OPPENHEIMER MIDCAP FUND
Supplement dated February 11, 2003 to the
Statement of Additional Information
dated December 23, 2002
The Statement of Additional Information is changed as follows:
1. The fourth paragraph on page 11, titled "Futures," is replaced with the
following:
The Fund can buy and sell futures contracts that relate to (1) stock
indices (these are referred to as "stock index futures"), (2) an
individual stock ("single stock futures"), (3) foreign currencies
(these are referred to as "forward contracts"), and (4) commodities
(these are referred to as "commodity futures").
2. In the section titled "Futures" on page 11, the following is added as
the third paragraph:
A single stock future obligates the seller to deliver (and the
purchaser to take) cash or a specified equity security to settle the
futures transaction. Either party could also enter into an
offsetting contract to close out the position. Single stock futures
trade on a very limited number of exchanges, with contracts
typically not fungible among the exchanges.
February 11, 2003 PX0745.016
Oppenheimer
MidCap Fund
Prospectus dated December 23, 2002
Oppenheimer MidCap Fund is a mutual
fund that seeks capital appreciation
to make your investment grow. It
emphasizes investments in common
stocks of growth companies having a
market capitalization between $2
billion and $11.5 billion.
This Prospectus contains
important information about the
Fund's objective, its investment
policies, strategies and risks. It
also contains important information
about how to buy and sell shares of
the Fund and other account
features. Please read this
Prospectus carefully before you
As with all mutual funds, the invest and keep it for future
Securities and Exchange Commission reference about your account.
has not approved or disapproved the
Fund's securities nor has it
determined that this Prospectus is
accurate or complete. It is a
criminal offense to represent
otherwise.
1234
Contents
ABOUT THE FUND
- ------------------------------------------------------------------------------
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
- ------------------------------------------------------------------------------
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
ABOUT THE FUND
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in equity
securities, such as common and preferred stocks, and securities convertible
into common stock. It invests primarily in equity securities of U.S.
companies, but can also buy foreign stocks. Under normal market conditions,
the Fund invests at least 80% of its net assets (plus borrowings for
investment purposes) in equity securities of growth companies that have a
market capitalization of between $2 billion and $11.5 billion (referred to as
"mid-cap"stocks). The Fund may invest its assets in a variety of industry
categories, although it may from time to time emphasize investments in one or
more industries. For example, the Fund has, at certain times, invested a
significant amount of its assets in technology companies. A technology
company is defined as a company using, producing and/or developing technology
products. The types of companies the Fund's investment advisor,
OppenheimerFunds, Inc. (the "Manager") considers to be technology companies
can be expected to change over time as developments in technology occur.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager looks for
high-growth companies using a "bottom-up" stock selection process. The
"bottom-up" approach focuses on fundamental analysis of individual issuers
before considering overall economic, market or industry trends. The stock
selection process includes analysis of other business and economic factors
that might contribute to the company's stock appreciation. The portfolio
manager also looks for companies with revenues growing at above-average rates
that might support and sustain above-average earnings, and companies whose
revenue growth is primarily driven by strength in unit volume sales. While
this process and the inter-relationship of the factors used may change over
time, and its implementation may vary in particular cases, the portfolio
manager currently searches primarily for stocks of companies having the
following characteristics:
o Market capitalization between $2 billion and $11.5 billion;
o What the portfolio manager believes to be a high rate of sustainable
earnings growth;
o Revenue growth the portfolio manager expects to be at a rate greater
than 10% annually;
o Established companies that are well-positioned to take advantage of
product or technology advances in their industry or related growth
sector.
If the portfolio manager discerns a slowdown in the company's internal
revenue growth or earnings growth or a negative movement in the company's
fundamental economic condition, he will consider selling that stock if there
are other investment alternatives that offer what he believes to be better
appreciation possibilities.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking capital growth in their investment over the long term. Those
investors should be willing to assume the greater risks of short-term share
price fluctuations that are typical for an aggressive growth fund focusing on
mid-cap stock investments. The Fund does not seek current income and the
income from its investments will likely be small. It is not designed for
investors needing current income or preservation of capital. Because of its
focus on long-term growth, the Fund may be appropriate for some portion of a
retirement plan investment for investors with a high risk tolerance. However,
the Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in stocks
are subject to changes in their value from a number of factors described
below. There is also the risk that poor security selection by the Manager
will cause the Fund to underperform other funds having similar objectives.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund invests
primarily in common stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets and the special economic and other
factors that might primarily affect the prices of mid-cap stocks in the
market. Market risk will affect the Fund's net asset value per share, which
will fluctuate as the values of the Fund's portfolio securities change. A
variety of factors can affect the price of a particular stock and the prices
of individual stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently from each
other.
Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer
or its industry.
Industry and Sector Focus. At times the Fund may increase the relative
emphasis of its investments in a particular industry or sector. The
prices of stocks of issuers in a particular industry or sector may go
up and down in response to changes in economic conditions, government
regulations, availability of basic resources or supplies, or other
events that affect that industry or sector more than others. To the
extent that the Fund increases the relative emphasis of its investments
in a particular industry or sector, its share values may fluctuate in
response to events affecting that industry or sector.
Risks of Growth Stocks. Stocks of growth companies, particularly newer
companies, may offer opportunities for greater long-term capital
appreciation but may be more volatile than stocks of larger, more
established companies. They have greater risks if the company's
earnings growth or stock price fails to increase as expected.
Risks of Technology Stocks. To the extent the Fund is invested in stocks of
technology companies, the value of the Fund's shares is particularly
vulnerable to risks affecting technology companies and/or companies
having investments in technology, including market and economic events
that affect those technology companies. The technology sector has
historically exhibited great fluctuations in valuations. We take this
into account when evaluating the long-term merits of our investments.
The stock prices of technology companies during the past few years have
been highly volatile, largely due to the rapid pace of product change
and development within this sector. This phenomenon may also result in
future stock price volatility. In addition, technologies that are
dependent on consumer demand may be more sensitive to changes in
consumer spending patterns. Technology companies focusing on the
information and telecommunications sectors may also be subject to
international, federal and state regulations and may be adversely
affected by changes in those regulations.
SPECIAL RISKS OF MID-CAP STOCKS. While stocks of mid-cap companies may offer
greater capital appreciation potential than investments in larger
capitalization companies, they may also present greater risks. Mid-cap
stocks tend to be more sensitive to changes in an issuer's earnings
expectations. They tend to have lower trading volumes than large
capitalization securities. As a result, they may experience more abrupt and
erratic price movements.
Since mid-cap companies typically reinvest a high proportion of
earnings in their own businesses, they may lack the dividend yield that can
help cushion their total return in a declining market. Many mid-cap stocks
are traded in over-the-counter markets and therefore may be less liquid than
stocks of larger exchange-traded issuers. That means the Fund could have
greater difficulty selling a security at an acceptable price, especially in
periods of market volatility. That factor increases the potential for losses
to the Fund.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks. These risks mean that
you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective. The Fund
focuses its investments on mid-cap equity securities for long-term growth,
and in the short term, they can be volatile. The price of the Fund's shares
can go up and down substantially. The Fund generally does not use
income-oriented investments to help cushion the Fund's total return from
changes in stock prices, except for defensive purposes. In the
OppenheimerFunds spectrum, the Fund is an aggressive investment vehicle,
designed for investors willing to assume greater risks in the hope of
achieving greater gains. In the short-term the Fund may be less volatile
than small-cap and emerging markets stock funds, but it may be subject to
greater fluctuations in its share prices than funds that emphasize large
capitalization stocks, or funds that focus on both stocks and bonds.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in
the Fund, by showing the Fund's performance (for its Class A shares) from
year to year for the full calendar years since the Fund's inception and by
showing how the average annual total returns of the Fund's shares, both
before and after taxes, compare to those of a broad-based market index.
The after-tax returns are shown for Class A shares only and are
calculated using the historical highest individual federal marginal income
tax rates in effect during the periods shown, and do not reflect the impact
of state or local taxes. The after-tax returns for the other classes of
shares will vary. In certain cases, the figure representing "Return After
Taxes on Distributions and Sale of Fund Shares" may be higher than the other
return figures for the same period. A higher after-tax return results when a
capital loss occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax returns are calculated
based on certain assumptions mandated by regulation and your actual after-tax
returns may differ from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not relevant to
investors who hold their fund shares through tax-deferred arrangements such
as 401(k) plans or IRAs or to institutional investors not subject to tax. The
Fund's past investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Sales charges and taxes are not included in the calculations of return in
this bar chart, and if those charges and taxes were included, the returns may
be less than those shown.
For the period from 1/1/02 through 9/30/02, the cumulative return (not
annualized) before taxes for Class A shares was -29.32%.
During the period shown in the bar chart, the highest return (not annualized)
before taxes for a calendar quarter was 43.43% (4Qtr `99) and the lowest
return (not annualized) before taxes for a calendar quarter was -32.06% (4Qtr
`00).
- ------------------------------------------------------------------
Average Annual Total Returns
- ------------------------------ 5 Years
for the periods ended (or life of
December 31, 2001 1 Year class, if less)
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Class A Shares (inception
12/1/97) -37.92% 9.55%
Return Before Taxes -37.92% 9.54%
Return After Taxes on
Distributions -23.09% 7.83%
Return After Taxes on
Distributions and Sale of
Fund Shares
- ------------------------------------------------------------------
S&P MidCap 400 Index
(reflects no deduction for
fees, expenses or taxes) -0.62% 13.18%1
- ------------------------------------------------------------------
Class B Shares (inception -37.86% 10.00%
12/1/97)
- ------------------------------------------------------------------
Class C Shares (inception -35.29% 10.35%
12/1/97)
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Class N Shares (inception N/A2 N/A2
3/1/01)
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Class Y Shares (inception -33.87% 11.68%
12/1/97)
- ------------------------------------------------------------------
1 From 11/30/97.
2 Because this is a new class of shares, return data for the period
specified is not available.
The Fund's average annual total returns include applicable sales charges: for
Class A, the current maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charge of 5% (1-year) and 3% (life of class); and
for Class C, the 1% contingent deferred sales charge for the 1-year period.
There is no sales charge for Class Y shares. The returns measure the
performance of a hypothetical account and assume that all dividends and
capital gains distributions have been reinvested in additional shares. The
performance of the Fund's Class A shares is compared to the S&P Midcap 400
Index, an unmanaged index of midcap equity securities. The index performance
includes reinvestment of income but does not reflect transaction costs. The
Fund's investments vary from those in the index.
Fees and Expenses of the Fund
The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. Shareholders pay
other transaction expenses directly, such as sales charges. The numbers below
are based on the Fund's expenses during its fiscal year ended October 31,
2002.
Shareholder Fees (charges paid directly from your investment):
- -------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases 5.75% None None None None
(as % of offering
price)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum Deferred
Sales
Charge (Load) (as % None1 5%2 1%3 1%4 None
of the
lower of the
original offering
price or redemption
proceeds)
- -------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to redemptions of
investments of $1 million or more ($500,000 for certain retirement plan
accounts) of Class A shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement plan's first
purchase of Class N Shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
-------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Distribution and/or Service 0.23% 1.00% 1.00% 0.50% N/A
(12b-1)Fees
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Other Expenses 0.76% 0.79% 0.78% 0.68% 0.14%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Annual Operating Expenses 1.68% 2.48% 2.47% 1.87% 0.83%
-------------------------------------------------------------------------------
The management fee rate was reduced, effective March 1, 2002, as described
below in "How the Fund is Managed - The Manager - The Manager's Fee."
Expenses may vary in future years. "Other Expenses" include transfer agent
fees, custodial expenses, and accounting and legal expenses the Fund pays.
The "Other Expenses" in the table are based on, among other things, the
fees the Fund would have paid if the transfer agent had not waived a
portion of its fee under a voluntary undertaking to the Fund to limit these
fees to 0.25% of average daily net assets per fiscal year for Class Y
shares and 0.35% of average daily net assets per fiscal year for all other
classes. That undertaking may be amended or withdrawn at any time. After
the waiver, the actual "Other Expenses" and "Total Annual Operating
Expenses" as percentages of average daily net assets were 0.55% and 1.47%
for Class A shares, 0.58% and 2.27% for Class B shares, 0.57% and 2.26% for
Class C shares, 0.47% and 1.66% for Class N shares, and 0.14% and 0.83%,
respectively for Class Y shares. Effective November 1, 2002, the limit on
transfer agent fees for Class Y shares increased to 0.35% of average daily
net assets per fiscal year. Had that limit been in effect during the
Fund's prior fiscal year, the transfer agent fees would not have exceeded
the expense limitation described above.
EXAMPLES. The following examples are intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a class of shares of the Fund
for the time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that
the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these
assumptions your expenses would be as follows:
------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares $736 $1,074 $1,435 $2,448
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares $751 $1,073 $1,521 $2,4381
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares $350 $770 $1,316 $2,806
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class N Shares $290 $588 $1,011 $2,190
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class Y Shares $85 $265 $460 $1,025
------------------------------------------------------------------------------
------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares $736 $1,074 $1,435 $2,448
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares $251 $773 $1,321 $2,4381
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares $250 $770 $1,316 $2,806
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class N Shares $190 $588 $1,011 $2,190
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class Y Shares $85 $265 $460 $1,025
------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A
and the applicable Class B, Class C or Class N contingent deferred sales
charges. In the second example, the Class A expenses include the sales
charge, but Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There is no sales charge on Class Y
shares.
1. Class B expenses for years 7 through 10 are based on Class A expenses,
since Class B shares automatically convert to Class A shares 72 months
after purchase.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's
portfolio among different investments will vary over time based upon the
Manager's evaluation of economic and market trends. The Fund's portfolio
might not always include all of the different types of investments described
in this prospectus. The Statement of Additional Information contains more
detailed information about the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques.
The Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial percentage of the stock of
any one company and by not investing too great a percentage of the Fund's
assets in any one company. Also, the Fund does not concentrate 25% or more
of its investments in companies in any one industry.
However, changes in the overall market prices of securities can occur
at any time. The share prices of the Fund will change daily based on changes
in market prices of securities and market conditions, and in response to
other economic events.
Mid-Cap Stock Investments. Mid-cap companies are those that have completed
their initial start-up cycle, and in many cases have established
markets and developed seasoned management teams. The portfolio manager
searches for stocks of mid-cap companies that have the financial
stability approximating that of larger companies and the high growth
potential associated with smaller companies. The portfolio manager
will not normally invest in stocks of companies in "turnaround"
situations until the company's operating characteristics have improved.
In general, growth companies tend to retain a large part of their
earnings for research, development or investment in capital assets.
Therefore, they do not tend to emphasize paying dividends, and may not
pay any dividends for some time. They are selected for the Fund's
portfolio because the Manager believes the price of the stock will
increase over the long term.
The Fund's investments are not limited only to mid-cap issuers, and
under normal market conditions the Fund can invest up to 20% of its
net assets (plus borrowings for investment purposes) in stocks of
companies in other market capitalizations, if the Manager believes they
offer opportunities for growth.
The Fund measures the market capitalization of an issuer at the time of
investment to determine if it fits within the Fund's mid-cap
definition. Because the relative sizes of companies change over time
as the stock market changes, the Fund's definition of what is a
"mid-cap" company may change over time as well. Also, as individual
companies grow, they may no longer fit within the Fund's definition of
a "mid-cap" issuer after the Fund buys their stock. While the Fund is
not required to sell stocks of companies whose market capitalizations
grow beyond the Fund's mid-cap definition, the Manager might sell some
of those holdings to try to lower the median capitalization of its
portfolio (measured on a dollar weighted basis). This could cause the
Fund to realize capital gains on its investments, which could increase
taxable distributions to shareholders. Of course, there is no
assurance that mid-cap stocks will grow in value.
Cyclical Opportunities. The Fund may also seek to take advantage of changes
in the business cycle by investing in companies that are sensitive to
those changes if the Manager believes they have growth potential. For
example, when the economy is expanding, companies in the consumer
cyclicals and technology sectors may benefit and offer long-term growth
opportunities. The Fund focuses on seeking growth over the long term,
but may seek to take tactical advantage of short-term market movements
or events affecting particular issuers or industries.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies are those that cannot be changed
without the approval of a majority of the Fund's outstanding voting shares.
The Fund's objective is a fundamental policy. Other Investment restrictions
that are fundamental policies are listed in the Statement of Additional
Information. An investment policy or technique is not fundamental unless this
Prospectus or the Statement of Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Manager might
not always use all of the different types of techniques and investments
described below. These techniques have certain risks, although some are
designed to help reduce overall investment or market risks.
Other Equity Securities. While the Fund emphasizes investments in common
stocks, it can also buy preferred stocks, warrants and securities
convertible into common stock. The Manager considers some convertible
securities to be "equity equivalents" because of the conversion feature
and in that case their rating has less impact on the investment
decision than in the case of other debt securities.
The Fund will not invest more than 5% of its net assets in convertible
securities that are rated below investment grade by a nationally
recognized rating organization such as Moody's Investors Service or
that are assigned a comparable rating by the Manager. "Investment
grade" securities are debt securities in the four highest ratings
categories of ratings organizations or unrated securities assigned a
comparable rating by the Manager. Lower-grade securities may be
subject to greater market fluctuations and risks of loss of income and
principal and have less liquidity than investments in investment-grade
securities. Debt securities are subject to credit risk (the risk that
the issuer will not make timely payments of interest and principal) and
interest rate risk (the risk that the value of the security will fall
if interest rates rise).
Investing in Small, Unseasoned Companies. The Fund can invest in small,
unseasoned companies. These are companies that have been in operation
less than three years, including the operations of any predecessors.
These securities may have limited liquidity, which means that the Fund
might not be able to sell them quickly at an acceptable price. Their
prices may be very volatile, especially in the short term.
Foreign Investing. The Fund can buy securities in any country, including
developed countries and emerging markets. The Fund has no limits on
the amount of its assets that can be invested in foreign securities,
but has adopted an operating policy limiting its investments in foreign
securities to 10% of its total assets. It does not expect to invest
substantial amounts of its assets in foreign stocks.
Special Risks of Foreign Investing. While foreign securities may 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. Securities in underdeveloped
countries may be more difficult to sell and their prices may be more
volatile. These risks could cause the prices of foreign stocks to fall
and could therefore decrease the Fund's share prices.
Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. Restricted
securities may have terms that limit their resale to other investors or
to any required registration under applicable securities laws before
they may be sold publicly. The Fund will not invest more than 15% of
its net assets in illiquid or restricted securities. That percentage
limitation is not a fundamental policy. Certain restricted securities
that are eligible for resale to qualified institutional purchasers may
not be subject to that limit. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.
Derivative Investments. The Fund can invest in a number of different kinds of
"derivative" investments. In general terms, a derivative investment is
an investment contract whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index. In the broadest
sense, options, futures contracts, and other hedging instruments the
Fund might use may be considered "derivative" investments. In addition
to using derivatives for hedging, the Fund might use other derivative
investments because they offer the potential for increased value. The
Fund currently does not use derivatives to a significant degree and is
not required to use them in seeking its objective.
Derivatives have special risks. If the issuer of the derivative
investment does not pay the amount due, the Fund can lose money on the
investment. The underlying security or investment on which the
derivative is based, and the derivative itself, may not perform the way
the Manager expected it to perform. Interest rate and stock market
changes in the U.S. and abroad may also influence the performance of
derivatives. As a result of these risks the Fund could realize less
principal or income from the investment than expected or its hedge
might be unsuccessful. If that happens, the Fund's share prices could
fall. Certain derivative investments held by the Fund may be
illiquid.
o Hedging. The Fund can buy and sell certain kinds of futures contracts,
put and call options and forward contracts. These are all referred to
as "hedging instruments." The Fund does not currently use hedging
extensively and is not required to do so to seek its objective. It does
not use hedging instruments for speculative purposes. It has limits on
the extent of its use of hedging and the types of hedging instruments
that it can use.
