.
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, 1997. 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, 1997 appears in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A CLASS B CLASS C
---------------------- --------------------- -----------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
1997 1996(1) 1997 1996(1) 1997 1996(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.48 $10.00 $15.39 $10.00 $15.39 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.09) (.05) (.18) (.14) (.18) (.14)
Net realized and unrealized gain 2.66 5.53 2.61 5.53 2.60 5.53
------ ------ ------ ------ ------ ------
Total income from investment operations 2.57 5.48 2.43 5.39 2.42 5.39
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (1.07) -- (1.07) -- (1.07) --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders (1.07) -- (1.07) -- (1.07) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.98 $15.48 $16.75 $15.39 $16.74 $15.39
====== ====== ====== ====== ====== ======
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 17.88% 54.80% 17.03% 53.90% 16.97% 53.90%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $52,455 $44,421 $25,856 $20,606 $5,653 $4,846
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $42,895 $30,655 $20,410 $14,123 $4,539 $3,472
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment loss (1.18)% (0.59)%(3) (1.96)% (1.37)%(3) (1.96)% (1.35)%(3)
Expenses 1.50% 1.66%(3) 2.27% 2.44%(3) 2.27% 2.43%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 142.4% 155.6% 142.4% 155.6% 142.4% 155.6%
Average brokerage commission rate(5) $0.0642 $0.0579 $0.0642 $0.0579 $0.0642 $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 lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $93,709,660 and $92,116,340, respectively. 5. Total
brokerage commissions paid on applicable purchases and sales of portfolio
securities for the period, divided by the total number of related shares
purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
3
<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 , and the derivative itself, may 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) , (4) foreign
currencies (these are referred to as Forward Contracts) and (5) commodities
(those are referred to as commodity futures). 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 exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
The call gives the buyer the ability to buy the investment on which the call was
written from the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment). Up to 25% of the Fund's total
assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. Buying a put on an investment gives the Fund the right to sell
the investment at a set price to a seller of a put on that investment. If the
Fund writes a put, the put must be covered by segregated liquid assets. The Fund
will not write puts if more than 50% of the Fund's net assets would have to be
segregated to cover put options.
o FORWARD CONTRACTS. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to 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. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain participation
interests other than those with puts exercisable within seven days. The Manager
monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity.
|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.
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 subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, and with more than 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
|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.
|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, 1997 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, 1997, followed by a
graphical comparison of the Fund's performance to appropriate broad-based market
indices.
o MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the Fund's past fiscal
year ended August 31, 1997, the Fund's positive performance was primarily
affected by economic growth in the stock markets. In particular, the Fund
realized gains on its stock holdings in the energy sector and benefited from
growth in sales and earnings of companies that supply the semiconductor
industry. In addition, certain holdings in the restaurant sector showed stronger
than expected sales and earnings. During the first eight of the twelve months
ended August 31, 1997, investors' general preference for larger, blue chip
multinational corporations as opposed to "micro-cap" companies and the market's
preference for value stocks as opposed to growth stocks hindered the Fund's
performance. However, from late April, 1997 through August 31, 1997, micro-cap
stocks generally rebounded and growth-type stocks showed renewed vigor. 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, 1997. 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.
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Enterprise Fund (Class A) , S&P500 Index, and
Russell 2000 Index
[Graph]
Average Annual Total Return of Class A Shares of the Fund at
8/31/97(1)
1 Year Life of Class
-----------------------------------
11.10% 34.78%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Enterprise Fund (Class B), S&P500 Index, and
Russell 2000 Index
[Graph]
Average Annual Total Return of Class B Shares of the Fund at
8/31/97(2)
1 Year Life of Class
----------------------------------
12.03% 36.55%
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Enterprise Fund (Class C), S&P 500 Index, and
Russell 2000 Index
[Graph]
Average Annual Total Return of Class C Shares of the Fund at
8/31/97(3)
1 Year Life of Class
----------------------------------
15.97% 38.21%
Total returns and ending account values in the graphs show change in share value
and include reinvestment of all dividends and capital gains distributions. The
performance information for the S&P 500 Index and the Russell 2000 Index in each
of the graphs begins on November 1, 1995.
1. The inception date of the Fund (Class A shares) was 11/7/95. Class A returns
are 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. Returns
are shown net of the applicable 5% and 4% contingent deferred sales charges,
respectively, for the one-year period and the life-of-class. The ending account
value for Class B shares in the graph is net of the applicable 4% contingent
deferred sales charge.
3. Class C shares of the Fund were first publicly offered on 11/7/95. The return
for the one year result is shown net of the applicable 1% contingent deferred
sales charge .
Past performance is not predictive of future performance.
Graphs may not be drawn to 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.
During the period beginning April 1, 1996 and ending June 8, 1997, the
Fund's Distributor, OppenheimerFunds Distributor, Inc., did not accept any
orders to purchase shares of the Fund, whether such orders were 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
follows. Additional shares could have been 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 had 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, could have
purchased 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 applied 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).
Effective June 9, 1997, investors may purchase shares of the Fund in
amounts not exceeding $5,000 per account per month (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). Accordingly, effective
June 9, 1997, shares of the Fund may be purchased by persons who were not
shareholders of the Fund prior to April 1, 1996. The Fund may be closed again to
new investors, or the new purchase policy further amended, at any time without
prior notice.
|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.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to each class, 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 of shares 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 shares might be more advantageous than Class C shares (as well as Class
B shares) for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C shares (and
Class B shares). If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares, or $1 million or more of
Class C shares, from a single investor.
o INVESTING FOR THE LONGER TERM. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class 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. Share
certificates are not available for Class B or Class C shares, and, if you are
considering using your shares as collateral for a loan, that may be a factor to
consider. Additionally, 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 of shares
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.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments of as little as $25; and subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, 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 from your
bank account through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. WHEN YOU BUY
SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT
CHOOSE, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES.
|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.
o PAYMENTS BY FEDERAL FUNDS WIRE. Shares may be purchased by Federal
Funds wire. The minimum investment is $2,500. You must FIRST call the
Distributor's Wire Department at 1-800-525-
7041 to notify the Distributor of the wire and receive further instructions.
|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 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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day"). If you buy shares through a dealer, the dealer must
receive your order by the close of The New York Stock Exchange on a regular
business day and normally your order must be transmitted to the Distributor so
that it is received before the Distributor's close of business that day, which
is normally 5:00 P.M. THE DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY REJECT ANY
PURCHASE ORDER FOR THE FUND'S SHARES.