Some of these strategies could be used to hedge the Fund's portfolio
against price fluctuations. Other hedging strategies, such as buying
futures and call options, could increase the Fund's exposure to the
securities market. Forward contracts can be used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency options
can 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.
There are also special risks in particular hedging strategies. Options
trading involves the payment of premiums and has special tax effects on
the Fund. If the Manager used a hedging instrument at the wrong time
or judged market conditions incorrectly, the hedge might fail and the
strategy could reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions
were not correlated with its other investments or if it could not close
out a position because of an illiquid market.
Portfolio Turnover. The Fund can engage in active and frequent short-term
trading to try to achieve its objective. It might have a portfolio
turnover rate in excess of 100% annually. Portfolio turnover increases
brokerage costs the Fund pays (and reduces performance). If the Fund
realizes capital gains when it sells its portfolio investments,
generally it must pay out those gains to shareholders, increasing their
taxable distributions. The Financial Highlights table at the end of
this prospectus shows the Fund's portfolio turnover rates during past
fiscal years.
Temporary Defensive and Interim Investments. In times of adverse or unstable
market, economic or political conditions, the Fund can invest up to
100% of its assets in temporary defensive investments that are
inconsistent with the Fund's principal investment strategies. Generally
they would be cash equivalents (such as commercial paper), money market
instruments, short-term debt securities, U.S. government securities, or
repurchase agreements. They could include other investment grade debt
securities. The Fund might also hold these types of securities pending
the investment of proceeds from the sale of Fund shares or portfolio
securities or to meet anticipated redemptions of Fund shares. To the
extent the Fund invests defensively in these securities, it might not
achieve its investment objective of capital appreciation.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities. The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.
The Manager has been an investment advisor since January 1960. The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of September 30, 2002, including other Oppenheimer funds
with more than 7 million shareholder accounts. The Manager is located at 498
Seventh Avenue, New York, New York 10018.
Portfolio Manager. The portfolio manager of the Fund is Bruce Bartlett who
is principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Bartlett has been the Fund's portfolio manager since
April 1, 1998, and is a Senior Vice President of the Manager since
January 1999. He is also an officer and portfolio manager of other
Oppenheimer funds. Mr. Bartlett joined the Manager as a portfolio
manager for other funds in 1995.
Advisory Fees. Under the investment advisory agreement, effective March 1,
2002, the Fund pays the Manager an advisory fee at an annual rate that
declines on additional assets as the Fund grows: 0.75% of the first
$200 million of average annual net assets of the Fund; 0.72% of the
next $200 million; 0.69% of the next $200 million; 0.66% of the next
$200 million; 0.60% of the next $700 million; 0.58% of the next $1
billion and 0.56% of average annual net assets in excess of $2.5
billion. Prior to March 1, 2002, the annual advisory fee rate was:
0.75% of the first $200 million of average annual net assets of the
Fund; 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 the fiscal
year ended October 31, 2002 was 0.69% of average annual net assets for
each class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its sole discretion,
may reject any purchase order for the Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer,
broker or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to
"OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the application, the
Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment with a financial advisor
before you make a purchase to be sure that the Fund is appropriate for
you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor
may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department
at 1.800.225.5677 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
you pay for shares by electronic funds transfers from your bank
account. Shares are purchased for your account by a transfer of money
from your bank account through the Automated Clearing House (ACH)
system. You can provide those instructions automatically, under an
Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.
o Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund automatically each month from your account at a bank or other
financial institution under an Asset Builder Plan with AccountLink.
Details are in the Asset Builder Application and the Statement of
Additional Information.
WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
o If you establish one of the many types of retirement plan accounts that
OppenheimerFunds offers, more fully described below under "Special
Investor Services," you can start your account with as little as $500.
o By using an Asset Builder Plan or Automatic Exchange Plan (details are
in the Statement of Additional Information), or government allotment
plan, you can make subsequent investments (after making the initial
investment of $500) for as little as $50. For any type of account
established under one of these plans prior to November 1, 2002, the
minimum additional investment will remain $25.
o The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or reinvesting distributions from
unit investment trusts that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which
is the net asset value per share plus any initial sales charge that applies.
The offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the
Distributor receives the purchase order at its offices in Colorado, or after
any agent appointed by the Distributor receives the order.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a
"regular business day"). The Exchange normally closes at 4:00 P.M.,
Eastern time, but may close earlier on some days. All references to
time in this Prospectus mean "Eastern time."
The net asset value per share is determined by dividing the value of
the Fund's net assets attributable to a class by the number of shares
of that class that are outstanding. To determine net asset value, the
Fund's Board of Trustees has established procedures to value the Fund's
securities, in general, based on market value. The Board has adopted
special procedures for valuing illiquid and restricted securities and
obligations for which market values cannot be readily obtained. Because
some foreign securities trade in markets and on exchanges that operate
on weekends and U.S. holidays, the values of some of the Fund's foreign
investments may change on days when investors cannot buy or redeem Fund
shares.
If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are
priced that day, an event occurs that the Manager deems likely to cause
a material change in the value of such security, the Fund's Board of
Trustees has authorized the Manager, subject to the Board's review, to
ascertain a fair value for such security. A security's valuation may
differ depending on the method used for determining value.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your
order by the time The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is
determined after your order is received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and
transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally
5:00 P.M.) to receive that day's offering price, unless your dealer has
made alternative arrangements with the Distributor. Otherwise, the
order will receive the next offering price that is determined.
- ------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors five
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject
to different expenses and will likely have different share prices. When you
buy shares, be sure to specify the class of shares. If you do not choose a
class, your investment will be made in Class A shares.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge
(on investments up to $1 million for regular accounts or lesser amounts
for certain retirement plans). The amount of that sales charge will
vary depending on the amount you invest. The sales charge rates are
listed in "How Can You Buy Class A Shares?" below.
- ------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the
time of purchase, but you will pay an annual asset-based sales charge.
If you sell your shares within 6 years of buying them, you will
normally pay a contingent deferred sales charge. That contingent
deferred sales charge varies depending on how long you own your shares,
as described in "How Can You Buy Class B Shares?" below.
- ------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the
time of purchase, but you will pay an annual asset-based sales charge.
If you sell your shares within 12 months of buying them, you will
normally pay a contingent deferred sales charge of 1.0%, as described
in "How Can You Buy Class C Shares?" below.
- ------------------------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only through certain
retirement plans), you pay no sales charge at the time of purchase, but
you will pay an annual asset-based sales charge. If you sell your
shares within 18 months of the retirement plan's first purchase of
Class N shares, you may pay a contingent deferred sales charge of 1.0%,
as described in "How Can You Buy Class N Shares?" below.
Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
best suited to your needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much
you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your
investment will vary your investment results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are
different. The discussion below assumes that you will purchase only one class
of shares and not a combination of shares of different classes. Of course,
these examples are based on approximations of the effects of current sales
charges and expenses projected over time, and do not detail all of the
considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will
also depend on how much you plan to invest. For example, the reduced
sales charges available for larger purchases of Class A shares may,
over time, offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-based
expenses on shares of Class B, Class C or Class N. For retirement plans
that qualify to purchase Class N shares, Class N shares will generally
be more advantageous than Class B and Class C shares.
o Investing for the Shorter Term. While the Fund is meant to be a
long-term investment, if you have a relatively short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A, or Class C
shares rather than Class B shares. That is because of the effect of the
Class B contingent deferred sales charge if you redeem within six
years, as well as the effect of the Class B asset-based sales charge on
the investment return for that class in the short-term. Class C shares
might be the appropriate choice (especially for investments of less
than $100,000), because there is no initial sales charge on Class C
shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C
shares might not be as advantageous as Class A shares. That is because
the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced
front-end sales charge available for larger purchases of Class A
shares.
And for non-retirement plan 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 less than $100,000
for the longer-term, for example for retirement, and do not expect to
need access to your money for seven years or more, Class B shares may
be appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B, Class C and Class N
shareholders. Other features may not be advisable (because of the
effect of the contingent deferred sales charge) for Class B, Class C
and Class N shareholders. Therefore, you should carefully review how
you plan to use your investment account before deciding which class of
shares to buy.
Additionally, the dividends payable to Class B, Class C and Class N
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A or Class Y shares, such as the
Class B, Class C and Class N asset-based sales charge described below
and in the Statement of Additional Information. Share certificates are
only available for Class A shares. If you are considering using your
shares as collateral for a loan, that may be a factor to consider.
How Do Share Classes Affect Payments to Your Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class
C and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for concessions and
expenses it pays to dealers and financial institutions for selling
shares. The Distributor may pay additional compensation from its own
resources to securities dealers or financial institutions based upon
the value of shares of the Fund owned by the dealer or financial
institution for its own account or for its customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix B to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified
retirement plan arrangements or in other special types of transactions. To
receive a waiver or special sales charge rate, you must advise the
Distributor when purchasing shares or the Transfer Agent when redeeming
shares that a special condition applies.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales charge.
However, in some cases, described below, purchases are not subject to an
initial sales charge, and the offering price will be the net asset value. In
other cases, reduced sales charges may be available, as described below or in
the Statement of Additional Information. Out of the amount you invest, the
Fund receives the net asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated
to your dealer as a concession. The Distributor reserves the right to reallow
the entire concession to dealers. The current sales charge rates and
concessions paid to dealers and brokers are as follows:
------------------------------------------------------------------------------
Amount of Purchase Front-End Sales Front-End Sales Concession As
Charge As a
Charge As a Percentage of
Percentage of Net Percentage of
Offering Price Amount Invested Offering Price
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
------------------------------------------------------------------------------
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
Class A Contingent Deferred Sales Charge. There is no initial sales charge on
purchases of Class A shares of any one or more of the Oppenheimer funds
aggregating $1 million or more, or for certain purchases by particular
types of retirement plans that were permitted to purchase such shares
prior to March 1, 2001 ("grandfathered retirement accounts").
Retirement plans are not permitted to make initial purchases of Class A
shares subject to a contingent deferred sales charge. The Distributor
pays dealers of record concessions in an amount equal to 1.0% of
purchases of $1 million or more other than by grandfathered retirement
accounts. For grandfathered retirement accounts, the concession is
0.75% of the first $2.5 million of purchases plus 0.25% of purchases in
excess of $2.5 million. In either case, the concession will not be paid
on purchases of shares by exchange or that were previously subject to a
front-end sales charge and dealer concession.
If you redeem any of those shares within an 18-month "holding period"
measured from the beginning of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent
deferred sales charge") may be deducted from the redemption proceeds.
That sales charge will be equal to 1.0% of the lesser of:
o the aggregate net asset value of the redeemed shares at the time of
redemption (excluding shares purchased by reinvestment of dividends or
capital gain distributions) or
o the original net asset value of the redeemed shares.
The Class A contingent deferred sales charge will not exceed the
aggregate amount of the concessions the Distributor paid to your dealer
on all purchases of Class A shares of all Oppenheimer funds you made
that were subject to the Class A contingent deferred sales charge.
Purchases by Certain Retirement Plans. There is no initial sales charge on
purchases of Class A shares of any one or more Oppenheimer funds by
retirement plans that have $10 million or more in plan assets and that
have entered into a special agreement with the Distributor and by
retirement plans which are part of a retirement plan product or
platform offered by certain banks, broker-dealers, financial advisors,
insurance companies or recordkeepers which have entered into a special
agreement with the Distributor. The Distributor currently pays dealers
of record concessions in an amount equal to 0.25% of the purchase price
of Class A shares by those retirement plans from its own resources at
the time of sale, subject to certain exceptions as described in the
Statement of Additional Information. There is no contingent deferred
sales charge upon the redemption of such shares.
HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B shares are
redeemed within six years from the beginning of the calendar month of their
purchase, a contingent deferred sales charge will be deducted from the
redemption proceeds. The Class B contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
The 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 for the Class B contingent deferred sales
charge holding period:
- -------------------------------------------------------------------------------
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(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%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
More than 6 None
- -------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the contingent
deferred sales charge, all purchases are considered to have been made on the
first regular business day of the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert
to Class A shares 72 months after you purchase them. 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 any Class B shares that you hold convert, any other
Class B shares that were acquired by reinvesting dividends and
distributions on the converted shares will also convert to Class A
shares. For further information on the conversion feature and its tax
implications, see "Class B Conversion" in the Statement of Additional
Information.
How Can you Buy Class C Shares? Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C shares are
redeemed within a holding period of 12 months from the beginning of the
calendar month of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent
deferred sales charge is paid to compensate the Distributor for its expenses
of providing distribution-related services to the Fund in connection with the
sale of Class C shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to
retirement plans (including IRAs and 403(b) plans) that purchase $500,000 or
more of Class N shares of one or more Oppenheimer funds or to group
retirement plans (which do not include IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible participants. See
"Availability of Class N shares" in the Statement of Additional Information
for other circumstances where Class N shares are available for purchase.
A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if:
o The group retirement plan is terminated or Class N shares of all
Oppenheimer funds are terminated as an investment option of the plan
and Class N shares are redeemed within 18 months after the plan's first
purchase of Class N shares of any Oppenheimer fund, or
o With respect to an IRA or 403(b) plan, Class N shares are redeemed
within 18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.
Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes
of shares described elsewhere in this Prospectus do not apply to Class N
shares offered through a group retirement plan. Instructions for buying,
selling, exchanging or transferring Class N shares offered through a group
retirement plan must be submitted by the plan, not by plan participants for
whose benefit the shares are held.
Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per
share without a sales charge directly to institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit
plans. Individual investors cannot buy Class Y shares directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares
(other than the time those orders must be received by the Distributor or
Transfer Agent at their Colorado office) and the special account features
available to investors buying those other classes of shares do not apply to
Class Y shares. Instructions for buying, selling, exchanging or transferring
Class Y shares held by institutional investors must be submitted by the
institutional investor, not by its customers for whose benefit the shares are
held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its
costs incurred for services provided to accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate of up to
0.25% of the average annual net assets of Class A shares of the Fund.
The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that
hold Class A shares. With respect to Class A shares subject to a Class
A contingent deferred sales charge purchased by grandfathered
retirement accounts, the Distributor pays the 0.25% service fee to
dealers in advance for the first year after the shares are sold by the
dealer. During the first year the shares are sold, the Distributor
retains the service fee. After the shares have been held for a year,
the Distributor pays the service fee to dealers on a quarterly basis.
Distribution and Service Plans for Class B, Class C and Class N Shares. The
Fund has adopted Distribution and Service Plans for Class B, Class C
and Class N shares to pay the Distributor for its services and costs in
distributing Class B, Class C and Class N shares and servicing
accounts. Under the plans, the Fund pays the Distributor an annual
asset-based sales charge of 0.75% on Class B and Class C shares and
0.25% on Class N shares. The Distributor also receives a service fee of
0.25% per year under the Class B, Class C and Class N plans.
The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.0% and increase Class N expenses by 0.50% of the
net assets per year of the respective class. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these
fees will increase the cost of your investment and may cost you more
than other types of sales charges.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B, Class C or
Class N shares. The Distributor pays the 0.25% service fees to dealers
in advance for the first year after the shares are sold by the dealer.
After the shares have been held for a year, the Distributor pays the
service fees to dealers on a quarterly basis. The Distributor retains
the service fees for accounts for which it renders the required
personal services.
The Distributor currently pays a sales concession 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 sale of
Class B shares is therefore 4.00% of the purchase price. The
Distributor retains the Class B asset-based sales charge. See the
Statement of Additional Information for exceptions.
The Distributor currently pays a sales concession of 0.75% of the
purchase price of Class C shares to dealers from its own resources at
the time of sale. Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the time of sale of
Class C shares is therefore 1.0% of the purchase price. The Distributor
pays the asset-based sales charge as an ongoing concession to the
dealer on Class C shares that have been outstanding for a year or more.
See the Statement of Additional Information for exceptions.
The Distributor currently pays a sales concession of 0.75% of the
purchase price of Class N shares to dealers from its own resources at
the time of sale. Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the time of sale of
Class N shares is therefore 1.0% of the purchase price. The Distributor
retains the asset-based sales charge on Class N shares. See the
Statement of Additional Information for exceptions.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through
a service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends
and distributions directly to your bank account. Please call the
Transfer Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.225.5677. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer.
After your account is established, you can request AccountLink privileges by
sending signature-guaranteed instructions and proper documentation to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed
in the registration on your account as well as to your dealer representative
of record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1.800.225.5677. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these
purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling
the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares,"
below for details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier).
Please call 1.800.225.5677 for information about which transactions may be
handled this way. Transaction requests submitted by fax are subject to the
same rules and restrictions as written and telephone requests described in
this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in the account
- ------------------------
registration (and the dealer of record) may request certain account
transactions through a special section of that website. To perform account
transactions or obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want to have Internet
account transaction capability for your account, please call the Transfer
Agent at 1.800.225.5677. At times, the website may be inaccessible or its
transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis. Please call the Transfer Agent
or consult the Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to six months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class
B shares on which you paid a contingent deferred sales charge when you
redeemed them. This privilege does not apply to Class C, Class N or Class Y
shares. You must be sure to ask the Distributor for this privilege when you
send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that
individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund
lets you sell your shares by writing a letter, or by telephone. You can also
set up Automatic Withdrawal Plans to redeem shares on a regular basis. If you
have questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death of the
owner or from a retirement plan account, please call the Transfer Agent
first, at 1.800.225.5677, for assistance
Certain Requests Require a Signature Guarantee. To protect you and the Fund
from fraud, the following redemption requests must be in writing and
must include a signature guarantee (although there may be other
situations that also require a signature guarantee):
o You wish to redeem more than $100,000 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
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are being redeemed by someone (such as an Executor) other than
the owners.
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must
ask the plan trustee or administrator to request the sale of the Fund
shares in your plan account.
HOW DO you SELL SHARES BY MAIL? Write a letter of instruction 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 documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption
price calculated on a particular regular business day, your call must be
received by the Transfer Agent by the close of The New York Stock Exchange
that day, which is normally 4:00 P.M., but may be earlier on some days. You
may not redeem shares held in an OppenheimerFunds retirement plan account or
under a share certificate by telephone.
o To redeem shares through a service representative or automatically on
PhoneLink, call 1.800.225.5677.
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
telephone in any seven-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
CAN YOU SELL 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. If your
shares are held in the name of your dealer, you must redeem them through your
dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding
period for the class of shares, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are eligible for a waiver
of that sales charge based on the categories listed in Appendix B to the
Statement of Additional Information and you advise the Transfer Agent of your
eligibility for the waiver when you place your redemption request.)
A 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 net asset value. A contingent deferred sales charge is not imposed
on:
o the amount of your account value represented by an increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix B to
the Statement of Additional Information.
To determine whether a 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 the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange
shares of the Fund for shares of other Oppenheimer funds. However, if you
exchange them within the applicable contingent deferred sales charge holding
period, the holding period will carry over to the fund whose shares you
acquire. Similarly, if you acquire shares of this Fund by exchanging shares
of another Oppenheimer fund that are still subject to a contingent deferred
sales charge holding period, that holding period will carry over to this Fund.
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.
Shares of the Fund can be purchased by exchange of shares of other
Oppenheimer funds on the same basis. 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 both funds must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least seven days before you can exchange them. After the account is
open seven days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose
shares you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for
shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund.
In some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you
own and a purchase of the shares of the other fund, which may result in a
capital gain or loss. Please refer to "How to Exchange Shares" in the
Statement of Additional Information for more details.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by calling
a service representative at 1.800.225.5677. That list can change from time to
time.
HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or
by telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at
the address on the back cover. Exchanges of shares held under
certificates cannot be processed unless the Transfer Agent receives the
certificates with the request.
Telephone Exchange Requests. Telephone exchange requests may be made either
by calling a service representative or by using PhoneLink for automated
exchanges by calling 1.800.225.5677. 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.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are 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 conforms to the
policies described above. It must be received by the close of The New
York Stock Exchange that day, which is normally 4:00 P.M. but may be
earlier on some days.
o The interests of the Fund's long-term shareholders and its ability to
manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." When large dollar amounts
are involved, the Fund may have difficulty implementing long-term
investment strategies, because it cannot predict how much cash it will
have to invest. Market timing also may force the Fund to sell portfolio
securities at disadvantageous times to raise the cash needed to buy a
market timer's Fund shares. These factors may hurt the Fund's
performance and its shareholders. When the Manager believes frequent
trading would have a disruptive effect on the Fund's ability to manage
its investments, the Manager and the Fund may reject purchase orders
and exchanges into the Fund by any person, group or account that the
Manager believes to be a market timer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so
by applicable law, but it may impose changes at any time for emergency
purposes.
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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
A $12 annual fee is assessed on any account valued at less than $500. The fee
is automatically deducted from accounts annually on or about the second
to last business day of September. See the Statement of Additional
Information, or visit the OppenheimerFunds website, to learn how you
can avoid this fee and for circumstances when this fee will not be
assessed.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is
in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may
be modified, suspended or terminated by the Fund at any time. The Fund
will provide you notice whenever it is required to do so by applicable
law. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer
representative of record for the account unless the Transfer Agent
receives cancellation instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the
Fund will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders
of the Fund if the dealer performs any transaction erroneously or
improperly.
The redemption price for shares will vary from day to day because the value
of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for
each class of shares. The redemption value of your shares may be more
or less than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check, or through AccountLink within seven days after the Transfer
Agent receives redemption instructions in proper form. However, under
unusual circumstances determined by the Securities and Exchange
Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
The Transfer Agent may delay processing any type of redemption payment as
described under "How to Sell Shares" for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by Federal Funds wire or certified
check, or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped. In some cases, involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
Shares may be "redeemed in kind" under unusual circumstances (such as a lack
of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with liquid securities from
the Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security
or Employer Identification Number when you sign your application, or if
you under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report
and annual notice of the Fund's privacy policy to shareholders having
the same last name and address on the Fund's records. The consolidation
of these mailings, called householding, benefits the Fund through
reduced mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.225.5677. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses, reports and
privacy notices will be sent to you commencing within 30 days after the
Transfer Agent receives your request to stop householding.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income on an annual basis and to pay them to
shareholders in December on a date selected by the Board of Trustees.
Dividends and distributions paid to Class A and Class Y shares will generally
be higher than dividends for Class B, Class C and Class N shares, which
normally have higher expenses than Class A and Class Y. The Fund has no fixed
dividend rate and cannot guarantee that it will pay any dividends or
distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term
or long-term capital gains in December of each year. The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year. There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends
and distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the
Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your
bank through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state
or local taxes. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Long-term capital gains are
taxable as long-term capital gains when distributed to shareholders. It does
not matter how long you have held your shares. Whether you reinvest your
distributions in additional shares or take them in cash, the tax treatment is
the same.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information
the Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." If you buy shares on or just before the
ex-dividend date, or just before the Fund declares a capital gains
distribution, you will pay the full price for the shares and then
receive a portion of the price back as a taxable dividend or capital
gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices
fluctuate, you may have a capital gain or loss when you sell or
exchange your shares. A capital gain or loss is the difference between
the price you paid for the shares and the price you received when you
sold them. Any capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax
situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance since inception. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). The
information for fiscal years 2002, 2001 and 2000 has been audited by KPMG
llp, the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request. Another accounting firm audited the
information for the fiscal years prior to 2000.
FINANCIAL HIGHLIGHTS Class A Year Ended October 31 2002 2001 2000 1999 1998 1 - --------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $14.42 $30.41 $19.88 $10.83 $10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.13) (.02) .04 (.04) (.02) Net realized and unrealized gain (loss) (2.86) (15.97) 10.49 9.11 .85 - ------------------------------------------------------------------------- Total from investment operations (2.99) (15.99) 10.53 9.07 .83 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions in excess of net realized gain -- - -- -- (.02) -- - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.43 $14.42 $30.41 $19.88 $10.83 ========================================================================= - --------------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 (20.74)% (52.58)% 52.97% 83.79% 8.30% - --------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $351,983 $532,338 $1,055,967 $167,879 $14,607 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $460,797 $718,814 $728,168 $60,644 $7,185 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income (loss) (1.06)% (0.09)% 0.28% (0.49)% (0.33)% Expenses 1.68% 1.33% 1.16% 1.40% 1.59% 4 Expenses, net of voluntary waiver of transfer agent fees and/or reduction to custodian expenses 1.47% 1.32% 1.16% 1.40% 1.59% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 51% 84% 23% 61% 117% 1. For the period from December 1, 1997 (inception of offering) to October 31, 1998. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), 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 for periods of less than one full year. 4. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements 19 | OPPENHEIMER MIDCAP FUND FINANCIAL HIGHLIGHTS Continued Class B Year Ended October 31 2002 2001 2000 1999 1998 1 - --------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $14.02 $29.79 $19.62 $10.77 $10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.30) (.15) (.07) (.07) (.05) Net realized and unrealized gain (loss) (2.70) (15.62) 10.24 8.94 .82 - ------------------------------------------------------------------------- Total from investment operations (3.00) (15.77) 10.17 8.87 .77 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions in excess of net realized gain -- - -- -- (.02) -- - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.02 $14.02 $29.79 $19.62 $10.77 ========================================================================= - --------------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 (21.40)% (52.94)% 51.83% 82.40% 7.70% - --------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $291,397 $438,962 $874,830 $118,611 $7,654 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $385,917 $592,096 $594,390 $40,455 $3,521 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment loss (1.85)% (0.84)% (0.48)% (1.25)% (1.06)% Expenses 2.48% 2.08% 1.91% 2.16% 2.35% 4 Expenses, net of voluntary waiver of transfer agent fees and/or reduction to custodian expenses 2.27% 2.07% 1.91% 2.16% 2.35% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 51% 84% 23% 61% 117% 1. For the period from December 1, 1997 (inception of offering) to October 31, 1998. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), 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 for periods of less than one full year. 4. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements 20 | OPPENHEIMER MIDCAP FUND Class C Year Ended October 31 2002 2001 2000 1999 1998 1 - --------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $14.02 $29.78 $19.60 $10.76 $10.00 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.30) (.15) (.07) (.06) (.05) Net realized and unrealized gain (loss) (2.70) (15.61) 10.25 8.92 .81 - ------------------------------------------------------------------------- Total from investment operations (3.00) (15.76) 10.18 8.86 .76 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions in excess of net realized gain -- - -- -- (.02) -- - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $11.02 $14.02 $29.78 $19.60 $10.76 ========================================================================= - --------------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 (21.40)% (52.92)% 51.94% 82.38% 7.60% - --------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $83,351 $128,230 $247,566 $26,482 $2,587 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $112,436 $170,129 $161,221 $9,066 $1,271 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment loss (1.84)% (0.85)% (0.48)% (1.26)% (1.07)% Expenses 2.47% 2.08% 1.91% 2.16% 2.35% 4 Expenses, net of voluntary waiver of transfer agent fees and/or reduction to custodian expenses 2.26% 2.07% 1.91% 2.16% 2.35% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 51% 84% 23% 61% 117% 1. For the period from December 1, 1997 (inception of offering) to October 31, 1998. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), 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 for periods of less than one full year. 4. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements 21 | OPPENHEIMER MIDCAP FUND FINANCIAL HIGHLIGHTS Continued Class N Year Ended October 31 2002 2001 1 - ------------------------------------------------------------------------------------------------ Per Share Operating Data Net asset value, beginning of period $ 14.40 $ 19.54 - ------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment loss (.14) (.05) Net realized and unrealized loss (2.88) (5.09) - ------------------------- Total from investment operations (3.02) (5.14) - ------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Distributions in excess of net realized gain - -- -- - ------------------------------------------------------------------------------------------------ Net asset value, end of period $11.38 $14.40 ========================= - ------------------------------------------------------------------------------------------------ Total Return, at Net Asset Value 2 (20.97)% (26.31)% - ------------------------------------------------------------------------------------------------ Ratios/Supplemental Data Net assets, end of period (in thousands) $8,846 $2,268 - ------------------------------------------------------------------------------------------------ Average net assets (in thousands) $6,576 $1,250 - ------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment loss (1.28)% (0.94)% Expenses 1.87% 1.73% Expenses, net of voluntary waiver of transfer agent fees and/or reduction to custodian expenses 1.66% 1.72% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 51% 84% 1. For the period from March 1, 2001 (inception of offering) to October 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), 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 for periods of less than one full year.
INFORMATION AND SERVICES
For More Information on Oppenheimer MidCap Fund
The following additional information about the Fund is available without
charge upon request:
STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or your account:
- ------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.CALL.OPP (225.5677)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or read or
down-load documents on the OppenheimerFunds
website: www.oppenheimerfunds.com
------------------------
- ------------------------------------------------------------------------------
Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090. Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
-----------
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by: [logo] OppenheimerFunds
Distributor, Inc.
The Fund's SEC File No. 811-08297
PR0745.001.1202
Printed on recycled paper
Appendix to Prospectus of
Oppenheimer MidCap Fund
Graphic Material included in the Prospectus of Oppenheimer MidCap Fund:
"Annual Total Returns (Class A) (% as of 12/31 each year)":
A bar chart will be included in the Prospectus of Oppenheimer MidCap
Fund (the "Fund") depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for its four most recent calendar
years, without deducting sales charges. Set forth below are the relevant data
points that will appear on the bar chart.
Calendar
Year Oppenheimer MidCap Fund
Ended Class A Shares
- ----- --------------
12/31/98 29.76%
12/31/99 94.87%
12/31/00 -10.84%
12/31/01 -34.13%
- ------------------------------------------------------------------------------
Oppenheimer MidCap Fund
- ------------------------------------------------------------------------------
6801 South Tucson Way, Centennial, Colorado 80112-3924
1.800.225.5677
Statement of Additional Information dated December 23, 2002
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December 23, 2002. It should be read
together with the Prospectus. You can obtain the Prospectus by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above, or by downloading it from the OppenheimerFunds Internet website
at www.oppenheimerfunds.com.
Contents
- ------------------------------------------------------------------------------
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 5
Investment Restrictions............................................ 21
How the Fund is Managed ............................................... 22
Organization and History........................................... 22
Trustees and Officers of the Fund.................................. 24
The Manager........................................................ 30
Brokerage Policies of the Fund......................................... 33
Distribution and Service Plans......................................... 35
Performance of the Fund................................................ 39
About Your Account
- ------------------------------------------------------------------------------
How To Buy Shares...................................................... 44
How To Sell Shares..................................................... 55
How To Exchange Shares................................................. 59
Dividends, Capital Gains and Taxes..................................... 63
Additional Information About the Fund.................................. 68
Financial Information About the Fund
- ------------------------------------------------------------------------------
Independent Auditor's Report........................................... 69
Financial Statements................................................... 70
Appendix A: Industry Classifications................................... A-1
Appendix B: Special Sales Charge Arrangements and Waivers.............. B-1
- ------------------------------------------------------------------------------
ABOUT THE FUND
- ------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's investment Manager,
OppenheimerFunds, Inc., (the "Manager") can select for the Fund. Additional
information is also provided about the strategies that the Fund may use to
try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and
the techniques and strategies that the Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking
its goal. It may use some of the special investment techniques and
strategies at some times or not at all.
|X| Cyclical Opportunities. The Fund might also seek to take advantage
of changes in the business cycle by investing in companies that are sensitive
to those changes if the Manager believes they have growth potential. For
example, when the economy is expanding, companies in the consumer durables
and technology sectors might benefit and offer long-term growth
opportunities. Other cyclical industries include insurance, for example. The
fund focuses on seeking growth over the long term, but could seek to take
tactical advantage of short-term market movements or events affecting
particular issuers or industries.
|X| Investments in Equity Securities. The Fund focuses its investments
in equity securities of mid-cap growth companies. Equity securities include
common stocks, preferred stocks, rights and warrants, and securities
convertible into common stock. The Fund's investments will primarily include
stocks of companies having a market capitalization between $2 billion and
$11.5 billion, generally measured at the time of the Fund's investment.
However, the Fund is not required to sell securities of an issuer it holds if
the issuer's capitalization exceeds $11.5 billion.
At times, in the Manager's view, the market may favor or disfavor
securities of issuers of a particular capitalization range. Therefore
although the Fund normally invests at least 80% of its net assets (plus
borrowings for investment purposes) of its assets in equity securities of
mid-cap issuers, the Fund may change the proportion of its equity investments
in securities of different capitalization ranges, based upon the Manager's
judgment of where the best market opportunities are to seek the Fund's
objective.
Growth companies might be providing new products or services that could
enable them to capture a dominant or important market position. They may have
a special area of expertise or the capability to take advantage of changes in
demographic factors in a more profitable way than larger, more established
companies.
Growth companies tend to retain a large part of their earnings for
research, development or investment in capital assets. Therefore, they do not
tend to emphasize paying dividends, and may not pay any dividends for some
time. They are selected for the Fund's portfolio because the Manager believes
the price of the stock will increase over the long term.
Current income is not a criterion used to select portfolio securities.
However, certain debt securities may be selected for the Fund's portfolio for
defensive purposes (including debt securities that the Manager believes may
offer some opportunities for capital appreciation when stocks are disfavored).
In general, securities of mid-cap issuers may be subject to greater
price volatility in general than securities of large-cap companies.
Therefore, to the degree that the Fund has investments in medium
capitalization companies at times of market volatility, the Fund's share
price may fluctuate more than funds holding large cap securities.
|_| Over-the-Counter Securities. Mid-cap growth companies that
are growth companies may offer greater opportunities for capital appreciation
than securities of large, more established companies. However, securities of
mid-cap companies also involve greater risks than securities of larger
companies. Securities of medium capitalization issuers may trade on
securities exchanges or in the over-the-counter market. The over-the-counter
markets, both in the U.S. and abroad, may have less liquidity than securities
exchanges. That lack of liquidity can affect the price the Fund is able to
obtain when it wants to sell a security, because if there are fewer buyers
and less demand for a particular security, the Fund might not be able to sell
it at an acceptable price or might have to reduce the price in order to
dispose of the security.
In the U.S., the principal over-the-counter market is the NASDAQ Stock
Market, Inc., which is regulated by the National Association of Securities
Dealers, Inc. It consists of an electronic quotation system for certain
securities, and a security must have at least two market makers to be
included in NASDAQ. Other over-the-counter markets exist in the U.S., as
well as those abroad, wherever a dealer is willing to make a market in a
particular security.
|_| Convertible Securities. Convertible securities are debt
securities that are convertible into an issuer's common stock. Convertible
securities rank senior to common stock in a corporation's capital structure
and therefore are subject to less risk than common stock in case of the
issuer's bankruptcy or liquidation.
The value of a convertible security is a function of its
"investment value" and its "conversion value." If the investment value
exceeds the conversion value, the security will behave more like a debt
security, and the security's price will likely increase when interest rates
fall and decrease when interest rates rise. If the conversion value exceeds
the investment value, the security will behave more like an equity security:
it will likely sell at a premium over its conversion value, and its price
will tend to fluctuate directly with the price of the underlying security.
While convertible securities are a form of debt security, in many
cases their conversion feature (allowing conversion into equity securities)
causes them to be regarded more as "equity equivalents." As a result, the
rating assigned to the security has less impact on the Manager's investment
decision with respect to convertible securities than in the case of
non-convertible fixed-income securities. To determine whether convertible
securities should be regarded as "equity equivalents," the Manager examines
the following factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any
appreciation in the price of the issuer's common stock.
|_| Preferred Stock. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative. "Cumulative" dividend
provisions require all or a portion of prior unpaid dividends to be paid
before dividends can be paid on the issuer's common stock. Preferred stock
may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases.
If interest rates rise, the fixed dividend on preferred stocks
may be less attractive, causing the price of preferred stocks to decline.
Preferred stock may have mandatory sinking fund provisions, as well as
provisions allowing calls or redemptions prior to maturity, which can also
have a negative impact on prices when interest rates decline. Preferred stock
generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation. The
rights of preferred stock on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.
|_| Credit Risk. Convertible securities are subject to credit risk.
Credit risk relates to the ability of the issuer of a debt to make interest
or principal payments on the security as they become due. If the issuer
fails to pay interest, the Fund's income may be reduced and if the issuer
fails to repay principal, the value of that bond and of the Fund's shares may
be reduced. The Manager may rely to some extent on credit ratings by
nationally-recognized ratings agencies in evaluating the credit risk of
securities selected for the Fund's portfolio. It may also use its own
research and analysis. Many factors affect an issuer's ability to make
timely payments, and the credit risks of a particular security may change
over time. The Fund may invest in higher-yielding lower-grade debt
securities (that is, securities below investment grade), which have special
risks. Those are securities rated below the four highest rating categories
of Standard & Poor's Rating Service (Standard & Poor's") or Moody's Investors
Service, Inc., ("Moody's") or equivalent ratings of other rating agencies or
ratings assigned to a security by the Manager.
|_| Special Risks of Lower-Grade Securities. "Lower-grade" debt
securities are those rated below "investment grade" which means they have a
rating lower than "Baa" by Moody's or lower than "BBB" by Standard & Poor's,
or similar ratings by other rating organizations. If they are unrated, and
are determined by the Manager to be of comparable quality to debt securities
rated below investment grade, they are included in limitation on the
percentage of the Fund's assets that can be invested in lower-grade
securities.
Among the special credit risks of lower-grade securities is the greater risk that
the issuer may default on its obligation to pay interest or to repay
principal than in the case of investment-grade securities. The issuer's low
creditworthiness may increase the potential for insolvency. An overall
decline in values in the high-yield bond market is also more likely during
a period of general economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high-yield bonds,
adversely affecting the values of outstanding bonds as well as the ability
of issuers to pay interest or repay principal. In the case of foreign
high-yield bonds, these risks are in addition to the special risk of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information. To the extent they can be converted into stock,
convertible securities may be less subject to some of these risks than
non-convertible high-yield bonds, since stock may be more liquid and less
affected by some of these risk factors.
Whilesecurities rated "Baa" by Moody's or "BBB" by Standard and Poor's are
investment-grade and are not regarded as junk bonds, those securities may
be subject to special risks, and have some speculative characteristics.
|_| Interest Rate Risks. In addition to credit risks, convertible debt
securities are subject to changes in value when prevailing interest rates
change. When prevailing interest rates fall, the values of outstanding debt
securities generally rise, and the bonds may sell for more than their face
amount. When prevailing interest rates rise, the values of outstanding debt
securities generally decline, and the bonds may sell at a discount from their
face amount. The magnitude of these price changes is generally greater for bonds
with longer maturities. Therefore, when the average maturity of the Fund's debt
securities is longer, its share price may fluctuate more when interest rates
change.
|_| Rights and Warrants. The Fund can invest up to 5% of its net
assets in warrants or rights. That 5% limitation does not apply to warrants
and rights the Fund has acquired as part of units of securities or that are
attached to other securities that the Fund buys. Warrants basically are
options to purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to the prices
of the underlying securities. Rights are similar to warrants, but normally
have a short duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at
which the Fund traded its portfolio securities during its last fiscal
period. For example, if a fund sold all of its securities during the year,
its portfolio turnover rate would have been 100%. The Fund's portfolio
turnover rate will fluctuate from year to year. The Fund may have a portfolio
turnover rate of more than 100% annually.
Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which can reduce its overall performance. Additionally,
the realization of capital gains from selling portfolio securities may result
in distributions of taxable long-term capital gains to shareholders, since
the Fund will normally distribute all of its capital gains realized each
year, to avoid excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the
Fund from time to time can use the types of investment strategies and
investments described below. It is not required to use all of these
strategies at all times, and at times may not use them.
|X| Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and debt securities of foreign governments that are traded on
foreign securities exchanges or in foreign over-the-counter markets. The Fund
can purchase equity and debt securities (which may be denominated in U.S.
dollars or non-U.S. currencies) issued by foreign corporations, or that are
issued or guaranteed by certain supranational entities (described below), or
foreign governments or their agencies or instrumentalities. These include
securities issued by U.S. corporations denominated in non-U.S. currencies.
In normal market conditions the Fund does not expect to hold significant
amounts of foreign debt securities.
Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations. That is
because they are not subject to some of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth
potential, or in foreign countries with economic policies or business cycles
different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities.
|_| Risks of Foreign Investing. Investments in foreign
securities may offer special opportunities for investing but also present
special additional risks and considerations not typically associated with
investments in domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency
blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse
diplomatic developments; and
o 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.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in
Europe, Canada, Australia, New Zealand and Japan. There may be even less
liquidity in their securities markets, and settlements of purchases and sales
of securities may be subject to additional delays. They are subject to
greater risks of limitations on the repatriation of income and profits
because of currency restrictions imposed by local governments. Those
countries may also be subject to the risk of greater political and economic
instability, which can greatly affect the volatility of prices of securities
in those countries.
|X| Investing in Small, Unseasoned Companies. The Fund can invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three (3) years, including the operations of
any predecessors. Securities of these companies may be subject to volatility
in their prices. They may have a limited trading market, which may adversely
affect the Fund's ability to dispose of them and can reduce the price the
Fund might be able to obtain for them. Other investors that own a security
issued by a small, unseasoned issuer for which there is limited liquidity
might trade the security when the Fund is attempting to dispose of its
holdings of that security. In that case the Fund might receive a lower price
for its holdings than might otherwise be obtained. These are more
speculative securities and can increase the Fund's overall portfolio risks.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities transactions, or for temporary defensive purposes, as described
below.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an
agreed-upon future date. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. Approved vendors include
U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that
have been designated as primary dealers in government securities. They must
meet credit requirements set by the Fund's Board of Trustees from time to
time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. The Fund will
not enter into a repurchase agreement that causes more than 15% of its net
assets to be subject to repurchase agreements having a maturity beyond seven
(7) days. There is no limit on the amount of the Fund's net assets that may
be subject to repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 (the "Investment Company Act"), are collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully collateralize
the repayment obligation. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may incur costs in disposing of the
collateral and may experience losses if there is any delay in its ability to
do so. The Manager will monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the
collateral's value.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Fund, along with other affiliated entities managed by the
Manager, may transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities that are
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each joint repurchase arrangement requires that
the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.
|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. To enable the
Fund to sell its holdings of a restricted security not registered under the
applicable securities laws, the Fund may have to cause those securities to be
registered. The expenses of registering restricted securities may be
negotiated by the Fund with the issuer at the time the Fund buys the
securities. When the Fund must arrange registration because the Fund wishes
to sell the security, a considerable period may elapse between the time the
decision is made to sell the security and the time the security is registered
so that the Fund could sell it. The Fund would bear the risks of any downward
price fluctuation during that period.
The Fund can also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions are
not fundamental policies and do not limit purchases of restricted securities
that are eligible for sale to qualified institutional purchasers under Rule
144A of the Securities Act of 1933, if those securities have been determined
to be liquid by the Manager under Board-approved guidelines. Those guidelines
take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there
is a lack of trading interest in a particular Rule 144A security, the Fund's
holdings of that security may be considered to be illiquid. Illiquid
securities include repurchase agreements maturing in more than seven days.
|X| Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of
Trustees. These loans are limited to not more than 25% of the value of the
Fund's total assets. The Fund currently does not intend to engage in loans
of securities, but if it does so, such loans will not likely exceed 5% of the
Fund's total assets.
There are some risks in connection with securities lending. The Fund
might experience a delay in receiving additional collateral to secure a loan,
or a delay in recovery of the loaned securities if the borrower defaults.
The Fund must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day
the loan collateral must be at least equal to the value of the loaned
securities. It must consist of cash, bank letters of credit, securities of
the U.S. government or its agencies or instrumentalities, or other cash
equivalents in which the Fund is permitted to invest. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. The terms of the
letter of credit and the issuing bank both must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of
(a) negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees in
connection with these loans. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five (5) days' notice or in time to vote on
any important matter.
|X| Borrowing for Leverage. The Fund has the ability to borrow for
leverage up to 10% of the value of its net assets from banks on an unsecured
basis to invest the borrowed funds in portfolio securities. This speculative
technique is known as "leverage." The Fund may borrow only from banks.
Currently, under the Investment Company Act, a mutual fund may borrow only
from banks and the maximum amount it may borrow is up to one-third of its
total assets (including the amount borrowed) less all liabilities and
indebtedness other than borrowing. If the value of the Fund's assets fails
to meet this 300% asset coverage requirement, the Fund will reduce its bank
debt within three days to meet the requirement. To do so, the Fund might have
to sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not
borrow for leverage. Additionally, the Fund's net asset value per share
might fluctuate more than that of funds that do not borrow. Currently, the
Fund does not contemplate using this technique, but if it does so, it will
not likely do so to a substantial degree.
|X| Interfund Borrowing Arrangements. Consistent with its fundamental
policies and pursuant to an exemptive order issued by the Securities
and Exchange Commission ("SEC"), the Fund may engage in borrowing
and lending activities with other funds in the OppenheimerFunds
complex. Borrowing money from affiliated funds may afford the Fund
the flexibility to use the most cost-effective alternative to
satisfy its borrowing requirements. Lending money to an affiliated
fund may allow the Fund to obtain a higher rate of return than it
could from interest rates on alternative short-term investments.
o Interfund Borrowing. The Fund will not borrow from affiliated funds
unless the terms of the borrowing arrangement are at least as favorable as
the terms the Fund could otherwise negotiate with a third party. To assure
that the Fund will not be disadvantaged by borrowing from an affiliated fund,
certain safeguards may be implemented. Examples of these safeguards include
the following:
o the Fund will not borrow money from affiliated funds unless the
interest rate is more favorable than available bank loan
rates;
o the Fund's borrowing from affiliated funds must be consistent with its
investment objective and investment policies;
o the loan rates will be the average of the overnight repurchase
agreement rate available through the OppenheimerFunds joint
repurchase agreement account and a pre-established formula
based on quotations from independent banks to approximate the
lowest interest rate at which bank loans would be available to
the Fund;
o if the Fund has outstanding borrowings from all sources greater than
10% of its total assets, then the Fund must secure each
additional outstanding interfund loan by segregating liquid
assets of the Fund as collateral;
o the Fund cannot borrow from an affiliated fund in excess of 125% of its
total redemptions for the preceding seven days;
o each interfund loan may be repaid on any day by the Fund; and
o the Trustees will be provided with a report of all interfund loans and
the Trustees will monitor all such borrowings to ensure that
the Fund's participation is appropriate.
There is a risk that a borrowing fund could have a loan called on one
day's notice. In that circumstance, the Fund might have to borrow from a
bank at a higher interest cost if money to lend were not available from
another Oppenheimer fund.
|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income for liquidity needs or for hedging purposes. Some
derivative investments the Fund can use are the hedging instruments described
below in this Statement of Additional Information. However, the Fund does not
use, and does not currently contemplate using, derivatives or hedging
instruments to a significant degree and is not obligated to use them in
seeking its objective.
Some of the derivative investments the Fund can use include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is exchanged for
common stock of the issuer or it is payable in an amount based on the price
of the issuer's common stock at the time of maturity. Both alternatives
present a risk that the amount payable at maturity will be less than the
principal amount of the debt because the price of the issuer's common stock
might not be as high as the Manager expected.
Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth
in the Investment Company Act that apply to those types of investments. For
example, the Fund can invest in Exchange-Traded Funds, which are typically
open-end funds or unit investment trusts, listed on a stock exchange. The
Fund might do so as a way of gaining exposure to the segments of the equity
or fixed-income markets represented by the Exchange-Traded Funds' portfolio,
at times when the Fund may not be able to buy those portfolio securities
directly.
Investing in another investment company may involve the payment of
substantial premiums above the value of such investment company's portfolio
securities and is subject to limitations under the Investment Company Act.
The Fund does not intend to invest in other investment companies unless the
Manager believes that the potential benefits of the investment justify the
payment of any premiums or sales charges. As a shareholder of an investment
company, the Fund would be subject to its ratable share of that investment
company's expenses, including its advisory and administration expenses. The
Fund does not anticipate investing a substantial amount of its net assets in
shares of other investment companies.
|X| Hedging. Although the Fund does not anticipate the extensive use
of hedging instruments, the Fund can use hedging instruments. It is not
required to do so in seeking its goal. To attempt to protect against declines
in the market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have appreciated,
or to facilitate selling securities for investment reasons, the Fund could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures. Covered calls can
also be used to seek income, but the Manager does not expect to
engage extensively in that practice.
The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In
that case the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of hedge
to attempt to protect against the possibility that its portfolio securities
would not be fully included in a rise in value of the market. To do so the
Fund could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The
Fund may employ new hedging instruments and strategies when they are
developed, if those investment methods are consistent with the Fund's
investment objective and are permissible under applicable regulations
governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate
to (1) stock indices (these are referred to as "stock index futures"), (2)
foreign currencies (these are referred to as "forward contracts"), and (3)
commodities (these are referred to as "commodity futures").
A broadly-based stock index is used as the basis for trading stock
index futures. In some cases stock indices may be based on stocks of issuers
in a particular industry or group of industries. A stock index assigns
relative values to the common stocks included in the index and its value
fluctuates in response to the changes in value of the underlying stocks. A
stock index cannot be purchased or sold directly. These contracts obligate
the seller to deliver, and the purchaser to take cash to settle the futures
obligation. There is no delivery of the underlying securities to settle the
obligation.
The Fund can invest a portion of its assets in commodity future contracts.
Commodity futures may be based upon commodities within five (5) main
commodity groups: (1) energy, which includes crude oil, natural gas,
gasoline and heating oil; (2) livestock, which includes cattle and hogs;
(3) agriculture, which includes wheat, corn, soybeans, cotton, coffee,
sugar and cocoa; (4) industrial metals, which includes aluminum, copper,
lead, nickel, tin and zinc; and (5) precious metals, which includes gold,
platinum and silver. The Fund may purchase and sell commodity futures
contracts, options on futures contracts and options and futures on
commodity indices with respect to these five main commodity groups and the
individual commodities within each group, as well as other types of
commodities.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required
to deposit an initial margin payment with the futures commission merchant
(the "futures broker"). Initial margin payments will be deposited with the
Fund's custodian bank in an account registered in the futures broker's name.
However, the futures broker can gain access to that account only under
specified conditions. As the future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by
the futures broker daily.
At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be
paid by or released to the Fund. Any loss or gain on the future is then
realized by the Fund for tax purposes. All futures transactions (except
forward contracts) are effected through a clearinghouse associated with the
exchange on which the contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain
kinds of put options ("puts") and call options ("calls"). The fund can buy
and sell exchange-traded and over-the-counter put and call options, including
options on indices, securities, currencies, commodities and futures.
|_| Writing Covered Call Options. The Fund can write (that is,
sell) covered calls. If the Fund sells a call option, it must be covered.
That means the Fund must own the security subject to the call while the call
is outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if
the call is exercised. Not more than 25% of the Fund's total assets may be
subject to calls the Fund writes.
When the Fund writes a call, it receives cash (a premium). In the case
of a call on a security, the Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call period
at a fixed exercise price regardless of market price changes during the call
period. The call period is usually not more than nine months. The exercise
price may differ from the market price of the underlying security. The Fund
has the risk of loss that the price of the underlying security may decline
during the call period. That risk may be offset to some extent by the
premium the Fund receives. If the value of the investment does not rise
above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium and the
investment.
When the Fund writes a call on an index, it receives cash (a premium). If the
buyer of the call exercises it, the Fund will pay an amount of cash equal
to the difference between the closing price of the call and the exercise
price, multiplied by a specified multiple that determines the total value
of the call for each point of difference. If the value of the underlying
investment does not rise above the call price it is likely that the call
will lapse without being exercised. In that case, the Fund would keep the
cash premium.
The Fund's custodian, or a securities depository acting for the
custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the option or when the
Fund enters into a closing transaction.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote is more or less than the price of the call the Fund purchases
to close out the transaction. The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the underlying security and
the premium it received when it wrote the call. Any such profits are
considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income. If the Fund cannot effect a closing purchase transaction
due to the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.
|_| Writing Uncovered Call Options on Futures Contracts. The Fund may also
write calls on a futures contract without owning the futures contract or
securities deliverable under the contract. To do so, at the time the call is
written, the Fund must cover the call by segregating an equivalent dollar
amount of liquid assets. The Fund will segregate additional liquid assets if
the value of the segregated assets drops below 100% of the current value of
the future. Because of this segregation requirement, in no circumstances
would the Fund's receipt of an exercise notice as to that future require the
Fund to deliver a futures contract. It would simply put the Fund in a short
futures position, which is permitted by the Fund's hedging policies.
|_| Writing Put Options. The Fund can sell put options. A put option on a
security gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying security at the exercise price during the option
period. The Fund will not write puts if, as a result, more than 50% of the
Fund's net assets would have to be segregated to cover put options.
If the Fund sells a put option, it must be covered by segregated liquid
assets. The premium the Fund receives from writing a put option represents a
profit, as long as the price of the underlying investment remains above the
exercise price of the put. However, the Fund also assumes the obligation
during the option period to buy the underlying investment from the buyer of
the put at the exercise price, even if the value of the investment falls
below the exercise price. If the Fund writes a put that expires unexercised,
the Fund realizes a gain in the amount of the premium less transaction
costs. If the put is exercised, the Fund must fulfill its obligation to
purchase the underlying investment at the exercise price. That price will
usually exceed the market value of the investment at that time. In that
case, the Fund may incur a loss if it sells the underlying investment. That
loss will be equal to the sum of the sale price of the underlying investment
and the premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing a put option on a security, to secure its obligation to
pay for the underlying security the Fund will identify liquid assets on its
books having a value equal to or greater than the exercise price of the
underlying security. The Fund therefore forgoes the opportunity of investing
the segregated assets or writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the exchange or broker-dealer through which
the put was sold. That notice will require the Fund to exchange currency
(for a put written on a currency) at the specified rate of exchange or to
take delivery of the underlying security and pay the exercise price. The
Fund has no control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time prior to
the termination of its obligation as the writer of the put. That obligation
terminates upon expiration of the put. It may also terminate if, before the
Fund receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund
has been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will permit the Fund to write another put option on the security or to sell
the security and use the proceeds from the sale for other investments. The
Fund will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the
premium received from writing the put option. Any profits from writing puts
are considered short-term capital gains for federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
|_| Purchasing Calls and Puts. The Fund can purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund buys a call (other
than in a closing purchase transaction), it pays a premium. The Fund then has
the right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. The Fund benefits only if it sells the call at a profit or if, during
the call period, the market price of the underlying investment is above the
sum of the call price plus the transaction costs and the premium paid for the
call and the Fund exercises the call. If the Fund does not exercise the call
or sell it (whether or not at a profit), the call will become worthless at
its expiration date. In that case the Fund will have paid the premium but
lost the right to purchase the underlying investment.
The Fund can buy puts whether or not it holds the underlying investment
in its portfolio. When the Fund purchases a put, it pays a premium and,
except as to puts on indices, has the right to sell the underlying investment
to a seller of a put on a corresponding investment during the put period at a
fixed exercise price.
Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling the
underlying investment at the exercise price to a seller of a corresponding
put. If the market price of the underlying investment is equal to or above
the exercise price and, as a result, the put is not exercised or resold, the
put will become worthless at its expiration date. In that case the Fund will
have paid the premium but lost the right to sell the underlying investment.
However, the Fund may sell the put prior to its expiration. That sale may or
may not be at a profit.
Buying a put on an investment the Fund does not own (such as an index
or future) permits the Fund to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to 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.
When the Fund purchases a call or put on an index or Future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally)
rather than on price movements in individual securities or futures contracts.
The Fund may buy a call or put only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the Fund's
total assets.
|_| Buying and Selling Options on Foreign Currencies. The Fund
can buy and sell calls and puts on foreign currencies. They include puts and
calls that trade on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized dealers in such
options. The Fund could use these calls and puts to try to protect against
declines in the dollar value of foreign securities and increases in the
dollar cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of those securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If the Manager anticipates a decline
in the dollar value of a foreign currency, the decline in the dollar value of
portfolio securities denominated in that currency might be partially offset
by writing calls or purchasing puts on that foreign currency. However, the
currency rates could fluctuate in a direction adverse to the Fund's position.
The Fund will then have incurred option premium payments and transaction
costs without a corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration from liquid
assets identified on the Fund's books upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns
or has the right to acquire and which is denominated in the currency
underlying the option. That decline might be one that occurs due to an
expected adverse change in the exchange rate. This is known as a
"cross-hedging" strategy. In those circumstances, the Fund covers the option
by identifying liquid assets on its books having a value equal to the
aggregate amount of the Fund's commitment under such option position.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management. If
the Manager uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund might
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause the
sale of underlying investments, increasing portfolio turnover. Although the
decision whether to exercise a put it holds is within the Fund's control,
holding a put might cause the Fund to sell the related investments for
reasons that would not exist in the absence of the put.
The Fund could pay a brokerage commission each time it buys a call or
put, sells a call, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to
the market value of the underlying investments. Consequently, put and call
options offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive to
changes in the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment
at the call price. It will not be able to realize any profit if the
investment has increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund might experience losses if it could not close out a position because of
an illiquid market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against
declines in the value of the Fund's portfolio securities. The risk is that
the prices of the futures or the applicable index will correlate imperfectly
with the behavior of the cash prices of the Fund's securities. For example,
it is possible that while the Fund has used hedging instruments in a short
hedge, the market may advance and the value of the securities held in the
Fund's portfolio might decline. If that occurred, the Fund would lose money
on the hedging instruments and also experience a decline in the value of its
portfolio securities. However, while this could occur for a very brief period
or to a very small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices upon which
the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price
of the portfolio securities being hedged and movements in the price of the
hedging instruments, the Fund might use hedging instruments in a greater
dollar amount than the dollar amount of portfolio securities being hedged. It
might do so if the historical volatility of the prices of the portfolio
securities being hedged is more than the historical volatility of the
applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit
and maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
market may cause temporary price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund
does so the market might decline. If the Fund then concludes not to invest
in securities because of concerns that the market might decline further or
for other reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the securities purchased.
|_| Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery
at a fixed price. The Fund uses them to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold,
or to protect against possible losses from changes in the relative values of
the U.S. dollar and a foreign currency. The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign currency to the
amount of its assets denominated in that currency or a closely-correlated
currency. The Fund may also use "cross-hedging" where the Fund hedges
against changes in currencies other than the currency in which a security it
holds is denominated.