SPECIAL SALES CHARGE ARRANGEMENTS FOR CERTAIN PERSONS. Appendix A 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 AS
SALES CHARGE SALES CHARGE 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 section 401(a) if the
retirement plan has total plan assets of $500,000 or more.
o Purchases by a retirement plan qualified under sections 401(a) or 401(k)
of the Internal Revenue Code, by a non-qualified deferred compensation plan,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an employee's 403(b)(7) custodial plan account, SEP IRA, SARSEP, or
SIMPLE plan (all of these plans are collectively referred to as "Retirement
Plans"), that: (1) buys shares costing $500,000 or more or (2) has, at the time
of purchase, 100 or more eligible participants, or (3) certifies that it
projects to have annual plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds 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, calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on Class
A shares purchased with the redemption proceeds of shares of a mutual fund
offered as an investment option in a Retirement Plan in which Oppenheimer funds
are also offered as investment options under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the proceeds of any of those shares purchased
on or after May 1, 1997 that are redeemed within 12 months of the end of the
calendar month of their purchase. That sales charge 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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
|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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN
PURCHASERS. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose;
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for their
employees;
o employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered into
sales arrangements with such dealers or brokers (and are identified to the
Distributor) or with the Distributor; the purchaser must certify to the
Distributor at the time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor children);
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 have entered into an
agreement with the Distributor for this purpose and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases, and (3) clients of such investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) who buy shares for their own accounts may also purchase shares
without sales charge but only if their accounts are linked to a master account
of their investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has made such
special arrangements (each of these investors may be charged a fee by the
broker, agent or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment adviser (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an appropriate
agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements 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 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust series.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN
REDEMPTIONS. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 months of purchase);
o for distributions from TRAC-2000 401(k) plans sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal 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;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; or
o for distributions from 401(k) plans sponsored by broker dealers that
have entered into a special agreement with the Distributor allowing this waiver.
|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:
YEARS SINCE CONTINGENT DEFERRED SALES CHARGE
BEGINNING OF MONTH IN WHICH ON REDEMPTIONS IN THAT YEAR
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 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 may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The 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 may pay the Class C service fee
and asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
The 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 Class C shares. At August 31, 1997, the end of the
Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with the sales of Class B shares of $544,471 (equal to 2.11% of the
Fund's net assets represented by Class B shares on that date). At August 31,
1997, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses in connection with sales of Class C shares of $44,775
(equal to 0.79% of the Fund's net assets represented by Class C shares on that
date). 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 distributing shares 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. In order to receive a waiver of the Class B or Class C contingent
deferred sales charge, you must notify the Transfer Agent as to which conditions
apply.
WAIVERS FOR REDEMPTIONS IN CERTAIN CASES. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares in
the following cases :
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request;
o shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below;
o distributions from OppenheimerFunds prototype 401(k) plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or(6) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS. The contingent
deferred sales charge is also waived on Class B and Class C shares in the
following cases:
o shares sold to the Manager or its affiliates;
o shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
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 call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
|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. 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.
SHAREHOLDER TRANSACTIONS BY FAX. Beginning May 30, 1997, requests for certain
account transactions may be sent to the Transfer Agent by fax (telecopier).
Please call 1-800-525-7048 for information about which transactions are
included. Transaction requests submitted by fax are subject to the same rules
and restrictions as written and telephone requests described in this Prospectus.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer 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 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 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 and SIMPLE IRAs offered by employers
o 403(B)(7) CUSTODIAL PLANS for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAS (Simplified Employee Pension Plans) for small business owners
or people with income from self-employment, including 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 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:
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 SEND COURIER OR EXPRESS MAIL
FOR REQUESTS BY MAIL: REQUEST TO:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue
Denver, Colorado 80217 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 available within 30 days of changing the address on an
account.
|X| TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK . There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH wire to your bank is initiated on the
business day after the redemption. You do not receive dividends on the proceeds
of the shares you redeemed while they are waiting to be wired.
SELLING SHARES THROUGH YOUR DEALER. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please 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 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 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.
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 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 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 FEDERAL FUNDS WIRE, CERTIFIED
CHECK OR ARRANGE WITH YOUR BANK TO PROVIDE TELEPHONE OR WRITTEN ASSURANCE TO THE
TRANSFER AGENT THAT YOUR PURCHASE PAYMENT HAS CLEARED.
|X| INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund if
the account value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped, 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 taxable dividends, distributions and redemption proceeds (including
exchanges) if you fail to furnish the Fund with a correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service .
|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 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 the same class of shares of another
Oppenheimer fund account you have
established.
TAXES. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you 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. So that the Fund will not have
to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
|X| "BUYING A DIVIDEND": 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
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.
4
<PAGE>
APPENDIX A
SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND WHO
WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS
The initial and contingent sales charge rates and waivers for Class A, Class B
and Class C shares of the Fund described elsewhere in this Prospectus are
modified as described below for those shareholders of (i) Quest for Value Fund,
Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity Fund,
Quest for Value Small Capitalization Fund and Quest for Value Global Equity
Fund, Inc. on November 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.
FRONT-END SALES FRONT-END SALES
NUMBER OF CHARGE AS A CHARGE AS A COMMISSION AS
ELIGIBLE EMPLOYEES PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
OR MEMBERS OFFERING PRICE AMOUNT INVESTED OFFERING 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| 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
|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 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.
5
<PAGE>
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, 1997. 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."
Fiscal Oppenheimer S&P 500 Russell
YEAR ENDED ENTERPRISE FUND INDEX 2000 INDEX
- ---------- --------------- ------- ----------
CLASS A
11/7/95 $ 9,425 $10,000 $10,000
08/31/96 $14,590 $11,432 $11,398
08/31/97 $17,199 $16,077 $14,700
CLASS B
11/7/95 $10,000 $10,000 $10,000
08/31/96 $15,390 $11,432 $11,398
08/31/97 $17,611 $16,077 $14,700
CLASS C
11/7/95 $10,000 $10,000 $10,000
08/31/96 $15,390 $11,432 $11,398
08/31/97 $18,001 $16,077 $14,700
6
<PAGE>
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 AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
One Wall Street
New York, New York 10015
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, 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.
PR0885.001.1297 Printed on recycled paper
<PAGE>
OPPENHEIMER ENTERPRISE FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1997
This Statement of Additional Information of Oppenheimer Enterprise Fund is
not a Prospectus. This document contains additional information about the Fund
and supplements information in the Prospectus dated December 15, 1997. It should
be read together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above.
CONTENTS
PAGE
ABOUT THE FUND
Investment Objective and Policies...................................... 2
Investment Policies and Strategies................................ 2
Other Investment Techniques and Strategies........................ 5
Other Investment Restrictions..................................... 13
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................................................ 25
Distribution and Service Plans......................................... 27
ABOUT YOUR ACCOUNT
How To Buy Shares...................................................... 29
How To Sell Shares..................................................... 38
How To Exchange Shares................................................. 42
Dividends, Capital Gains and Taxes..................................... 44
Additional Information About the Fund.................................. 45
FINANCIAL INFORMATION ABOUT THE FUND
Financial Statements................................................... 46
Independent Auditors' Report........................................... 47
Appendix: Corporate Industry Classifications........................... A-1
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<PAGE>
ABOUT THE FUND
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES AND STRATEGIES. The investment objective and policies of the
Fund are described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in which the Fund
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 (on which it will pay interest), 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
-2-
<PAGE>
different from those of the U.S., or to reduce fluctuations in portfolio value
by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets. If the Fund's portfolio securities are held abroad,
the countries in which 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
-3-
<PAGE>
Fund's holding of that security may be deemed to be illiquid.
|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
-4-
<PAGE>
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 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
-5-
<PAGE>
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.
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
-6-
<PAGE>
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 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
-7-
<PAGE>
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.
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
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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 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
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involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written options
traded on exchanges or as to other acceptable escrow securities, so that no
margin will be required 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
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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
marked-to-market value of any OTC option held by it unless subject to a buy-
back agreement with the executing broker. 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 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
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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).
Certain foreign currency exchange contracts (Forward Contracts) in which
the Fund may invest are treated as "Section 1256 contracts." Gains or losses
relating to Section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain Section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, Section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
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
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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
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
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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;
(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.
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<PAGE>
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 had made certain undertakings. These undertakings, which are
non-fundamental policies of the Fund, would 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. In accordance with the adoption of the National
Securities Markets Improvement Act, the Fund has withdrawn the state
undertakings that are no longer applicable. These undertakings, which have been
withdrawn, were as follows: 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 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
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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 or directors of Oppenheimer Discovery
Fund, Oppenheimer Growth Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global
Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer International Small
Company Fund, Oppenheimer International Growth Fund, Oppenheimer Developing
Markets Fund, Oppenheimer Series Fund, Inc., 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 November 28, 1997, the Trustees and
officers of the Fund as a group owned less than 1% of the outstanding Class A ,
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
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officers of the Fund listed above.
LEON LEVY, CHAIRMAN OF THE BOARD OF TRUSTEES; AGE: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
ROBERT G. GALLI, TRUSTEE*; Age: 64
Vice Chairman of OppenheimerFunds, Inc. (the "Manager") (since October 1995);
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 and a director of the Manager and
OppenheimerFunds Distributor, Inc. (the "Distributor"), Vice President and a
director of HarbourView Asset Management Corporation ("HarbourView") and
Centennial Asset Management Corporation ("Centennial"), investment adviser
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: 74
591 Breezy Hill Road, Hillsdale, N.Y. 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 of Spy Magazine, L.P.
BRIDGET A. MACASKILL, PRESIDENT AND TRUSTEE*; AGE: 49
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
ELIZABETH B. MOYNIHAN, TRUSTEE; AGE: 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 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
- --------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
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Council, Preservation League of New York State, and of the Indo-U.S.
Sub-Commission on Education and Culture.
KENNETH A. RANDALL, TRUSTEE; AGE: 70
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), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
EDWARD V. REGAN, TRUSTEE; AGE: 67
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. (health care
provider); a director of River Bank America (real estate manager); Trustee,
Financial Accounting Foundation (FASB and GASB); formerly New York State
Comptroller and trustee, New York State and Local Retirement Fund.
RUSSELL S. REYNOLDS, JR., TRUSTEE; AGE: 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K.); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.
DONALD W. SPIRO, VICE CHAIRMAN AND TRUSTEE*; AGE: 72
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
PAULINE TRIGERE, TRUSTEE; AGE: 85
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*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
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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: 67
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) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order) IMC Global Inc. (chemicals and
animal feed), 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: 44
Vice President of the Manager (since September 1994); Vice President and
portfolio manager of other OppenheimerFunds; formerly a Managing Director of
Buckingham Capital Management (February 1994-September 1994), prior to which he
was Portfolio Manager and Vice President of the Fund and other Oppenheimer funds
and a Vice President of the Manager (July 1991-February 1994).
ANDREW J. DONOHUE, SECRETARY; AGE: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager ; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
GEORGE C. BOWEN, TREASURER; AGE: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor ; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice
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President (since February 1992), Treasurer (since July 1991)and a director
(since December 1991) of Centennial; President, Treasurer and a director of
Centennial Capital Corporation (since June 1989); Vice President and Treasurer
(since August 1978) and Secretary (since April 1981) of SSI; Vice President,
Treasurer and Secretary of SFSI (since November 1989); Treasurer of OAC (since
June 1990); Treasurer of Oppenheimer Partnership Holdings, Inc. (since November
1989); Vice President and Treasurer of Oppenheimer Real Asset Management, Inc.
(since July 1996); Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc., a broker-dealer (since December 1995); an officer of
other Oppenheimer funds.
ROBERT J. BISHOP, ASSISTANT TREASURER; AGE: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
SCOTT T. FARRAR, ASSISTANT TREASURER; AGE: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
|X| REMUNERATION OF TRUSTEES. The officers of the Fund and certain
Trustees are affiliated with the Manager. They and the Trustees of the Fund (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,
1997. The compensation from all of the New York-based Oppenheimer funds includes
the Fund and is compensation received as a director, trustee, managing general
partner or member of a committee of the Board of those funds during the 1996
calendar year.