Under a forward contract, one party agrees to purchase, and another
party agrees to sell, a specific currency at a future date. That date may be
any fixed number of days from the date of the contract agreed upon by the
parties. The transaction price is set at the time the contract is entered
into. These contracts are traded in the inter-bank market conducted directly
among currency traders (usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates. The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying securities
the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a
decline in the value of the hedged currency, at the same time they limit any
potential gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments. To do so, the Fund could enter into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars per unit of the
foreign currency. This is called a "transaction hedge." The transaction hedge
will protect the Fund against a loss from an adverse change in the currency
exchange rates during the period between the date on which the security is
purchased or sold or on which the payment is declared, and the date on which
the payments are made or received.
The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge." When the
Fund believes that foreign currency might suffer a substantial decline
against the U.S. dollar, it could enter into a forward contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in that foreign currency. When the
Fund believes that the U.S. dollar might suffer a substantial decline against
a foreign currency, it could enter into a forward contract to buy that
foreign currency for a fixed dollar amount. Alternatively, the Fund could
enter into a forward contract to sell a different foreign currency for a
fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of
the foreign currency to be sold pursuant to its forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated. That is referred to as a
"cross hedge."
The Fund will cover its short positions in these cases by identifying
liquid assets on its books having a value equal to the aggregate amount of
the Fund's commitment under forward contracts. The Fund will not enter into
forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge.
However, to avoid excess transactions and transaction costs, the Fund
may maintain a net exposure to forward contracts in excess of the value of
the Fund's portfolio securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid securities denominated
in any currency. The cover must be at least equal at all times to the amount
of that excess. As one alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged
by a forward sale contract at a price no higher than the forward contract
price. As another alternative, the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contact price.
The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold. In some cases the Manager might decide
to sell the security and deliver foreign currency to settle the original
purchase obligation. If the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver, the Fund might
have to purchase additional foreign currency on the "spot" (that is, cash)
market to settle the security trade. If the market value of the security
instead exceeds the amount of foreign currency the Fund is obligated to
deliver to settle the trade, the Fund might have to sell on the spot market
some of the foreign currency received upon the sale of the security. There
will be additional transaction costs on the spot market in those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and to pay additional transactions costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same currency on the
maturity date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting forward contract under either
circumstance. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and offsetting contract.
The costs to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no brokerage fees or commissions
are involved. Because these contracts are not traded on an exchange, the
Fund must evaluate the credit and performance risk of the counterparty under
each forward contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time to
time, and will incur costs in doing so. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit based on
the difference between the prices at which they buy and sell various
currencies. Thus, a dealer might offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange if the Fund
desires to resell that currency to the dealer.
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund
is exempted from registration with the CFTC as a "commodity pool operator" if
the Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The
Rule does not limit the percentage of the Fund's assets that may be used for
futures margin and related options premiums for a bona fide hedging
position. However, under the Rule, the Fund must limit its aggregate initial
futures margin and related options premiums to not more than 5% of the Fund's
net assets for hedging strategies that are not considered bona fide hedging
strategies under the Rule. Under the Rule, the Fund must also use short
futures and options on futures solely for bona fide hedging purposes within
the meaning and intent of the applicable provisions of the Commodity Exchange
Act.
Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same advisor as the Fund (or
an advisor that is an affiliate of the Fund's advisor). The exchanges also
impose position limits on futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Under interpretations of staff members of the Securities and Brokerage
Commission regarding applicable provisions of the Investment Company Act,
when the Fund purchases a future, it must segregate cash or readily
marketable short-term debt instruments in an amount equal to the purchase
price of the future, less the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign
currency exchange contracts in which the Fund may invest are treated as
"Section 1256 contracts" under the Internal Revenue Code. In general, gains
or losses relating to Section 1256 contracts are characterized as 60%
long-term and 40% short-term capital gains or losses under the Code.
However, foreign currency gains or losses arising from Section 1256 contracts
that are forward contracts generally are treated as ordinary income or loss.
In addition, Section 1256 contracts held by the Fund at the end of each
taxable year are "marked-to-market," and unrealized gains or losses are
treated as though they were realized. These contracts also may be
marked-to-market for purposes of determining the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can be made by
the Fund to exempt those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in
"straddles" for federal income tax purposes. The straddle rules may affect
the character and timing of gains (or losses) recognized by the Fund on
straddle positions. Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent that the loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there is
no unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that
occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in
a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security
denominated in a foreign currency or foreign currency forward
contracts and the date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the
amount of the Fund's investment income available for distribution to its
shareholders.
|X| Temporary Defensive Investments. When market conditions are
unstable, or the Manager believes it is otherwise appropriate to reduce
holdings in stocks, the Fund can invest in a variety of debt securities for
defensive purposes. The Fund can also purchase these securities for liquidity
purposes to meet cash needs due to the redemption of Fund shares, or to hold
while waiting to reinvest cash received from the sale of other portfolio
securities. The Fund can buy:
|_| high-quality, short-term money market instruments, including
those issued by the U. S. Treasury or other government agencies,
|_| commercial paper (short-term, unsecured, promissory notes of domestic
or foreign companies),
|_| short-term debt obligations of corporate issuers,
|_| certificates of deposit and bankers' acceptances of domestic and
foreign banks and savings and loan associations, and
|_| repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly,
are not generally subject to significant fluctuations in principal value and
their value will be less subject to interest rate risk than longer-term debt
securities.
- ------------------------------------------------------------------------------
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, a "majority" vote is defined
as the vote of the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy
at a shareholder meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in
supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's most significant investment policies
are described in the Prospectus.
|X| What are the Fund's Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
|_| The Fund cannot buy securities issued or guaranteed by any one
issuer if more than 5% of its total assets would be invested in
securities of that issuer or if it would then own more than 10% of
that issuer's voting securities. That restriction applies to 75% of
the Fund's total assets. The limit does not apply to securities
issued by the U.S. government or any of its agencies or
instrumentalities.
|_| The Fund cannot invest in physical commodities or physical
commodity contracts. However, the Fund can buy and sell hedging
instruments to the extent specified in its Prospectus and this
Statement of Additional Information from time to time. The Fund can
also buy and sell options, futures, securities or other instruments
backed by, or the investment return from which, is linked to changes
in the price of, physical commodities.
|_| The Fund cannot lend money. However, it can invest in all or a
portion of an issue of bonds, debentures, commercial paper or other
similar corporate obligations. The Fund may also lend its portfolio
securities subject to the restrictions stated in the Prospectus and
this Statement of Additional Information and can enter into
repurchase transactions.
|_| The Fund cannot concentrate investments. That means it cannot
invest 25% or more of its total assets in companies in any one
industry.
|_| The Fund cannot underwrite securities of other companies. A
permitted exception is in case it is deemed to be an underwriter
under the Securities Act of 1933 when reselling any securities held
in its own portfolio.
|_| The Fund cannot invest in real estate or in interests in real estate.
However, the Fund can purchase readily-marketable securities of
companies holding real estate or interests in real estate.
|_| The Fund cannot issue "senior securities." However, that restriction
does not prohibit the Fund from borrowing money subject to the
provisions set forth in this Statement of Additional Information, or
from entering into margin, collateral or escrow arrangements
permitted by its other investment policies.
|X| Non-Fundamental Investment Restrictions. The Fund has a number of
other investment restrictions that are not fundamental policies, which means
that they can be changed by vote of a majority of the Fund's Board of
Trustees without shareholder approval.
|_| The Fund cannot invest in companies for the purpose of acquiring
control or management of them.
|_| The Fund cannot invest in or hold securities of any issuer if officers
and Trustees or directors of the Fund or the Manager individually or
beneficially own more than1/2of 1% of the securities of that issuer
and together own more than 5% of the securities of that issuer.
|_| The Fund cannot purchase securities on margin. However, the Fund can
make margin deposits in connection with any of the hedging
instruments permitted by any of its other investment policies.
|_| The Fund cannot pledge, mortgage or hypothecate any of its assets.
However, this does not prohibit the escrow arrangements contemplated
by writing covered call options or other collateral or margin
arrangements in connection with any of the hedging instruments
permitted by any of its other investment policies.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment (except in the case of
borrowing and investments in illquid securities). The Fund need not sell
securities to meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth
in Appendix A to this Statement of Additional Information. That is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of
beneficial interest. The Fund was organized as a Massachusetts business trust
in June 1997.
Classes of Shares. The Trustees are authorized, without shareholder approval,
to create new series and classes of shares. The Trustees may reclassify
unissued shares of the Fund into additional series or classes of shares. The
Trustees also may divide or combine the shares of a class into a greater or
lesser number of shares without changing the proportionate beneficial
interest of a shareholder in the Fund. Shares do not have cumulative voting
rights or preemptive or subscription rights. Shares may be voted in person
or by proxy at shareholder meetings.
The Fund currently has five classes of shares: Class A, Class B, Class
C, Class N and Class Y. All classes invest in the same investment portfolio.
Only retirement plans may purchase Class N shares. Only certain institutional
investors may elect to purchase Class Y shares. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and
o votes as a class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally on
matters submitted to the vote of shareholders. Each share of the Fund
represents an interest in the Fund proportionately equal to the interest of
each other share of the same class.
Meetings of Shareholders. As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a
Trustee upon the written request of the record holders of 10% of its
outstanding shares. If the Trustees receive a request from at least 10
shareholders 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. The
shareholders making the request must have been shareholders for at least six
months and must hold shares of the Fund valued at $25,000 or more or
constituting at least 1% of the Fund's outstanding shares. The Trustees may
also take other action as permitted by the Investment Company Act.
Shareholder and Trustee Liability. The Fund's Declaration of Trust contains
an express disclaimer of shareholder or Trustee liability for the Fund's
obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations. The Declaration of Trust also states that upon
request, the Fund shall assume the defense of any claim made against a
shareholder for any act or obligation of the Fund and shall satisfy any
judgment on that claim. Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances. However, the risk that a Fund shareholder will
incur financial loss from being held liable as a "partner" of the Fund is
limited to the relatively remote circumstances in which the Fund would be
unable to meet its obligations.
The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand that may arise out of any dealings with
the Fund. Additionally, the Trustees shall have no personal liability to any
such person, to the extent permitted by law.
Board of Trustees and Oversight Committees. 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. 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 an Audit Committee which is comprised solely
of Independent Trustees. The Audit Committee provides the Board with
recommendations regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of audits and the
audit fees charged, reviews reports from the Fund's independent auditors
concerning the Fund's internal accounting procedures and controls, and
reviews reports of the Manager's internal auditor. The members of the Audit
Committee are Paul Clinton (Chairman), Thomas Courtney, Robert Galli, Lacy
Herrmann and Brian Wruble. The Audit Committee met two times during the
Fund's fiscal year ended October 31, 2002.
Trustees and Officers of the Fund. Each of the Trustees is an "Independent
Trustee," as defined in the Investment Company Act. The Fund's Trustees and
officers and their positions held with the Fund and length of service in such
position(s) and their principal occupations and business affiliations during
the past five years are listed in the chart below. The information for the
Trustees also includes the dollar range of shares of the Fund as well as the
aggregate dollar range of shares beneficially owned in any of the Oppenheimer
funds overseen by the Trustees. All of the Trustees are also trustees or
directors of the following Oppenheimer funds (referred to as "Board III
Funds"):
Oppenheimer Quest For Value Funds, a
series fund having the following three
series:
Oppenheimer Small Cap Value Fund, Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Capital Value
and Fund, Inc.
Oppenheimer Quest Opportunity Value Oppenheimer Quest Value Fund, Inc.
Fund
Rochester Portfolio Series, a series Bond Fund Series, a series fund
fund having one series: Limited-Term New having one series: Oppenheimer
York Municipal Fund Convertible Securities Fund
Rochester Fund Municipals Oppenheimer MidCap Fund
In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 31 other portfolios in the
OppenheimerFunds complex. Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their employees
are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charges
on Class A shares is waived for that group because of the economies of sales
efforts realized by the Distributor.
Messrs. Murphy, Masterson, Molleur, Vottiero, Wixted, Zack, and
Bartlett, and Mses. Bechtolt, Feld and Ives who are officers of the Fund,
respectively hold the same offices of one or more of the other Board III
Funds as with the Fund. As of November 27, 2002, the Trustees and officers of
the Fund, as a group, owned of record or beneficially less than 1% of each
class of shares of the Fund. The foregoing statement does not reflect
ownership of shares of the Fund held of record by an employee benefit plan
for employees of the Manager, other than the shares beneficially owned under
the plan by the officers of the Fund listed above. In addition, each
Independent Trustee, and his or her family members, do not own securities of
either the Manager or Distributor of the Board III Funds or any person
directly or indirectly controlling, controlled by or under common control
with the Manager or Distributor.
The address of each Trustee in the chart below is 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until
his or her resignation, retirement, death or removal.
- -------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
As of December 31,
2001
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Thomas W. Principal of Courtney Associates, Inc. $0 $10,001-$50,000
Courtney, (venture capital firm); former General
Chairman of the Partner of Trivest Venture Fund (private
Board of Trustees, venture capital fund); former President
Trustee since 1997 of Investment Counseling Federated
Age: 69 Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of
OCC Cash Reserves, Inc. and Trustee of
OCC Accumulation Trust, both of which are
open-end investment companies; Trustee of
four funds for Pacific Capital and Tax
Free Trust of Arizona. Oversees 10
portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Paul Y. Clinton, Principal of Clinton Management $0 Over
Trustee, since Associates, a financial and venture $100,000
1997 Age: 70. capital consulting firm; Trustee of
Capital Cash Management Trust, a
money-market fund and Narragansett
Tax-Free Fund, a tax-exempt bond fund;
Director of OCC Cash Reserves, Inc. and
Trustee of OCC Accumulation Trust, both
of which are open-end investment
companies. Formerly: Director, External
Affairs, Kravco Corporation, a national
real estate owner and property management
corporation; President of Essex
Management Corporation, a management
consulting company; a general partner of
Capital Growth Fund, a venture capital
partnership; a general partner of Essex
Limited Partnership, an investment
partnership; President of Geneve Corp., a
venture capital fund; Chairman of
Woodland Capital Corp., a small business
investment company; and Vice President of
W.R. Grace & Co. Oversees 10 portfolios
in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Galli, A trustee or director of other $0 Over
Trustee since 1997 Oppenheimer funds. Formerly Vice Chairman $100,000
Age: 69 (October 1995-December 1997) of the
Manager. Oversees 41 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Lacy B. Herrmann, Chairman and Chief Executive Officer of $0 $10,001-$50,000
Trustee since 1997 Aquila Management Corporation, the
Age: 73 sponsoring organization and manager,
administrator and/or sub-Adviser to the
following open-end investment companies,
and Chairman of the Board of Trustees and
President of each: Churchill Cash
Reserves Trust, Aquila-Cascadia Equity
Fund, Pacific Capital Cash Assets Trust,
Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free
Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income
Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund
of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian
Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director,
Secretary, and formerly Treasurer of
Aquila Distributors, Inc., distributor of
the above funds; President and Chairman
of the Board of Trustees of Capital Cash
Management Trust ("CCMT"), and an Officer
and Trustee/Director of its predecessors;
President and Director of STCM Management
Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director
of InCap Management Corporation, formerly
sub-adviser and administrator of Prime
Cash Fund and Short Term Asset Reserves;
Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust, both
of which are open-end investment
companies; Trustee Emeritus of Brown
University. Oversees 10 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian Wruble, Special Limited Partner (since January $1-$10,000 $50,001-$100,000
Trustee since 2001 1999) of Odyssey Investment Partners, LLC
Age: 59 (private equity investment); General
Partner (since September 1996) of Odyssey
Partners, L.P. (hedge fund in
distribution since 1/1/97); Board of
Governing Trustees (since August 1990) of
The Jackson Laboratory (non-profit);
Trustee (since May 1992) of Institute for
Advanced Study (educational institute);
Trustee (since May 2000) of Research
Foundation of AIMR (investment research,
non-profit); formerly Governor, Jerome
Levy Economics Institute of Bard College
(economics research) (August
1990-September 2001); Director of Ray &
Berendtson, Inc. (executive search firm)
(May 2000-April 2002). Oversees 10
portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
The address of the Officers in the chart below is as follows: for
Messrs. Bartlett, Molleur, Murphy and Zack and Ms. Feld, 498 Seventh Avenue,
New York, NY 10018, for Messrs. Masterson, Vottiero and Wixted and Mses.
Bechtolt and Ives, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each
Officer serves for an annual term or until his or her earlier resignation,
death or removal.
- -------------------------------------------------------------------------------------
Officers of the Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Bruce Bartlett, Vice Senior Vice President (since January 1999) of the Manager;
President and an officer of 6 portfolios in the OppenheimerFunds complex.
Portfolio Manager Prior to joining the Manager in April, 1995, he was a Vice
since 1998 President and Senior Portfolio Manager at First of America
Age: 52 Investment Corp. (September 1986 - April 1995).
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President since 2001 2001) and President (since September 2000) of the Manager;
Age: 53 President and a director or trustee of other Oppenheimer
funds; President and a director (since July 2001) of
Oppenheimer Acquisition Corp. (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings, Inc. (a
holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc.
(a subsidiary of the Manager); Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director
(since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a
director of the investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc. and
Centennial Asset Management Corporation (since November
2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President
(since November 1, 2001) and a director (since July 2001)
of Oppenheimer Real Asset Management, Inc.; a director
(since November 2001) of Trinity Investment Management
Corp. and Tremont Advisers, Inc. (Investment advisory
affiliates of the Manager); Executive Vice President (since
February 1997) of Massachusetts Mutual Life Insurance
Company (the Manager's parent company); a director (since
June 1995) of DLB Acquisition Corporation (a holding
company that owns the shares of David L. Babson & Company,
Inc.); formerly, Chief Operating Officer (September
2000-June 2001) of the Manager; President and trustee
(November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment
companies); a director (September 1999-August 2000) of C.M.
Life Insurance Company; President, Chief Executive Officer
and director (September 1999-August 2000) of MML Bay State
Life Insurance Company; a director (June 1989-June 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle Bancorp). Oversees
69 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer, Principal the Manager; Treasurer (since March 1999) of HarbourView
Financial and Asset Management Corporation, Shareholder Services, Inc.,
Accounting Officer Oppenheimer Real Asset Management Corporation, Shareholder
since 1999 Financial Services, Inc., Oppenheimer Partnership Holdings,
Age: 43 Inc., OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000) and OFI Institutional
Asset Management, Inc. (since November 2000) (offshore fund
management subsidiaries of the Manager); Treasurer and
Chief Financial Officer (since May 2000) of Oppenheimer
Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer
Acquisition Corp. and OppenheimerFunds Legacy Program
(since April 2000); formerly Principal and Chief Operating
Officer (March 1995-March 1999), Bankers Trust
Company-Mutual Fund Services Division. An officer of 85
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer 2002; formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002) prior to which he was Chief
Age: 39 Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 85 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Connie Bechtolt, Assistant Vice President of the Manager (since September
Assistant Treasurer 1998); formerly Manager/Fund Accounting (September
since 2002 1994-September 1998) of the Manager. An officer of 85
Age: 39 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Zack, Senior Vice President (since May 1985) and General Counsel
Secretary since 2001 (since February 2002) of the Manager; General Counsel and a
Age: 54 director (since November 2001) of OppenheimerFunds
Distributor, Inc.; Senior Vice President and General
Counsel (since November 2001) of HarbourView Asset
Management Corporation; Vice President and a director
(since November 2000) of Oppenheimer Partnership Holdings,
Inc.; Senior Vice President, General Counsel and a director
(since November 2001) of Shareholder Services, Inc.,
Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.; General Counsel
(since November 2001) of Centennial Asset Management
Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant
Secretary and a director (since November 2001) of
OppenheimerFunds International Ltd.; Vice President (since
November 2001) of OppenheimerFunds Legacy Program;
Secretary (since November 2001) of Oppenheimer Acquisition
Corp.; formerly Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of
Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November
1989-November 2001); OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc (October 1997-November
2001). An officer of 85 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since
Assistant Secretary July 1998); formerly, an associate with Davis, Graham, &
since 2002 Stubbs LLP (January 1997-June 1998). An officer of 85
Age: 38 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Denis R. Molleur, Vice President and Senior Counsel of the Manager (since
Assistant Secretary July 1999); formerly a Vice President and Associate Counsel
since 2001 of the Manager (September 1995-July 1999). An officer of 82
Age: 45 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the
Assistant Secretary Manager; Vice President (since June 1990) of
since 2001 OppenheimerFunds Distributor, Inc.; Director, Vice
Age: 44 President and Assistant Secretary (since June 1999) of
Centennial Asset Management Corporation; Vice President
(since 1997) of Oppenheimer Real Asset Management, Inc.;
formerly Vice President and Associate Counsel of the
Manager (June 1990-July 1999). An officer of 85 portfolios
in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of
Assistant Secretary the Manager; Vice President (since 1999) of
since 2001 OppenheimerFunds Distributor, Inc.; Vice President and
Age: 37 Assistant Secretary (since 1999) of Shareholder Services,
Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc.; formerly Assistant Vice President and
Assistant Counsel of the Manager (August 1997-June 1998);
Assistant Counsel of the Manager (August 1994-August 1997).