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RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED AS FROM ALL
FROM PART OFUND NEW YORK-BASED
NAME AND POSITION THE FUND(1) EXPENSES OPPENHEIMER FUNDS
Leon Levy, $7,769 $1,734 $152,750
Chairman and Trustee
Benjamin Lipstein $4,646 $1,037 $91,350
Study Committee Chairman,
Audit Committee Member
and Trustee(2)
Elizabeth B. Moynihan $4,646 $1,037 $91,350
Study Committee Member
and Trustee
Kenneth A. Randall $4,244 $947 $83,450
Audit Committee Chairman
and Trustee
Edward V. Regan $3,975 $887 $78,150
Proxy Committee Chairman,
Audit Committee Member
and Trustee
Russell S. Reynolds, Jr. $2,991 $667 $58,800
Proxy Committee Member
and Trustee
Pauline Trigere, Trustee $2,813 $628 $55,300
Clayton K. Yeutter $2,991 $667 $58,800
Proxy Committee Member
and Trustee
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(1)For the fiscal year ended August 31, 1997.
(2)Committee position held during a portion of the period shown.
DEFERRED COMPENSATION PLAN. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
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 Fund estimate the number of years of
credited service that will be used to determine those benefits.
|X| MAJOR SHAREHOLDERS. As of November 28, 1997, 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: OMC Capital
Accumulation Plan Omnibus Account, P.O. Box 5270, Denver, Colorado 80217, which
was the record owner of 220,501.790 Class A shares (equal to 6.33% of the Class
A shares then outstanding); and Merrill Lynch Pierce Fenner & Smith Inc., 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246-6484, which was the
record owner of 47,403.647 Class C shares (equal to 12.20% 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| PORTFOLIO MANAGEMENT. The Portfolio Manager of the Fund is Mr. Jay W.
Tracey, III, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Tracey's
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background is described in the Prospectus under "Portfolio Manager." Other
members of the Manager's Equity Portfolio Department, particularly Mr. Paul
LaRocco, provide the Portfolio Manager with counsel and support in managing the
Fund's portfolio.
|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
ended August 31, 1996 and the fiscal year ended August 31, 1997, the management
fees paid by the Fund to the Manager were $294,228 and $508,062.
The advisory agreement contains no expense limitation. However,
independently of the 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
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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 ended August 31, 1996 and fiscal year ended
August 31, 1997, the aggregate sales charges on sales of the Fund's Class A
shares were $552,815 and $160,348, respectively, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $122,988 and $39,980,
respectively. During the same periods, contingent deferred sales charges
collected on the Fund's Class B shares totaled $20,035 and $52,498,
respectively, all of which the Distributor retained. During the same periods,
contingent deferred sales charges collected on Class C shares were $1,237 and
$3,292, 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 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
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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, 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
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"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 period ended August 31, 1996 and fiscal year
ended August 31, 1997, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net trade basis)
was $24,405 and $15,954, respectively. During the fiscal year ended August 31,
1997, $2,699 was paid to brokers as commissions in return for research services;
the aggregate dollar amount of those transactions was $689,194. 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 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 )
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<PAGE>
|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:
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 returns 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 through the fiscal year ended
on August 31, 1997 were 71.99%, 76.11% and 80.01%, respectively, and for the
one-year period ended August 31, 1997, 11.10%, 12.03% and 15.97%, 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 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, 1997 were 82.48%,
80.11% and 80.01%, respectively, and for the one-year period ended August 31,
1997, 17.88%, 17.03% and 16.97%, 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
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<PAGE>
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 star ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an independent
mutual fund monitoring service . Morningstar 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. The Fund is ranked among other small company funds.
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 Fund's Class A, Class B and Class C shares in relation to
other equity funds. Rankings are subject to change.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
The total return on an investment in the Fund's Class A, Class B 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 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
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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 "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
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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 year ended August 31, 1997, payments under the Class A Plan
totalled $91,498, all of which was paid to Recipients, including $2,345 which
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 year ended August 31, 1997, payments under the Class
B Plan totalled $203,769, of which $174,549 was retained by the Distributor.
During this period, payments under the Class C Plan totalled $45,325, of which
$23,136 was retained by the Distributor. As of August 31, 1997, the Distributor
had incurred unreimbursed expenses under the Class B and Class C Plans of
$544,471 and $44,775, respectively (equal to 2.11% and 0.79% of Class B and
Class C shares, respectively, on that date), which have been carried into the
present Plan year.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fees on such shares,
or to pay Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to Recipients
in the manner described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the Board.
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
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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 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)
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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 , Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that Class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M. New York time, but may
close earlier on some days (for example, in case of weather emergencies or days
falling before a holiday). The Exchange's most recent annual holiday schedule
(which is subject to change) states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days. The Fund
may invest a portion of its assets in foreign securities primarily listed on
foreign exchanges which may trade on Saturdays or customary U.S. business
holidays on which the Exchange is closed. Because the Fund's price and net asset
value will not be calculated on those days, the Fund's net asset values per
share of Class A, Class B and Class C shares of the Fund may be significantly
affected of days when shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally as follows: (i) equity securities traded on
a securities exchange or on the Automated Quotation System ("NASDAQ") of the
Nasdaq Stock Market, Inc. for which last sale information is regularly reported
are valued at the last reported sale price on their primary exchange or NASDAQ
that day (or, in the absence of sales that day, at values based on the last sale
price of the preceding trading day, or closing bid and asked 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 the mean between "bid" and "asked" prices
obtained from the principal exchange or two active market makers in the security
on the basis of reasonable inquiry; (iii) long-term debt securities having a
remaining maturity in excess of 60 days are valued based on the mean between the
"bid" and "asked" prices determined by a portfolio pricing service approved by
the Fund's Board of 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 397 days or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean between "bid" and
"asked" prices determined by a 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-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued that have a remaining maturity
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of 60 days or less , and debt instruments held by a money market fund that have
a remaining maturity of 397 days or less, shall be valued at cost, adjusted for
amortization of premiums and accretion of 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 Manager 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 "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).
In the case of 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 any
of the types of securities described above to price U.S. Government Securities ,
mortgage-backed securities, foreign government securities and corporate bonds.
The Manager will monitor the accuracy of such pricing services, which may
include comparing prices used for portfolio evaluation to actual sales prices of
selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of 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 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. 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
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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. Relations by virtue of a remarriage (step-children,
step-parents, etc.) are included.
|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
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 Capital Appreciation Fund
Oppenheimer Discovery Fund
Oppenheimer Developing Markets Fund
Oppenheimer Enterprise Fund
Oppenheimer Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company
Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer MidCap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Equity Income Fund
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer Total Return Fund, Inc.
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 Gold & Special Minerals Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income 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.
Oppenheimer Quest
Capital Value Fund, Inc.
Oppenheimer Bond Fund for Growth
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.
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
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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 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.
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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 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. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds, or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating
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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 other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch recordkeeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between
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Merrill Lynch and the mutual fund's principal underwriter or distributor and in
funds advised or managed by MLAM (collectively, the "Applicable Investments");
or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service
agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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
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<PAGE>
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, 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.
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<PAGE>
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 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
-39-
<PAGE>
on this basis. Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have Automatic
Withdrawal Plan payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed instructions.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the date you select in the Account Application. If a
contingent deferred sales charge applies to the redemption, the amount of the
check or payment will be reduced accordingly. The Fund cannot guarantee receipt
of a payment on the date requested 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 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 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.
-40-
<PAGE>
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
-41-
<PAGE>
"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. 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 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
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<PAGE>
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 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
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<PAGE>
income tax purposes, an exchange transaction is treated as a redemption of
shares of one fund and a purchase of shares of another. "Reinvestment
Privilege," above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the Transfer
Agent are unable to provide investment, tax or legal advice to a shareholder in
connection with an exchange request or any other investment transaction.
DIVIDENDS, CAPITAL GAINS AND TAXES
TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
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
-44-
<PAGE>
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.
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.
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<PAGE>
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, 1997, and the
related statement of operations for the year then ended, the statements of
changes in net assets for the year then ended and the period ended August 31,
1996, and the financial highlights for the year ended August 31, 1997 and 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 1997 by correspondence with the custodian and brokers;
and where confirmations were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Enterprise Fund as of August 31, 1997, the results of
its operations for the year then ended, the changes in its net assets for the
year ended August 31, 1997 and the period ended August 31, 1996, and the
financial highlights for the year ended August 31, 1997 and the period from
November 7, 1995 (commencement of operations) to August 31, 1996, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick
KPMG PEAT MARWICK LLP
Denver, Colorado
September 22, 1997
<PAGE>
STATEMENT OF INVESTMENTS August 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
===============================================================================================================
<S> <C> <C>
COMMON STOCKS--97.4%
- ---------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--1.7%
- ---------------------------------------------------------------------------------------------------------------
Brunswick Technologies, Inc.(1) 80,000 $ 1,410,000
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--17.4%
- ---------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--3.6%
Keystone Automotive Industries, Inc.(1) 45,000 849,375
- ---------------------------------------------------------------------------------------------------------------
National R.V. Holdings, Inc.(1)(2) 70,000 1,246,875
- ---------------------------------------------------------------------------------------------------------------
Trendwest Resorts, Inc.(1) 50,000 912,500
-----------
3,008,750
- ---------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--6.8%
Casa Ole Restaurants, Inc.(1) 76,500 683,719
- ---------------------------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 30,000 952,500
- ---------------------------------------------------------------------------------------------------------------
DSI Toys, Inc.(1) 60,000 547,500
- ---------------------------------------------------------------------------------------------------------------
Equity Marketing, Inc.(1) 30,000 712,500
- ---------------------------------------------------------------------------------------------------------------
PJ America, Inc.(1) 40,000 640,000
- ---------------------------------------------------------------------------------------------------------------
Schlotzsky's, Inc.(1) 100,000 1,812,500
- ---------------------------------------------------------------------------------------------------------------
Silver Diner, Inc.(1) 80,000 210,000
- ---------------------------------------------------------------------------------------------------------------
Silver Diner, Inc.(1)(2) 50,000 124,687
-----------
5,683,406
- ---------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--1.8%
North Face, Inc. (The)(1) 24,000 532,500
- ---------------------------------------------------------------------------------------------------------------
Sport-Haley, Inc.(1) 60,000 960,000
-----------
1,492,500
- ---------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--5.2%
Coldwater Creek, Inc.(1) 35,000 822,500
- ---------------------------------------------------------------------------------------------------------------
Marks Bros. Jewelers, Inc.(1) 50,000 550,000
- ---------------------------------------------------------------------------------------------------------------
Mazel Stores, Inc.(1) 30,000 637,500
- ---------------------------------------------------------------------------------------------------------------
Party City Corp.(1) 50,000 1,200,000
- ---------------------------------------------------------------------------------------------------------------
RDO Equipment Co., Cl. A(1) 50,000 1,143,750
-----------
4,353,750
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--20.8%
- ---------------------------------------------------------------------------------------------------------------
BEVERAGES--0.6%
Puro Water Group, Inc.(1) 110,000 550,000
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS--5.6%
ArQule, Inc.(1) 50,000 $ 912,500
- ---------------------------------------------------------------------------------------------------------------