An officer of 85 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
|X| Remuneration of Trustees. The officers of the Fund who are
affiliated with the Manager receive no salary or fee from the Fund. The
Trustees of the Fund received the compensation shown below from the Fund with
respect to the Fund's fiscal year ended October 31, 2002. The compensation
from all of the Board III Funds (including the Fund) represents compensation
received as a director, trustee or member of a committee of the board of
those funds during the calendar year 2001.
- ------------------------------------------------------------------------------------
Trustee Name and Aggregate Retirement Estimated Total
Annual Compensation
Retirement From All Board
Benefits III Funds For
Benefits Paid at Which Individual
Accrued as Retirement Serves As
Compensation Part of Fund from all Trustee/Director
From Fund Expenses Board III For Calendar
Other Fund For Fiscal For Fiscal Funds Year Ended
Position(s) (as Year Ended Year Ended (10 funds)2 12/31/01
applicable) 10/31/021 10/31/02 (10 Funds)2
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Paul Y. Clinton $5,698 $4,408 $97,126
Audit Committee $63,738
Chairman
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Thomas W. Courtney
Chairman, Audit $5,698 $5,795 $63,738 $97,126
Committee Member
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Robert G. Galli
Audit Committee $5,698 $8,343 $55,6782 $202,8863
Member
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Lacy B. Herrmann
Audit Committee $5,698 $1,660 $63,702 $97,126
Member
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Brian Wruble $3,475 $1,390 $59,250
Audit Committee $7,606
Member4
- ------------------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any,
and retirement plan benefits accrued for a Trustee.
2. Estimated annual retirement benefits paid at retirement is based on a
straight life payment plan election. The amount for Mr. Galli includes
$30,689 for serving as a trustee or director of 33 Oppenheimer funds that
are not Board III Funds.
3. Includes $105,760 for Mr. Galli for serving as trustee or director of
33 Oppenheimer funds that are not Board III Funds.
4. Brian Wruble was elected to the board on April 1, 2001.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement
plan that provides for payments to retired Trustees. Payments are up to 80%
of the average compensation paid during a Trustee's five years of service in
which the highest compensation was received. A Trustee must serve as Trustee
for any of the Board III Funds listed above for at least 15 years to be
eligible for the maximum payment. Each Trustee's retirement benefits will
depend on the amount of the Trustee's future compensation and length of
service.
|X| Deferred Compensation Plan for Trustees. 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.
|X| Major Shareholders. As of November 27, 2002, the only people who
owned of record or was known by the Fund to own beneficially 5% or more of
any class of the Fund's outstanding shares, and their holdings of that class
as of that date, were the following:
Charles Schwab & Co., Inc., for the exclusive benefit of customers,
Attn.: Mutual Funds, 101 Montgomery St., San Francisco, CA 94104-4122, which
owned 2,096,251.398 Class A shares, representing 6.82% of the Class A shares
then outstanding;
Anthony Di Maria, Attn.: Joseph Lomangino, TJH Medical Services PC
401K, 8906 135th St., Suite 7E, Jamaica, NY 11418-2834, which owned
69,329.044 Class N shares, representing 8.23% of the Class N shares then
outstanding;
MLPF&S for the sole benefit of its customers, Attn.: Fund Admin., 4800
Deer Lake Dr. East Floor 3, Jacksonville, FL 32246-6484, which owned
56,773.773 Class N shares, representing 6.74% of the Class N shares then
outstanding;
Massachusetts Mutual Life Insurance Company, 1295 State St.,
Springfield, MA 01111-0001, which owned 210,622.458 Class Y shares,
representing 33.20% of the Class Y shares then outstanding;
IBT & Co. Cust., OppenheimerFunds Cap-Accum. Plan, Attn.: MML037, 200
Clarendon St. Floor 16, Boston, MA 02116-5021, which owned 124,251.527 Class
Y shares, representing 19.58% of the Class Y shares then outstanding;
Mass Mutual Life Insurance Co., Attn.: N225 Separate Investment Acct.,
1295 State St., Springfield, MA 01111-0001, which owned 298,863.300 Class Y
shares, representing 47.11% of the Class Y shares then outstanding.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a
Code of Ethics. It is designed to detect and prevent improper personal
trading by certain employees, including portfolio managers, that would
compete with or take advantage of the Fund's portfolio transactions. Covered
persons include persons with knowledge of the investments and investment
intentions of the Fund and other funds advised by the Manager. The Code of
Ethics does permit personnel subject to the Code to invest in securities,
including securities that may be purchased or held by the Fund, subject to a
number of restrictions and controls. Compliance with the Code of Ethics is
carefully monitored and enforced by the Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by
calling the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as
part of the Fund's registration statement on the SEC's EDGAR database at the
SEC's Internet website at http://www.sec.gov. Copies may be obtained, after
paying a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov., or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreement. The Manager provides
investment advisory and management services to the Fund under an investment
advisory agreement between the Manager and the Fund. The Manager selects
securities for the Fund's portfolio and handles its day-to-day business. The
portfolio manager of the Fund is employed by the Manager and is the person
who is principally responsible for the day-to-day management of the Fund's
portfolio. Other members of the Manager's Equity Portfolio Team provide the
portfolio manager with counsel and support in managing the Fund's portfolio.
The investment advisory agreement requires the Manager, at its expense,
to provide the Fund with adequate office space, facilities and equipment. It
also requires the Manager to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
administration for the Fund. Those responsibilities include the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the advisory
agreement. The advisory agreement lists examples of expenses paid by the
Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to Independent 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.
The management fees paid by the Fund to the Manager are calculated at the
rates described in the Prospectus, which are applied to the assets of the
Fund as a whole. The fees are allocated to each class of shares based upon
the relative proportion of the Fund's net assets represented by that class.
The management fees paid by the Fund to the Manager during its last three
fiscal years are listed below.
-----------------------------------------------------
Management Fees Paid to
Fiscal Year Ended 10/31: OppenheimerFunds, Inc.
-----------------------------------------------------
-----------------------------------------------------
2000 $9,665,786
-----------------------------------------------------
-----------------------------------------------------
2001 $9,759,526
-----------------------------------------------------
-----------------------------------------------------
2002 $6,671,502
-----------------------------------------------------
The investment advisory agreement states that in the absence of willful misfeasance,
bad faith, gross negligence in the performance of its duties or reckless
disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.
The agreement permits the Manager to act as investment advisor for any other person,
firm or corporation and to use the name "Oppenheimer" in connection with
other investment companies for which it may act as investment advisor or
general distributor. If the Manager shall no longer act as investment
advisor to the Fund, the Manager may withdraw the right of the Fund to use
the name "Oppenheimer" as part of its name.
|X|...Annual Approval of Investment Advisory Agreement. Each year, the Board
of Trustees, including a majority of the Independent Trustees, is required
to approve the renewal of the investment advisory agreement. The
Investment Company Act requires that the Board request and evaluate and
the Manager provide such information as may be reasonably necessary to
evaluate the terms of the investment advisory agreement. The Board
employs an independent consultant to prepare a report that provides such
information as the Board requests for this purpose.
The Board also receives information about the 12b-1 distribution fees
the Fund pays. These distribution fees are reviewed and approved at a
different time of the year.
The Board reviewed the foregoing information in arriving at its
decision to renew the investment advisory agreement. Among other factors,
the Board considered:
o The nature, cost, and quality of the services provided to the Fund and
its shareholders;
o The profitability of the Fund to the Manager;
o The investment performance of the Fund in comparison to regular market
indices
o Economies of scale that may be available to the Fund from the Manager;
o Fees paid by other mutual funds for similar services;
o The value and quality of any other benefits or services received by the
Fund from its relationship with the Manager, and
o The direct and indirect benefits the Manager received from its
relationship with the Fund. These included services provided by
the Distributor and the Transfer Agent, and brokerage and soft
dollar arrangements permissible under Section 28(e) of the
Securities Exchange Act.
The Board considered that the Manager must be able to pay and retain
high quality personnel at competitive rates to provide services to the Fund.
The Board also considered that maintaining the financial viability of the
Manager is important so that the Manager will be able to continue to provide
quality services to the Fund and its shareholders in adverse times. The
Board also considered the investment performance of other mutual funds
advised by the Manager. The Board is aware that there are alternatives to the
use of the Manager.
These matters were also considered by the Independent Trustees, meeting
separately from the full Board with experienced Counsel to the Fund who
assisted the Board in its deliberations. The Fund's Counsel is independent
of the Manager within the meaning and intent of the SEC Rules regarding the
independence of counsel.
After careful deliberation, the Board of Trustees concluded that it was in the
best interest of shareholders to continue the investment advisory agreement
for another year. In arriving at a decision, the Board did not single out any
one factor or group of factors as being more important than other factors,
but considered all factors together. The Board judged the terms and
conditions of the Agreement, including the investment advisory fee, in light
of all of the surrounding circumstances.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties
of the Manager under the investment advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act. The Manager may employ broker-dealers
that the Manager thinks in its best judgment based on all relevant factors,
will implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" of the Fund's portfolio transactions. "Best execution"
means prompt and reliable execution at the most favorable price obtainable.
The Manager need not seek competitive commission bidding. However, it is
expected to be aware of the current rates of eligible brokers and to minimize
the commissions paid to the extent consistent with the interests and policies
of the Fund as established by its Board of Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its affiliates
have investment discretion. The commissions paid to such brokers may be
higher than another qualified broker would charge, if the Manager makes a
good faith determination that the commission is fair and reasonable in
relation to the services provided. Subject to those considerations, as a
factor in selecting brokers for the Fund's portfolio transactions, the
Manager may also consider sales of shares of the Fund and other investment
companies for which the Manager or an affiliate serves as investment advisor.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and the procedures and rules described above. Generally, the Manager's
portfolio traders allocate brokerage based upon recommendations from the
Manager's portfolio managers. In certain instances, portfolio managers may
directly place trades and allocate brokerage. In either case, the Manager's
executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid
primarily for transactions in listed securities or for certain fixed-income
agency transactions in the secondary market. Otherwise brokerage commissions
are paid only if it appears likely that a better price or execution can be
obtained by doing so. In an option transaction, the Fund ordinarily uses the
same broker for the purchase or sale of the option and any transaction in the
securities to which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities
as the Fund at the same time as the Fund, which could affect the supply and
price of the securities. If two or more funds advised by the Manager
purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed for
each account.
Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreement permits the Manager to allocate brokerage for
research services. The investment research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the
Manager and its affiliates. The investment research received for the
commissions of those other accounts may be useful both to the Fund and one or
more of the Manager's other accounts. Investment research may be supplied to
the Manager by a third party at the instance of a broker through which trades
are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager in the investment decision-making process may be paid
in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker
represents to the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis
at the stated commission, and (iii) the trade is not a riskless principal
transaction. The Board of Trustees permits the Manager to use commissions on
fixed-price offerings to obtain research, in the same manner as is permitted
for agency transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either
held in the Fund's portfolio or are being considered for purchase. The
Manager provides information to the Board about the commissions paid to
brokers furnishing such services, together with the Manager's representation
that the amount of such commissions was reasonably related to the value or
benefit of such services.
------------------------------------------------------------------
Fiscal Year Ended Total Brokerage Commissions Paid by the
10/31: Fund1
------------------------------------------------------------------
------------------------------------------------------------------
2000 $580,0162
------------------------------------------------------------------
------------------------------------------------------------------
2001 $1,558,8913
------------------------------------------------------------------
------------------------------------------------------------------
2002 $1,124,3314
------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions
on a net trade basis.
2. During the fiscal year ended 10/31/00, the amount of
transactions directed to brokers for research services
was $121,757,422 and the amount of the commissions paid to
broker-dealers for those services
was $132,848.
3. During the fiscal year ended 10/31/01, the amount of transactions
directed to brokers for research services was $500,061,457 and the
amount of the commissions paid to broker-dealers for those services
was $657,022.
4. During the fiscal year ended 10/31/02, the amount of transactions
directed to brokers for research services was $245,831,696 and
commissions were $319,458.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund,
the Distributor, whose primary address is P.O. Box 5270, Denver, CO 80217,
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's different classes of shares. The Distributor bears the expenses
normally attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of
shares.
The sales charges and concessions paid to, or retained by, the
Distributor from the sale of shares during the Fund's three most recent
fiscal years, and the contingent deferred sales charges retained by the
Distributor on the redemption of shares for the three most recent fiscal
years are shown in the tables below.
-----------------------------------------------------------
Aggregate Class A
Fiscal Front-End Front-End
Year Sales Charges Sales Charges
Ended on Class A Retained by
10/31: Shares Distributor
-----------------------------------------------------------
-----------------------------------------------------------
2000 $8,001,647 $2,223,986
-----------------------------------------------------------
-----------------------------------------------------------
2001 $4,350,671 $1,160,3391
-----------------------------------------------------------
-----------------------------------------------------------
2002 $1,724,680 $534,240
-----------------------------------------------------------
1. Includes amount retained by a broker-dealer that is an affiliate or a
parent of the Distributor.
----------------------------------------------------------------------
Concessions Concessions Concessions Concessions
on Class A on Class B on Class C on Class N
Fiscal Shares Shares Shares Shares
Year Advanced by Advanced by Advanced by Advanced by
Ended Distributor1 Distributor1 Distributor1 Distributor1
10/31:
----------------------------------------------------------------------
----------------------------------------------------------------------
2000 $601,117 $15,049,373 $1,293,236 N/A
----------------------------------------------------------------------
----------------------------------------------------------------------
2001 $480,871 $6,744,263 $613,517 $24,1092
----------------------------------------------------------------------
----------------------------------------------------------------------
2002 $141,003 $2,277,844 $265,000 $76,769
----------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain
sales of Class A shares and for sales of Class B and Class C shares from
its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.
-----------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Class N
Year Deferred Sales Deferred Sales Contingent Contingent
Ended Charges Charges Deferred Sales Deferred Sales
10/31 Retained by Retained by Charges Charges
Distributor Distributor Retained by Retained by
Distributor Distributor
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2000 $473 $762,760 $39,189 $0
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2001 $3,441 $1,306,155 $69,810 $0
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2002 $19,229 $1,380,533 $33,503 $17,023
-----------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for
Class A shares and Distribution and Service Plans for Class B, Class C and
Class N shares under Rule 12b-1 of the Investment Company Act. Under those
plans the Fund pays the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the shares
of the particular class.
Each plan has been approved by a vote of the Board of Trustees,
including a majority of the Independent Trustees1, cast in person at a
meeting called for the purpose of voting on that plan.
Under the plans, the Manager and the Distributor may make payments
to affiliates and in their sole discretion, from time to time, may use
their own resources (at no direct cost to the Fund) to make payments to
brokers, dealers or other financial institutions for distribution and
administrative services they perform. The Manager may use its profits
from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the
amount of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by
the vote of a majority of the Independent 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.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund must
obtain the approval of both Class A and Class B shareholders for a proposed
material amendment to the Class A plan that would materially increase
payments under the plan. That approval must be by a "majority" (as defined
in the Investment Company Act) of the shares of each Class, voting separately
by class.
While the plans are in effect, the Treasurer of the Fund shall provide separate
written reports on the plans to the Board of Trustees at least quarterly for
its review. The reports shall detail the amount of all payments made under a
plan and the purpose for which the payments were made. Those reports are
subject to the review and approval of the Independent Trustees.
Each plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of
the Independent Trustees. The Board of Trustees has set no minimum amount of
assets to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan,
the Board has not yet done so. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed 0.25% of the average
annual net assets consisting of Class A shares held in the accounts of the
recipients or their customers. With respect to purchases of Class A shares
subject to a contingent deferred sales charge by certain retirement plans
that purchased such shares prior to March 1, 2001 ("grandfathered retirement
accounts"), the Distributor currently intends to pay the service fee to
Recipients in advance for the first year after the shares are purchased.
After the first year shares are outstanding, the Distributor makes service
fee payments to Recipients quarterly on those shares. The advance payment is
based on the net asset value of shares sold. While the plan permits the
Board to authorize payments to the Distributor to reimburse itself for
services under the plan, the Board has not yet done so, except in the case of
the special arrangement described below. If Class A shares purchased by
grandfathered retirement accounts are redeemed during the first year after
their purchase, the Recipient of the service fees on those shares will be
obligated to repay the Distributor a pro rata portion of the advance payment
of the service fee made on those shares.
For the fiscal year ended October 31, 2002, payments under the Class A Plan totaled
$1,057,057, of which $267 was retained by the Distributor under the
arrangement described above, and included $67,315 paid to an affiliate of the
Distributor's parent company. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered
in subsequent years. During the first year the shares are sold, the
Distributor retains the service fee to reimburse itself for the costs of
distributing the shares. The Distributor may not use payments received under
the Class A Plan to pay any of its interest expenses, carrying charges, or
other financial costs, or allocation of overhead.
|X| Class B, Class C and Class N Service and Distribution Plan Fees.
Under each plan, service fees and distribution fees are computed on the
average of the net asset value of shares in the respective class, determined
as of the close of each regular business day during the period. Each plan
provides for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid. The
types of services that recipients provide are similar to the services
provided under the Class A service plan, described above.
Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a
quarterly basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after the shares are purchased. After the first year shares are
purchased, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares.
The Distributor retains the asset-based sales charge on Class B and
Class N shares. The Distributor retains the asset-based sales charge on Class
C shares during the first year the shares are outstanding. It pays the
asset-based sales charge as an ongoing concession to the recipient on Class C
shares outstanding for a year or more. If a dealer has a special agreement
with the Distributor, the Distributor will pay the Class B, Class C or Class
N service fee and the asset-based sales charge to the dealer quarterly in
lieu of paying the sales concessions and service fee in advance at the time
of purchase.
The asset-based sales charges on Class B, Class C and Class N shares
allow investors to buy 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, Class C and Class N shares. The payments are made to
the Distributor in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide
such financing from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of Class B, Class C and Class
N shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue
sky" registration fees and certain other distribution expenses,
o may not be able to adequately compensate dealers that sell Class B,
Class C and Class N shares without receiving payment under the plans
and therefore may not be able to offer such Classes for sale absent
the plans,
o receives payments under the plans consistent with the service fees and
asset-based sales charges paid by other non-proprietary funds that
charge 12b-1 fees,
o may use the payments under the plan to include the Fund in various
third-party distribution programs that may increase sales of Fund
shares,
o may experience increased difficulty selling the Fund's shares if
payments under the plan are discontinued because most competitor
funds have plans that pay dealers for rendering distribution
services as much or more than the amounts currently being paid by
the Fund, and
o may not be able to continue providing, at the same or at a lesser cost,
the same quality distribution sales efforts and services, or to
obtain such services from brokers and dealers, if the plan payments
were to be discontinued.