Ascent Pediatrics, Inc.(1) 60,000 427,500
- ---------------------------------------------------------------------------------------------------------------
Global Pharmaceutical Corp.(1) 39,200 235,200
- ---------------------------------------------------------------------------------------------------------------
International Isotopes, Inc.(1) 100,000 943,750
- ---------------------------------------------------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(1) 20,000 690,000
- ---------------------------------------------------------------------------------------------------------------
Onyx Pharmaceuticals, Inc.(1) 60,000 585,000
- ---------------------------------------------------------------------------------------------------------------
PMR Corp.(1) 40,000 935,000
-----------
4,728,950
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--14.6%
Advance Paradigm, Inc.(1) 40,000 835,000
- ---------------------------------------------------------------------------------------------------------------
Autonomous Technologies Corp.(1)(2) 200,000 570,000
- ---------------------------------------------------------------------------------------------------------------
Calypte Biomedical Corp.(1) 80,000 440,000
- ---------------------------------------------------------------------------------------------------------------
Carriage Services, Inc.(1) 30,000 645,000
- ---------------------------------------------------------------------------------------------------------------
EP MedSystems, Inc.(1) 100,000 275,000
- ---------------------------------------------------------------------------------------------------------------
HumaScan, Inc.(1) 116,000 667,000
- ---------------------------------------------------------------------------------------------------------------
Intelligent Medical Imaging, Inc.(1) 140,000 831,250
- ---------------------------------------------------------------------------------------------------------------
Medical Manager Corp.(1) 60,000 1,050,000
- ---------------------------------------------------------------------------------------------------------------
Monarch Dental Corp.(1) 29,000 525,625
- ---------------------------------------------------------------------------------------------------------------
Nitinol Medical Technologies, Inc.(1) 61,000 777,750
- ---------------------------------------------------------------------------------------------------------------
Norland Medical Systems, Inc.(1) 40,000 450,000
- ---------------------------------------------------------------------------------------------------------------
Ortivus AB, A Shares(1) 13,700 558,402
- ---------------------------------------------------------------------------------------------------------------
Ortivus AB, B Shares(1) 7,000 294,231
- ---------------------------------------------------------------------------------------------------------------
Photoelectron Corp.(1) 70,000 446,250
- ---------------------------------------------------------------------------------------------------------------
Sabratek Corp.(1) 40,000 1,450,000
- ---------------------------------------------------------------------------------------------------------------
Somanetics Corp.(1) 60,000 187,500
- ---------------------------------------------------------------------------------------------------------------
Superior Consultant Holdings Corp.(1) 35,000 997,500
- ---------------------------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 50,000 806,250
- ---------------------------------------------------------------------------------------------------------------
Vision Twenty-One, Inc.(1) 40,000 460,000
-----------
12,266,758
- ---------------------------------------------------------------------------------------------------------------
ENERGY--11.7%
- ---------------------------------------------------------------------------------------------------------------
Basin Exploration, Inc.(1) 80,000 820,000
- ---------------------------------------------------------------------------------------------------------------
Cal Dive International, Inc.(1) 70,000 2,380,000
- ---------------------------------------------------------------------------------------------------------------
Carrizo Oil & Gas, Inc.(1) 75,000 834,375
- ---------------------------------------------------------------------------------------------------------------
Edge Petroleum Corp.(1) 40,000 640,000
- ---------------------------------------------------------------------------------------------------------------
FX Energy, Inc.(1) 100,000 912,500
- ---------------------------------------------------------------------------------------------------------------
Gulf Island Fabrication, Inc.(1) 30,000 1,215,000
- ---------------------------------------------------------------------------------------------------------------
Patterson Energy, Inc.(1) 50,000 1,912,500
- ---------------------------------------------------------------------------------------------------------------
Superior Energy Services, Inc.(1) 130,000 1,080,625
-----------
9,795,000
</TABLE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL--5.2%
- ---------------------------------------------------------------------------------------------------------------
American Capital Strategies Ltd.(1) 50,000 $ 981,250
- ---------------------------------------------------------------------------------------------------------------
Granite Financial, Inc.(1) 100,000 1,175,000
- ---------------------------------------------------------------------------------------------------------------
Investors Financial Services Corp. 42,200 1,872,625
- ---------------------------------------------------------------------------------------------------------------
Rockford Industries, Inc.(1) 38,400 326,400
-----------
4,355,275
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL--18.6%
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--16.6%
A Consulting Team, Inc.(1) 70,000 927,500
- ---------------------------------------------------------------------------------------------------------------
Coinstar, Inc.(1) 60,000 712,500
- ---------------------------------------------------------------------------------------------------------------
Cornell Corrections, Inc.(1) 80,000 1,170,000
- ---------------------------------------------------------------------------------------------------------------
Dynamex, Inc.(1) 5,000 34,375
- ---------------------------------------------------------------------------------------------------------------
Eagle Geophysical, Inc.(1) 40,000 820,000
- ---------------------------------------------------------------------------------------------------------------
Farr Co.(1) 60,000 967,500
- ---------------------------------------------------------------------------------------------------------------
Hub Group, Inc., Cl. A(1) 30,000 1,020,000
- ---------------------------------------------------------------------------------------------------------------
ICTS International NV(1) 60,000 577,500
- ---------------------------------------------------------------------------------------------------------------
Leap Group, Inc. (The)(1) 97,100 194,200
- ---------------------------------------------------------------------------------------------------------------
Mansur Industries, Inc.(1) 27,500 608,438
- ---------------------------------------------------------------------------------------------------------------
NCO Group, Inc.(1) 25,000 937,500
- ---------------------------------------------------------------------------------------------------------------
ONTRACK Data International, Inc.(1) 45,000 776,250
- ---------------------------------------------------------------------------------------------------------------
Rent-Way, Inc.(1) 50,000 906,250
- ---------------------------------------------------------------------------------------------------------------
RWD Technologies, Inc.(1) 40,000 770,000
- ---------------------------------------------------------------------------------------------------------------
Service Experts, Inc.(1) 15,000 387,188
- ---------------------------------------------------------------------------------------------------------------
Stericycle, Inc.(1) 100,000 1,000,000
- ---------------------------------------------------------------------------------------------------------------
U.S. Liquids, Inc.(1) 60,000 907,500
- ---------------------------------------------------------------------------------------------------------------
Unidigital, Inc.(1) 100,000 775,000
- ---------------------------------------------------------------------------------------------------------------
Waste Industries, Inc.(1) 25,000 456,250
-----------
13,947,951
- ---------------------------------------------------------------------------------------------------------------
MANUFACTURING--2.0%
Ballantyne of Omaha, Inc.(1) 50,000 975,000
- ---------------------------------------------------------------------------------------------------------------
ITEQ, Inc.(1) 60,000 742,500
-----------
1,717,500
- ---------------------------------------------------------------------------------------------------------------
TECHNOLOGY--22.0%
- ---------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.4%
Aehr Test Systems(1) 75,000 1,312,500
- ---------------------------------------------------------------------------------------------------------------
MicroTouch Systems, Inc.(1) 30,000 945,000