When Class B, Class C, or Class N shares are sold without the
designation of a broker-dealer, the Distributor is automatically designated
as the broker-dealer of record. In those cases, the Distributor retains the
service fee and asset-based sales charge paid on Class B, Class C and Class N
shares.
The Distributor's actual expenses in selling Class B, Class C and Class
N shares may be more than the payments it receives from the contingent
deferred sales charges collected on redeemed shares and from the Fund under
the plans. If the Class B, Class C or Class N 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.
All payments under the Class B, Class C and Class N 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.
-----------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended
10/31/02
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Unreimbursed
Expenses as
Aggregate % of Net
Payments Retained by Unreimbursed Assets of
Under Plan1 Distributor Expenses Under Plan Class
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class B $3,863,200 $3,108,386 $18,327,906 6.29%
Plan
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class C $1,125,590 $316,558 $3,097,912 3.72%
Plan
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class N $32,790 $30,509 $216,093 2.44%
Plan
-----------------------------------------------------------------------
1.....Includes amounts paid to an affiliate of the Distributor's parent
company: $38,747(Class B), $27,166 (Class C) and $44 (Class N).
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the Fund's Transfer Agent
at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance
data must include the average annual total returns for the advertised class
of shares of the Fund. Those returns must be shown for the 1-, 5- and 10-year
periods (or the life of the class, if less) ending as of the most recently
ended calendar quarter prior to the publication of the advertisement (or its
submission for publication).
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
|_| Total returns measure the performance of a hypothetical account in
the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
|_| The Fund's performance may not reflect the effect of taxes on
dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or
less than their original cost.
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The total
returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of debt
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.
|X| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, ten
years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown without sales
charge, as described below). For Class B shares, payment of the applicable
contingent deferred sales charge is applied, depending on the period for
which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter. For Class C shares, the 1% contingent deferred
sales charge is deducted for returns for the 1-year period. For Class N
shares, the 1% contingent deferred sales charge is deducted for returns for
the one year period. Class N total returns may also be calculated for the
periods prior to 3/01/01 (the inception date for Class N shares), based on
the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1
fees. There is no sales charge on Class Y shares.
|_| Average Annual Total Return. The "average annual total
return" of each class is an average annual compounded rate of return for each
year in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n" in the formula) to achieve an
Ending Redeemable Value ("ERV" in the formula) of that investment, according
to the following formula:
ERV - 1 = AVERAGE ANNUAL TOTAL RETURN
- -----
P
|_| Average Annual Total Return (After Taxes on Distributions). The
"average annual total return (after taxes on distributions)" of Class A
shares is an average annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of federal taxes
(calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during
the specified period. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:
ATVD - 1= Average Annual Total Return (After Taxes on
- ----
1/n Distributions)
P
|_| Average Annual Total Return (After Taxes on Distributions and
Redemptions). The "average annual total return (after taxes on distributions
and redemptions)" of Class A shares is an average annual compounded rate of
return for each year in a specified number of years, adjusted to show the
effect of federal taxes (calculated using the highest individual marginal
federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of
capital gains taxes or capital loss tax benefits (each calculated using the
highest federal individual capital gains tax rate in effect on the redemption
date) resulting from the redemption of the shares at the end of the period.
It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value ("ATVDR" in the
formula) of that investment, after taking into account the effect of taxes on
fund distributions and on the redemption of Fund shares, according to the
following formula:
ATVDR - 1= Average Annual Total Return (After Taxes on
- -----
1/n Distributions and Redemptions)
P
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the same
factors as average annual total return, but it does not average the rate of
return on an annual basis. Cumulative total return is determined as follows:
ERV - P = TOTAL RETURN
- -------
P
|_| Total Returns at Net Asset Value. From time to time the Fund
may also quote a cumulative or an average annual total return "at net asset
value" (without deducting sales charges) for Class A, Class B, Class C or
Class N shares. There is no sales charge on Class Y shares. Each is based on
the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
- -------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended
10/31/02
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Cumulative Average Annual Total
Class of Total Returns Returns
Shares (10 years or
Life of Class)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
1-Year 5-Year or Life
of Class
- ---------------------------------------------------------------
- ---------------------------------------------------------------
After Without After Without After Without
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class A 7.86%1 14.44%1 -25.29% -20.74% 1.55%1 2.78%1
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class B 8.34%1 10.34%1 -25.33% -21.40% 1.64%1 2.02%1
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class C 10.34%1 10.34%1 -22.18% -21.40% 2.02%1 2.02%1
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class N -41.76%2-41.76%2 -21.76% -20.97% -27.70% -27.70%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class Y 17.24%1 17.24%1 -20.29% -20.29% 3.29%1 3.29%1
- ---------------------------------------------------------------
1. Inception of Class A, Class B, Class C and Class Y: 12/1/97.
2. Inception of Class N: 3/1/01.
-----------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares1 (After Taxes)
For the Periods Ended 10/31/02
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1-Year 5-Year or Life of Class
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on -25.29% 1.54%1
Distributions
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on
Distributions and -15.40% 1.24%1
Redemption of Fund Shares
-----------------------------------------------------------------------------
1. Inception of Class A shares: 12/1/97.
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer
Agent at the addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also compare its
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples of
these performance comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the
ranking of the performance of its classes of shares by Lipper, Inc.
("Lipper"), is a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods in
categories based on investment styles. Lipper ranks the performance of the
Fund against all other mid-cap funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages
of the performance of the funds in particular categories.
|X| Morningstar Ratings. From time to time the Fund may publish the
star rating of the performance of its classes of shares by Morningstar, Inc.,
an independent mutual fund monitoring service. Morningstar rates mutual
funds in their specialized market sector. The Fund is rated among mid-cap
growth funds.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. For each fund with at least a three-year history,
Morningstar calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and redemption
fees), placing more emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category receive 5 stars, the
next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5%
receive 2 stars, and the bottom 10% receive 1 star. (Each share class is
counted as a fraction of one fund within this scale and rated separately,
which may cause slight variations in the distribution percentages.) The
Overall Morningstar Rating for a fund is derived from a weighted average of
the performance figures associated with its three-, five-and ten-year (if
applicable) Morningstar Rating metrics.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements
and sales literature performance information about the Fund cited in
newspapers and other periodicals such as The New York Times, The Wall Street
Journal, Barron's, or similar publications. That information may include
performance quotations from other sources, including Lipper and Morningstar.
The performance of the Fund's classes of shares may be compared in
publications to the performance of various market indices or other
investments, and averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.
From time to time the Fund may include in its advertisements and sales literature
the total return performance of a hypothetical investment account that
includes shares of the fund and other Oppenheimer funds. The combined account
may be part of an illustration of an asset allocation model or similar
presentation. The account performance may combine total return performance of
the fund and the total return performance of other Oppenheimer funds included
in the account. Additionally, from time to time, the Fund's advertisements
and sales literature may include, for illustrative or comparative purposes,
statistical data or other information about general or specific market and
economic conditions. That may include, for example,
o information about the performance of certain securities or commodities
markets or segments of those markets,
o information about the performance of the economies of particular
countries or regions,
o the earnings of companies included in segments of particular
industries, sectors, securities markets, countries or regions,
o the availability of different types of securities or offerings of
securities,
o information relating to the gross national or gross domestic product of
the United States or other countries or regions,
o comparisons of various market sectors or indices to demonstrate
performance, risk, or other characteristics of the Fund.
ABOUT your account
How to Buy Shares
Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix B contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $50 and shareholders must invest at least $500 before an
---
Asset Builder Plan (described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain at $25 for
additional purchases. Shares will be purchased on the regular business day
the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange (the "Exchange"). The Exchange normally
----------------
closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund three days after the transfers are initiated. If the proceeds of the ACH
transfer are not received on a timely basis, the Distributor reserves the
right to cancel the purchase order. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and reduction
in expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain other circumstances described
in Appendix B to this Statement of Additional Information because the
Distributor or dealer or broker incurs little or no selling expenses.
|X| Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your spouse
can add together:
o Class A and Class B shares you purchase for your individual accounts
(including IRAs and 403(b) plans), or for your joint accounts, or
for trust or custodial accounts on behalf of your children who
are minors, and
o Current purchases of Class A and Class B shares of the Fund and other
Oppenheimer funds to reduce the sales charge rate that applies to
current purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of
Class A shares, provided that you still hold your investment in
one of the Oppenheimer funds.
A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You
must request it when you buy shares.
The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor and currently include the
following:
Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New York Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Champion Income Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Convertible Securities Fund Inc.
Oppenheimer Developing Markets Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Discovery Fund Oppenheimer Real Asset Fund
Oppenheimer Rochester National
Oppenheimer Emerging Growth Fund Municipals
Oppenheimer Emerging Technologies Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund Oppenheimer Strategic Income Fund
Oppenheimer Global Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth & Income Fund Oppenheimer Trinity Core Fund
Oppenheimer Trinity Large Cap Growth
Oppenheimer Gold & Special Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Trinity Value Fund
Oppenheimer High Yield Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer Value Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Company
Fund Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund OSM1- Gartmore Millennium Growth Fund II
Oppenheimer Limited Term Municipal Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street Growth & Income OSM1 - Mercury Advisors S&P 500 Index
Fund Fund
OSM1 - Mercury Advisors Focus Growth
Oppenheimer Main Street Opportunity Fund Fund
Oppenheimer Main Street Small Cap Fund OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund OSM1 - Salomon Brothers All Cap Fund
Oppenheimer Multiple Strategies Fund
And the following money market funds:
Centennial New York Tax Exempt
Centennial America Fund, L. P. Trust
Centennial California Tax
Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Oppenheimer Money Market Fund,
Centennial Money Market Trust Inc.
1 - "OSM" stands for Oppenheimer Select Managers
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds
and Oppenheimer Senior Floating Rate Fund. Under certain circumstances
described in this Statement of Additional Information, redemption proceeds of
certain money market fund shares may be subject to a contingent deferred
sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares
or Class A and Class B shares of the Fund and other Oppenheimer funds during
a 13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate
for the Class A shares purchased during that period. You can include
purchases made up to 90 days before the date of the Letter. Letters of
Intent do not consider Class C or Class N shares you purchase or may have
purchased.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class
B shares of the Fund (and other Oppenheimer funds) during a 13-month period
(the "Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases of
shares which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases
made at net asset value without sales charge do not count toward satisfying
the amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on
purchases of Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that applies to a single lump-sum
purchase of shares in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter of Intent. If those terms are amended, as they may be from time
to time by the Fund, the investor agrees to be bound by the amended terms and
that those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the concessions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during the
Letter of Intent period exceed the intended purchase amount and exceed the
amount needed to qualify for the next sales charge rate reduction set forth
in the Prospectus, the sales charges paid will be adjusted to the lower rate.
That adjustment will be made only if and when the dealer returns to the
Distributor the excess of the amount of concessions allowed or paid to the
dealer over the amount of concessions that apply to the actual amount of
purchases. The excess concessions 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.
The Transfer Agent will not hold shares in escrow for purchases of
shares of the Fund and other Oppenheimer funds by OppenheimerFunds prototype
401(k) plans under a Letter of Intent. If the intended purchase amount under
a Letter of Intent 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 concessions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
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.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.
2. If the total minimum investment specified under the Letter is
completed within the 13-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the 13-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually
paid and the amount of sales charges which would have been paid if the total
amount purchased had been made at a single time. That sales charge
adjustment will apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid within twenty days
after a request from the Distributor or the dealer, the Distributor will,
within sixty days of the expiration of the Letter, redeem the number of
escrowed shares necessary to realize such difference in sales charges. Full
and fractional shares remaining after such redemption will be released from
escrow. If a request is received to redeem escrowed shares prior to the
payment of such additional sales charge, the sales charge will be withheld
from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption
any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) Class A
shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge
or (2) Class B shares of one of the other Oppenheimer funds that
were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.
Asset Builder Plans. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to
November 1, 2002 and which have previously established Asset Builder Plans,
additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions
for recent purchases described in the Prospectus. Asset Builder Plans are
available only if your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use their fund account to make monthly automatic
purchases of shares of up to four other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit
will be made two business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares that result from
delays in ACH transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by
writing to the Transfer Agent. The Transfer Agent requires a reasonable
period (approximately 10 days) after receipt of your instructions to
implement them. The Fund reserves the right to amend, suspend or discontinue
offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix B to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $3 million in assets (other than
assets invested in money market funds) invested in applicable investments,
then the retirement plan may purchase only Class B shares of the Oppenheimer
funds. Any retirement plans in that category that currently invest in Class B
shares of the Fund will have their Class B shares converted to Class A shares
of the Fund when the plan's applicable investments reach $5 million.
OppenheimerFunds has entered into arrangements with certain record keepers
whereby the Transfer Agent compensates the record keeper for its record
keeping and account servicing functions that it performs on behalf of the
participant level accounts of a retirement plan. While such compensation may
act to reduce the record keeping fees charged by the retirement plan's record
keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.
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 values 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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable
to Class B, Class C or Class N shares and the dividends payable on Class B,
Class C or Class N shares will be reduced by incremental expenses borne
solely by that class. Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of
a single investor (not including dealer "street name" or omnibus accounts).
That is because generally it will be more advantageous for that investor to
purchase Class A shares of the Fund.
Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases
of Class A shares at net asset value whether or not subject to a contingent
deferred sales charge as described in the Prospectus, no sales concessions
will be paid to the broker-dealer of record, as described in the Prospectus,
on sales of Class A shares purchased with the redemption proceeds of shares
of another mutual fund offered as an investment option in a retirement plan
in which Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor, if the purchase occurs more than 30
days after the Oppenheimer funds are added as an investment option under that
plan. Additionally, that concession will not be paid on purchases of Class A
shares by a retirement plan made with the redemption proceeds of Class N
shares of one or more Oppenheimer funds held by the plan for more than 18
months.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares after six years is not treated as a taxable
event for the shareholder. If those laws or the IRS interpretation of those
laws should change, the automatic conversion feature may be suspended. In
that event, no further conversions of Class B shares would occur while that
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 shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.
|X| Availability of Class N Shares. In addition to the description
of the types of retirement plans which may purchase Class N shares contained
in the prospectus, Class N shares also are offered to the following:
o to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o to all rollover contributions made to Individual 401(k) plans,
Profit-Sharing Plans and Money Purchase Pension Plans,
o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix B to this Statement
of Additional Information) which have entered into a special
agreement with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the
Internal Revenue Code, the recordkeeper or the plan sponsor for
which has entered into a special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all
such plans invested in the Oppenheimer funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
purchase with the redemption proceeds of Class A shares of one or
more Oppenheimer funds.
o to certain customers of broker-dealers and financial advisors that are
identified in a special agreement between the broker-dealer or
financial advisor and the Distributor for that purpose.
The sales concession and the advance of the service fee, as described
in the Prospectus, will not be paid to dealers of record on sales of Class N
shares on:
o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class A shares of one or more Oppenheimer funds
(other than rollovers from an OppenheimerFunds-sponsored Pinnacle
or Ascender 401(k) plan to any IRA invested in the Oppenheimer
funds),
o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class C shares of one or more Oppenheimer funds held
by the plan for more than one year (other than rollovers from an
OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to
any IRA invested in the Oppenheimer funds), and
o on purchases of Class N shares by an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan made with the redemption
proceeds of Class A shares of one or more Oppenheimer funds.
No sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class N shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
|X| Allocation of Expenses. The Fund pays expenses related to its
daily operations, such as custodian fees, Trustees' fees, transfer agency
fees, legal fees and auditing costs. Those expenses are paid out of the
Fund's assets and are not paid directly by shareholders. However, those
expenses reduce the net asset values of shares, and therefore are indirectly
borne by shareholders through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are
allocated pro rata to the shares of all classes. The allocation is based on
the percentage of the Fund's total assets that is represented by the assets
of each class, and then equally to each outstanding share within a given
class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest, taxes and
brokerage commissions, and non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of
such expenses include distribution and service plan (12b-1) fees, transfer
and shareholder servicing agent fees and expenses, and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).
Account Fees. As stated in the Prospectus, a $12 annual fee is assessed on
any account valued at less than $500. This fee will not be assessed on the
following accounts:
o Accounts that have balances below $500 due to the automatic conversion
of shares from Class B to Class A shares;
o Accounts with an active Asset Builder Plan, payroll deduction plan or a
military allotment plan;
o OppenheimerFunds-sponsored group retirement accounts that are making
continuing purchases;
o Certain accounts held by broker-dealers through the National Securities
Clearing Corporation; and
o Accounts that fall below the $500 threshold due solely to market
fluctuations within the 12-month period preceding the date the fee is
deducted.
The fee is automatically deducted from qualifying accounts annually on
or about the second to last business day of September. This annual fee is
waived for any shareholders who elect to access their account documents
through electronic document delivery rather than in paper copy and who elect
to utilize the Internet or PhoneLink as their primary source for their
general servicing needs. To sign up to access account documents
electronically via eDocs Direct, please visit the Service Center on our
website at www.oppenheimerfunds.com or call 1.888.470.0862 for instructions.
------------------------
Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of the Exchange on each day that the Exchange is open. The
calculation is done 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 Exchange normally closes at 4:00 P.M., Eastern time, but
may close earlier on some other days (for example, in case of weather
emergencies or on days falling before a U.S. holiday). All references to
time in this Statement of Additional Information mean "Eastern time." The
Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, Presidents' Day, Martin Luther
King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. Because the Fund's
net asset values will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such days when shareholders
may not purchase or redeem shares. Additionally, trading on European and
Asian stock exchanges and over-the-counter markets normally is completed
before the close of the Exchange.
Changes in the values of securities traded on foreign exchanges or
markets as a result of events that occur after the prices of those securities
are determined, but before the close of The Exchange, will not be reflected
in the Fund's calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value
of the security. The Manager, or an internal valuation committee established
by the Manager, as applicable, may establish a valuation, under procedures
established by the Board and subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting.
|X| Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on Nasdaq, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and
"asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last
trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
o 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.
o The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60
days or less.
o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a
remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information
is not generally available, the Manager may use pricing services approved by
the Board of Trustees. The pricing service may use "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield and
maturity. Other special factors may be involved (such as the tax-exempt
status of the interest paid by municipal securities). The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of
selected securities.
The closing prices in the London foreign exchange market on a
particular business day that are provided to the Manager by a bank, dealer or
pricing service that the Manager has determined to be reliable are used to
value foreign currency, including forward contracts, and to convert to U.S.
dollars securities that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on Nasdaq, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last
sale price on the preceding trading day if it is within the spread of the
closing "bid" and "asked" prices on the principal exchange or on Nasdaq on
the valuation date. If not, the value shall be the closing bid price on the
principal exchange or on Nasdaq on the valuation date. If the put, call or
future is not traded on an exchange or on Nasdaq, it shall be valued by the
mean between "bid" and "asked" prices obtained by the Manager from two active
market makers. In certain cases that may be at the "bid" price if no "asked"
price is available.
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium. If the Fund enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the
Fund.
How to Sell Shares
The information below supplements the terms and conditions for redeeming
shares set forth in the Prospectus.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
o Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C, Class N or Class Y shares. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all
of the loss may not be tax deductible, depending on the timing and amount of
the reinvestment. Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are reinvested in
shares of the Fund or another of the Oppenheimer funds within 90 days of
payment of the sales charge, the shareholder's basis in the shares of the
Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, under certain
circumstances, 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 liquid securities from the portfolio of the Fund,
in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price
is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $200 or such lesser amount as
the Board may fix. The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations.
If the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.