- ---------------------------------------------------------------------------------------------------------------
Planar Systems, Inc.(1) 50,000 618,750
-----------
2,876,250
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE--10.7%
Advent Software, Inc.(1) 30,000 $ 795,000
- ---------------------------------------------------------------------------------------------------------------
Aware, Inc.(1) 50,000 587,500
- ---------------------------------------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 30,000 1,147,500
- ---------------------------------------------------------------------------------------------------------------
Genesys Telecomm Labs, Inc.(1) 25,000 700,000
- ---------------------------------------------------------------------------------------------------------------
H.T.E., Inc.(1) 60,000 930,000
- ---------------------------------------------------------------------------------------------------------------
Integrated Measurement Systems, Inc.(1) 30,000 465,000
- ---------------------------------------------------------------------------------------------------------------
Jetfax, Inc.(1) 100,000 987,500
- ---------------------------------------------------------------------------------------------------------------
New Era of Networks, Inc.(1) 95,000 1,306,250
- ---------------------------------------------------------------------------------------------------------------
QAD, Inc.(1) 50,000 1,093,750
- ---------------------------------------------------------------------------------------------------------------
Rogue Wave Software, Inc.(1) 30,000 438,750
- ---------------------------------------------------------------------------------------------------------------
SPSS, Inc.(1) 20,000 557,500
-----------
9,008,750
- ---------------------------------------------------------------------------------------------------------------
ELECTRONICS--4.2%
Advanced Technology Materials, Inc.(1) 40,000 1,180,000
- ---------------------------------------------------------------------------------------------------------------
BENCHMARQ Microelectronics, Inc.(1) 40,000 1,240,000
- ---------------------------------------------------------------------------------------------------------------
Galileo Technology Ltd.(1) 20,000 622,500
- ---------------------------------------------------------------------------------------------------------------
TelCom Semiconductor, Inc.(1) 30,000 478,125
-----------
3,520,625
- ---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY--3.7%
Innova Corp.(1) 20,000 440,000
- ---------------------------------------------------------------------------------------------------------------
Lightbridge, Inc.(1) 75,000 928,125
- ---------------------------------------------------------------------------------------------------------------
Microwave Power Devices, Inc.(1) 70,000 682,500
- ---------------------------------------------------------------------------------------------------------------
PhoneTel Technologies, Inc.(1) 350,000 1,028,125
-----------
3,078,750
-----------
Total Common Stocks (Cost $63,276,663) 81,794,215
<CAPTION>
FACE
AMOUNT
===============================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--4.9%
- ---------------------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.55%,
dated 8/29/97, to be repurchased at $4,102,528 on 9/2/97,
collateralized by U.S. Treasury Bonds, 7.25%-11.25%,
2/15/03-8/15/19, with a value of $3,911,886 and U.S. Treasury
Nts., 5.875%, 10/31/98, with a value of $274,110 (Cost $4,100,000) $4,100,000 4,100,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $67,376,663) 102.3% 85,894,215
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.3) (1,930,031)
---------- -----------
NET ASSETS 100.0% $83,964,184
========== ===========
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES August 31, 1997
<TABLE>
===============================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $67,376,663)--see accompanying statement $85,894,215
- ---------------------------------------------------------------------------------------------------------------
Cash 41,407
- ---------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 433,367
Shares of beneficial interest sold 407,879
Interest and dividends 2,103
- ---------------------------------------------------------------------------------------------------------------
Other 11,193
-----------
Total assets 86,790,164
===============================================================================================================
LIABILITIES Payables and other liabilities:
Investments purchased 2,572,500
Shares of beneficial interest redeemed 101,380
Trustees' fees--Note 1 69,702
Distribution and service plan fees 29,684
Transfer and shareholder servicing agent fees 9,452
Other 43,262
-----------
Total liabilities 2,825,980
===============================================================================================================
NET ASSETS $83,964,184
===========
===============================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $63,696,902
- ---------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (32,928)
- ---------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 1,782,658
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 18,517,552
-----------
Net assets $83,964,184
===========
</TABLE>
<TABLE>
==================================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $52,454,822 and 3,089,162 shares of beneficial interest outstanding) $16.98
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $18.02
- ------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $25,856,429 and
1,544,041 shares of beneficial interest outstanding) $16.75
- ------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $5,652,933 and
337,716 shares of beneficial interest outstanding) $16.74
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS For the Year Ended August 31, 1997
<TABLE>
===============================================================================================================
<S> <C>
INVESTMENT INCOME
Interest $ 195,334
- ---------------------------------------------------------------------------------------------------------------
Dividends 20,044
-----------
Total income 215,378
===============================================================================================================
EXPENSES
Management fees--Note 4 508,062
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 91,498
Class B 203,769
Class C 45,325
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 160,009
- ---------------------------------------------------------------------------------------------------------------
Shareholder reports 114,845
- ---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 41,539
- ---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 15,184
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 10,497
- ---------------------------------------------------------------------------------------------------------------
Deferred organization expenses 5,867
- ---------------------------------------------------------------------------------------------------------------
Insurance expenses 2,857
- ---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,050
Class B 959
Class C 111
- ---------------------------------------------------------------------------------------------------------------
Other 6,771
-----------
Total expenses 1,208,343
===============================================================================================================
NET INVESTMENT LOSS (992,965)
===============================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments 5,157,150
Foreign currency transactions (4,077)
-----------
Net realized gain 5,153,073
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 7,630,383
Translation of assets and liabilities denominated in foreign currencies (24,763)
-----------
Net change 7,605,620
-----------
Net realized and unrealized gain 12,758,693
===============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,765,728
===========
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED AUGUST 31,
AUGUST 31, 1997 1996(1)
===============================================================================================================
<S> <C> <C>
OPERATIONS
Net investment loss $ (992,965) $ (343,149)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 5,153,073 2,595,623
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 7,605,620 10,911,932
----------- -----------
Net increase in net assets resulting from operations 11,765,728 13,164,406
===============================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Distributions from net realized
gain:
Class A (2,947,210) --
Class B (1,406,497) --
Class C (317,008) --
===============================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions--Note
2:
Class A 3,467,955 35,949,485
Class B 3,163,980 16,853,753
Class C 364,697 3,904,895
===============================================================================================================
NET ASSETS
Total increase 14,091,645 69,872,539
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 69,872,539 --
----------- -----------
End of period (including accumulated net investment
loss of $32,928 and $2,168, respectively) $83,964,184 $69,872,539
=========== ===========
</TABLE>
1. For the period from November 7, 1995 (commencement of operations) to August
31, 1996.
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------
YEAR ENDED AUGUST 31,
1997 1996(1)
========================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.48 $10.00
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.09) (.05)
Net realized and unrealized gain 2.66 5.53
------- -------
Total income from investment operations 2.57 5.48
- ----------------------------------------------------------------------------------------
Distributions from net realized gain (1.07) --
------- -------
Total dividends and distributions to shareholders (1.07) --
- ----------------------------------------------------------------------------------------
Net asset value, end of period $16.98 $15.48
======= =======
========================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 17.88% 54.80%
========================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $52,455 $44,421
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $42,895 $30,655
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment loss (1.18)% (0.59)%(3)
Expenses 1.50% 1.66%(3)
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(4) 142.4% 155.6%
Average brokerage commission rate(5) $0.0642 $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.
<TABLE>
<CAPTION>
CLASS B CLASS C
- ----------------------------------- -------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
1997 1996(1) 1997 1996(1)
==========================================================================
<S> <C> <C> <C>
$15.39 $10.00 $15.39 $10.00
- --------------------------------------------------------------------------
(.18) (.14) (.18) (.14)
2.61 5.53 2.60 5.53
------- ------- ------- -------
2.43 5.39 2.42 5.39
- --------------------------------------------------------------------------
(1.07) -- (1.07) --
------- ------- ------- -------
(1.07) -- (1.07) --
- --------------------------------------------------------------------------
$16.75 $15.39 $16.74 $15.39
======= ======= ======= =======
==========================================================================
17.03% 53.90% 16.97% 53.90%
==========================================================================
$25,856 $20,606 $5,653 $4,846
- --------------------------------------------------------------------------
$20,410 $14,123 $4,539 $3,472
- --------------------------------------------------------------------------
(1.96)% (1.37)%(3) (1.96)% (1.35)%(3)
2.27% 2.44%(3) 2.27% 2.43%(3)
- --------------------------------------------------------------------------
142.4% 155.6% 142.4% 155.6%
$0.0642 $0.0579 $0.0642 $0.0579
</TABLE>
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1997 were $93,709,660 and $92,116,340, respectively.
5. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
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 that class and exclusive voting rights with respect to matters
affecting that class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of 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 foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
================================================================================
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 1997, a provision of $32,270 was made for the Fund's projected
benefit obligations and payments of $1,509 were made to retired trustees,
resulting in an accumulated liability of $32,929, at August 31, 1997.
- --------------------------------------------------------------------------------
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.
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
During the period ended August 31, 1997, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1997, amounts have been reclassified to reflect a decrease in accumulated net
investment loss of $962,205. Accumulated net realized gain on investments was
decreased by the same amount.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and 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.
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:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1997 PERIOD ENDED AUGUST 31, 1996(1)
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 852,726 $ 12,879,046 3,497,248 $45,306,140
Dividends and
distributions reinvested 193,503 2,765,162 -- --
Redeemed (827,440) (12,176,253) (626,875) (9,356,655)
-------- ------------ --------- -----------
Net increase 218,789 $ 3,467,955 2,870,373 $35,949,485
======== ============ ========= ===========
- -------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 388,682 $ 5,860,950 1,532,771 $19,742,737
Dividends and
distributions reinvested 93,212 1,320,815 -- --
Redeemed (276,877) (4,017,785) (193,747) (2,888,984)
-------- ------------ --------- -----------
Net increase 205,017 $ 3,163,980 1,339,024 $16,853,753
======== ============ ========= ===========
- -------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 93,376 $ 1,411,388 395,954 $ 5,114,214
Dividends and
distributions reinvested 20,665 292,614 -- --
Redeemed (91,264) (1,339,305) (81,015) (1,209,319)
-------- ------------ --------- -----------
Net increase 22,777 $ 364,697 314,939 $ 3,904,895
======== ============ ========= ===========
</TABLE>
1. For the period from November 7, 1995 (commencement of operations) to August
31, 1996.
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At August 31, 1997, net unrealized appreciation on investments of $18,517,552
was composed of gross appreciation of $21,866,150, and gross depreciation of
$3,348,598.
================================================================================
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 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.
For the year ended August 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $160,348, of which $39,980
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 $164,270 and $9,473, respectively, of which $9,198 was
paid to an affiliated broker/dealer for Class B. During the year ended August
31, 1997, OFDI received contingent deferred sales charges of $52,498 and $3,292,
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.
================================================================================
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a
portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average annual
net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the year ended August 31, 1997, OFDI paid $2,345 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted 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
and Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. OFDI also receives
a service fee of 0.25% per year as 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 year ended August 31, 1997, OFDI retained $174,549 and $23,136,
respectively, as compensation for Class B and Class C sales commissions and
service fee advances, as well as financing costs. If either Plan is terminated
by the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to OFDI for distributing shares before the Plan was
terminated. At August 31, 1997, OFDI had incurred unreimbursed expenses of
$544,471 for Class B and $44,775 for Class C.
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. ILLIQUID AND RESTRICTED SECURITIES
At August 31, 1997, investments in securities included issues that are illiquid
or restricted. Restricted 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 be considered
illiquid if it lacks a readily-available market or 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
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at August 31, 1997 was $1,941,562, which represents
2.31% of the Fund's net assets. Information concerning restricted securities is
as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT AUGUST 31, 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Autonomous Technologies Corp. 6/12/97 $ 3.00 $ 2.85
- -------------------------------------------------------------------------------------------------------------------------
National R.V. Holdings, Inc. 11/26/96 13.25 17.81
- -------------------------------------------------------------------------------------------------------------------------
Silver Diner, Inc. 7/10/96 5.50 2.49
</TABLE>
<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
A-1
<PAGE>
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-2
<PAGE>
INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
One Wall Street
New York, New York 10015
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
LEGAL COUNSEL
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
PX0885