If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B,
Class C and Class N contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, SEP-IRAs, SIMPLE 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:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed plan sponsors) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the
Transfer Agent 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, 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. Shareholders should contact
their broker or dealer to arrange this type of redemption. The repurchase
price per share will be the net asset value next computed after the
Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the
close of the Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the Exchange closes. Normally, the Exchange
closes at 4:00 P.M., but may do so earlier on some days. Additionally, the
order must have been transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares
have been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made by
check payable to all shareholders of record. Payments must also be sent to
the address of record for the account and the address must not have been
changed within the prior 30 days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis.
Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated
on the account application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant to an Automatic
Withdrawal Plan three business days before the payment transmittal date you
select in the account application. If a contingent deferred sales charge
applies to the redemption, the amount of the check or payment will be reduced
accordingly.
The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B, Class C and Class N shareholders should not establish automatic
withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C
or Class N contingent deferred sales charge is waived as described in
Appendix B to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated
below. These provisions may be amended from time to time by the Fund and/or
the Distributor. When adopted, any amendments will automatically apply to
existing Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent to exchange a pre-determined amount of shares of the Fund for
shares (of the same class) of other Oppenheimer funds automatically on a
monthly, quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum amount that may be exchanged to each other fund account is
$50. Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.
Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon
the amount withdrawn, the investor's principal may be depleted. Payments
made under these plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for
any action taken or not taken by the Transfer Agent in good faith to
administer the Plan. Share certificates will not be issued for shares of the
Fund purchased for and held under the Plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application so that the shares
represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder.
Receipt of payment on the date selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such
notification for the requested change to be put in effect. The Planholder
may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the Plan. That notice must be in
proper form in accordance with the requirements of the then-current
Prospectus of the Fund. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect and
will mail a check for the proceeds to the Planholder.
The Planholder may terminate a Plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a Plan. The Transfer Agent will also terminate a Plan upon its
receipt of evidence satisfactory to it that the Planholder has died or is
legally incapacitated. Upon termination of a Plan by the Transfer Agent or
the Fund, shares that have not been redeemed will be held in uncertificated
form in the name of the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued without
causing the withdrawal checks to stop. However, should such uncertificated
shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to
act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares
of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. You can obtain a current list showing which funds
offer which classes of shares by calling the Distributor.
o All of the Oppenheimer funds currently offer Class A, B, C, N and Y
shares with the following exceptions:
The following funds only offer Class A shares:
Centennial America Fund, L.P. Centennial New York Tax Exempt
Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust
The following funds do not offer Class N shares:
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer Municipal Bond Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer New Jersey Municipal Fund Limited Term New York Municipal
Fund
Oppenheimer New York Municipal Fund Rochester Fund Municipals
The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal
Fund
Oppenheimer Capital Income Fund Oppenheimer Multiple Strategies
Fund
Oppenheimer Cash Reserves Oppenheimer New Jersey Municipal
Fund
Oppenheimer Champion Income Fund Oppenheimer New York Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Capital Value
Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Quest Global Value
Fund, Inc.
Oppenheimer Gold & Special Minerals Oppenheimer Rochester National
Fund Municipals
Oppenheimer International Bond Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer International Growth Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Limited Term New York Municipal
Company Fund Fund
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
shares of any other fund.
o Class B, Class C and Class N 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.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class X shares of Limited Term New York Municipal Fund may be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may
be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged
for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
Reserves or Oppenheimer Limited-Term Government Fund. Only
participants in certain retirement plans may purchase shares of
Oppenheimer Capital Preservation Fund, and only those participants may
exchange shares of other Oppenheimer funds for shares of Oppenheimer
Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not
available by exchange of shares of Oppenheimer Money Market Fund or
Class A shares of Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund
and Oppenheimer Select Managers QM Active Balanced Fund are only
available to retirement plans and are available only by exchange from
the same class of shares of other Oppenheimer funds held by retirement
plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares
of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge
upon payment of the sales charge. They may also be used to purchase
shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days
prior to that purchase may subsequently be exchanged for shares of
other Oppenheimer funds without being subject to an initial sales
charge or contingent deferred sales charge. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge, with the
following exceptions:
o When Class A shares of any Oppenheimer fund (other than Rochester
National Municipals and Rochester Fund Municipals) acquired by exchange of
Class A shares of any Oppenheimer fund purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months measured
from the beginning 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.
o When Class A shares of Rochester National Municipals and Rochester Fund
Municipals acquired by exchange of Class A shares of any Oppenheimer fund
purchased subject to a Class A contingent deferred sales charge are
redeemed within 24 months of the beginning 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.
o If any Class A shares of another Oppenheimer fund that are exchanged
for Class A shares of Oppenheimer Senior Floating Rate Fund are subject to
the Class A contingent deferred sales charge of the other Oppenheimer fund
at the time of exchange, the holding period for that Class A contingent
deferred sales charge will carry over to the Class A shares of Oppenheimer
Senior Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of Oppenheimer Senior
Floating Rate Fund if they are repurchased before the expiration of the
holding period.
o When Class A shares of Oppenheimer Cash Reserves and Oppenheimer Money
Market Fund, Inc. acquired by exchange of Class A shares of any
Oppenheimer fund purchased subject to a Class A contingent deferred sales
charge are redeemed within the Class A holding period of the fund from
which the shares were exchanged, the Class A contingent deferred sales
charge of the fund from which the shares were exchanged is imposed on the
redeemed shares.
o With respect to Class B shares, the Class B contingent deferred sales
charge is imposed on Class B shares acquired by exchange if they are
redeemed within six years of the initial purchase of the exchanged Class B
shares.
o With respect to Class C 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.
o With respect to Class N shares, a 1% contingent deferred sales charge
will be imposed if the retirement plan (not including IRAs and 403(b)
plans) is terminated or Class N shares of all Oppenheimer funds are
terminated as an investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first purchase of Class N
shares of any Oppenheimer fund or with respect to an individual retirement
plan or 403(b) plan, Class N shares are redeemed within 18 months of the
plan's first purchase of Class N shares of any Oppenheimer fund.
o When Class B, Class C or Class N 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, Class C or Class N
contingent deferred sales charge will be followed in determining the order
in which the shares are exchanged. Before exchanging shares, shareholders
should take into account how the exchange may affect any contingent
deferred sales charge that might be imposed in the subsequent redemption
of remaining shares.
Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account. The Fund may accept requests for
exchanges of up to 50 accounts per day from representatives of authorized
dealers that qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging shares by telephone,
a shareholder must have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Processing Exchange Requests. Shares to be exchanged are redeemed on the
regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases may be
delayed by either fund up to five business days if it determines that it
would be disadvantaged by an immediate transfer of the redemption proceeds.
The Fund reserves the right, in its discretion, to refuse any exchange
request that may disadvantage it. For example, if the receipt of multiple
exchange requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the Fund,
the Fund may refuse the request.
When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange
features such as Automatic Exchange Plans and Automatic Withdrawal Plans
cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a
share certificate that is not tendered with the request. In those cases,
only the shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that
the fund selected is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of redemption proceeds
in such cases. The Fund, the Distributor, and the Transfer Agent are unable
to provide investment, tax or legal advice to a shareholder in connection
with an exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
and Class Y shares. That is because of the effect of the asset-based sales
charge on Class B, Class C and Class N shares. Those dividends will also
differ in amount as a consequence of any difference in the net asset values
of the different classes of shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by
checks returned to the Transfer Agent by the Postal Service as undeliverable
will be invested in shares of Oppenheimer Money Market Fund, Inc.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders
or their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares.
The federal tax treatment of the Fund's dividends and capital gains
distributions is briefly highlighted in the Prospectus. The following is only
a summary of certain additional tax considerations generally affecting the
Fund and its shareholders.
The tax discussion in the Prospectus and this Statement of Additional
Information is based on tax law in effect on the date of the Prospectus and
this Statement of Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action, sometimes with
retroactive effect. State and local tax treatment of ordinary income
dividends and capital gain dividends from regulated investment companies may
differ from the treatment under the Internal Revenue Code described below.
Potential purchasers of shares of the Fund are urged to consult their tax
advisers with specific reference to their own tax circumstances as well as
the consequences of federal, state and local tax rules affecting an
investment in the Fund.
Qualification as a Regulated Investment Company. The Fund has elected to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company, the
Fund is not subject to federal income tax on the portion of its net
investment income (that is, taxable interest, dividends, and other taxable
ordinary income, net of expenses) and capital gain net income (that is, the
excess of net long-term capital gains over net short-term capital losses)
that it distributes to shareholders. That qualification enables the Fund to
"pass through" its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless their Fund shares are held
in a retirement account or the shareholder is otherwise exempt from tax).
The Internal Revenue Code contains a number of complex tests relating
to qualification that the Fund might not meet in a particular year. If it did
not qualify as a regulated investment company, the Fund would be treated for
tax purposes as an ordinary corporation and would receive no tax deduction
for payments made to shareholders.
To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year. The Fund must also satisfy
certain other requirements of the Internal Revenue Code, some of which are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income and gains for the
taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.
To qualify as a regulated investment company, the Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies (to the extent such currency gains
are directly related to the regulated investment company's principal business
of investing in stock or securities) and certain other income.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under that test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items (including receivables), U.S. government
securities, securities of other regulated investment companies, and
securities of other issuers. As to each of those issuers, the Fund must not
have invested more than 5% of the value of the Fund's total assets in
securities of each such issuer and the Fund must not hold more than 10% of
the outstanding voting securities of each such issuer. No more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
For purposes of this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are treated as U.S.
government securities.
Excise Tax on Regulated Investment Companies. Under the Internal Revenue
Code, by December 31 each year, the Fund must distribute 98% of its taxable
investment income earned from January 1 through December 31 of that year and
98% of its capital gains realized in the period from November 1 of the prior
year through October 31 of the current year. If it does not, the Fund must
pay an excise tax on the amounts not distributed. It is presently anticipated
that the Fund will meet those requirements. To meet this requirement, in
certain circumstances the Fund might be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
However, the Board of Trustees and the Manager might determine in a
particular year that it would be in the best interests 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.
Taxation of Fund Distributions. The Fund anticipates distributing
substantially all of its investment company taxable income for each taxable
year. Those distributions will be taxable to shareholders as ordinary income
and treated as dividends for federal income tax purposes.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. If net long term capital gains are distributed and
designated as a capital gain distribution, it will be taxable to shareholders
as a long-term capital gain and will be properly identified in reports sent
to shareholders in January of each year. Such treatment will apply no matter
how long the shareholder has held his or her shares or whether that gain was
recognized by the Fund before the shareholder acquired his or her shares.
If the Fund elects to retain its net capital gain, the Fund will be
subject to tax on it at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, the Fund will provide to shareholders of record
on the last day of its taxable year information regarding their pro rata
share of the gain and tax paid. As a result, each shareholder will be
required to report his or her pro rata share of such gain on their tax return
as long-term capital gain, will receive a refundable tax credit for his/her
pro rata share of tax paid by the Fund on the gain, and will increase the tax
basis for his/her shares by an amount equal to the deemed distribution less
the tax credit.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on such
income.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain distributions will be treated as a return of
capital to the extent of the shareholder's tax basis in their shares. Any
excess will be treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S. federal income
tax consequences of distributions made (or deemed made) during the year. If
prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of
the effect of the Fund's investment policies, they will be identified as such
in notices sent to shareholders.
Distributions by the Fund will be treated in the manner described above
regardless of whether the distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date.
The Fund will be required in certain cases to withhold 30% (29% for
payments after December 31, 2003) of ordinary income dividends, capital gains
distributions and the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct taxpayer identification
-------
number or to properly certify that number when required, (2) who is subject
to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that
the shareholder is not subject to backup withholding or is an "exempt
recipient" (such as a corporation). All income and any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and is identified in
reports mailed to shareholders in January of each year.
Tax Effects of Redemptions of Shares. If a shareholder redeems all or a
portion of his/her shares, the shareholder will recognize a gain or loss on
the redeemed shares in an amount equal to the difference between the proceeds
of the redeemed shares and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss recognized in that manner may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the redemption.
In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year. However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.
Foreign Shareholders. Under U.S. tax law, taxation of a shareholder who is a
foreign person (to include, but not limited to, a nonresident alien
individual, a foreign trust, a foreign estate, a foreign corporation, or a
foreign partnership) primarily depends on whether the foreign person's income
from the Fund is effectively connected with the conduct of a U.S. trade or
business. Typically, ordinary income dividends paid from a mutual fund are
not considered "effectively connected" income.
Ordinary income dividends that are paid by the Fund (and are deemed not
"effectively connected income") to foreign persons will be subject to a U.S.
tax withheld by the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign Status. The tax rate may
be reduced if the foreign person's country of residence has a tax treaty with
the U.S. allowing for a reduced tax rate on ordinary income dividends paid by
the Fund. All income and any tax withheld by the Fund is remitted by the Fund
to the U.S. Treasury and is identified in reports mailed to shareholders in
March of each year.
If the ordinary income dividends from the Fund are effectively
---
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.
If the foreign person fails to provide a certification of his/her
foreign status, the Fund will be required to withhold U.S. tax at a rate of
30% (29% for payments after December 31, 2003) on ordinary income dividends,
capital gains distributions and the proceeds of the redemption of shares,
paid to any foreign person. All income and any tax withheld (in this
situation) by the Fund is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of each year.
The tax consequences to foreign persons entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax consequences to
them of an investment in the Fund, including the applicability of the U.S.
withholding taxes described above.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds listed above. Reinvestment
will be made without sales charge at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
To elect this option, the shareholder must notify the Transfer Agent in
writing and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
(other than Oppenheimer Cash Reserves) may be invested in shares of this Fund
on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as
the Fund's Distributor. The Distributor also distributes shares of the other
Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of
the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It serves as the Transfer Agent for
an annual per account fee. It also acts as 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 numbers shown on
the back cover.
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It is the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with
the Manager and its affiliates. The Fund's cash balances with the custodian
in excess of $100,000 are not protected by federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. KPMG LLP are the independent auditors of the Fund. They
audit the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds advised by the
Manager and its affiliates.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
Oppenheimer MidCap Fund:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer MidCap Fund, including the statement of investments, as of
October
31, 2002, and the related statement of operations for the year then ended,
the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the three years in the
period then ended. 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. The financial highlights for the year ended October 31, 1999, and the
11-month period ended October 31, 1998, were audited by other auditors whose
report dated November 19, 1999, expresses an unqualified opinion on this
information.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 October 31, 2002, by
correspondence with the custodian and brokers or by other appropriate
auditing
procedures where replies from brokers were not received. 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 MidCap Fund as of October 31, 2002, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the period then ended, in conformity with accounting
principles
generally accepted in the United States of America.
/s/KPMG LLP
KPMG LLP
Denver, Colorado
November 21, 2002
STATEMENT OF INVESTMENTS October 31, 2002
Market
Value
Shares See
Note 1
- --------------------------------------------------------------------------------
Common Stocks--87.8%
- --------------------------------------------------------------------------------
Consumer Discretionary--17.3%
- --------------------------------------------------------------------------------
Auto Components--1.0%
CarMax, Inc. 1 460,000 $
7,539,400
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--4.6%
Outback Steakhouse,
Inc. 1 500,000
17,025,000
- --------------------------------------------------------------------------------
Wendy's International,
Inc. 545,000
17,265,600
- ------------
34,290,600
- --------------------------------------------------------------------------------
Multiline Retail--3.1%
Family Dollar
Stores, Inc. 750,000
23,092,500
- --------------------------------------------------------------------------------
Specialty Retail--6.3%
Bed Bath &
Beyond, Inc. 1 1,320,000
46,807,200
- --------------------------------------------------------------------------------
Textiles & Apparel--2.3%
Coach, Inc. 1 558,000
16,600,500
- --------------------------------------------------------------------------------
Consumer Staples--0.8%
- --------------------------------------------------------------------------------
Food & Drug Retailing--0.8%
Whole Foods
Market, Inc. 1 135,000
6,298,290
- --------------------------------------------------------------------------------
Financials--14.0%
- --------------------------------------------------------------------------------
Banks--3.1%
Commerce
Bancorp, Inc. 508,000
23,322,280
- --------------------------------------------------------------------------------
Insurance--10.9%
AMBAC Financial
Group, Inc. 395,000
24,411,000
- --------------------------------------------------------------------------------
MBIA, Inc. 802,500
35,029,125
- --------------------------------------------------------------------------------
Radian Group, Inc. 611,100
21,553,497
- ------------
80,993,622
- --------------------------------------------------------------------------------
Health Care--34.2%
- --------------------------------------------------------------------------------
Biotechnology--10.0%
Gilead Sciences, Inc. 1 1,388,000
48,219,120
- --------------------------------------------------------------------------------
IDEC Pharmaceuticals
Corp. 1 566,000
26,047,320
- ------------
74,266,440
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--12.8%
Biomet, Inc. 118,500
3,491,010
- --------------------------------------------------------------------------------
Cytyc Corp. 1 233,000
2,437,180
- --------------------------------------------------------------------------------
Stryker Corp. 576,000
36,345,600
Market
Value
Shares See
Note 1
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies Continued
Varian Medical
Systems, Inc. 1 1,095,000
$52,800,900
- ------------
95,074,690
- --------------------------------------------------------------------------------
Health Care Providers & Services--11.4%
AmerisourceBergen
Corp. 585,000
41,622,750
- --------------------------------------------------------------------------------
Lincare
Holdings, Inc. 1 1,268,400
43,214,388
- ------------
84,837,138
- --------------------------------------------------------------------------------
Industrials--10.6%
- --------------------------------------------------------------------------------
Aerospace & Defense--2.3%
Alliant Techsystems,
Inc. 1 288,900
17,377,335
- --------------------------------------------------------------------------------
Commercial Services & Supplies--4.6%
Concord EFS, Inc. 1 1,859,200
26,549,376
- --------------------------------------------------------------------------------
Weight Watchers
International, Inc. 1 154,200
7,301,370
- ------------
33,850,746
- --------------------------------------------------------------------------------
Machinery--3.7%
SPX Corp. 1 650,000
27,306,500
- --------------------------------------------------------------------------------
Information Technology--10.9%
- --------------------------------------------------------------------------------
Communications Equipment--3.4%
Brocade
Communications
Systems, Inc. 1 750,000
5,152,500
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1 1,187,900
20,289,332
- ------------
25,441,832
- --------------------------------------------------------------------------------
Internet Software & Services--1.9%
Hotels.com, Cl. A 1 220,800
13,766,880
- --------------------------------------------------------------------------------
Semiconductor Equipment & Products--3.0%
Marvell Technology
Group Ltd. 1 665,000
10,779,650
- --------------------------------------------------------------------------------
QLogic Corp. 1 325,000
11,313,250
- ------------
22,092,900
- --------------------------------------------------------------------------------
Software--2.6%
Cerner Corp. 1 542,100
19,304,181
- ------------
Total Common Stocks
(Cost $693,387,041)
652,263,034
STATEMENT OF INVESTMENTS Continued
Market
Value
Shares See
Note 1
- --------------------------------------------------------------------------------
Preferred Stocks--0.0%
Axsun Technologies,
Inc., Cv., Series C 1,2,3 771,208 $
194,344
- --------------------------------------------------------------------------------
Centerpoint
Broadband
Technologies, Inc.,
Cv., Series D 1,2 556,586
- --
- --------------------------------------------------------------------------------
fusionOne, Inc.,
8% Non-Cum. Cv.,
Series D 1,2,3 1,675,894
39,719
- --------------------------------------------------------------------------------
ITF Optical
Technologies, Inc.,
Cv., Series A 1,2,3 200,000
173,000
- ------------
Total Preferred Stocks
(Cost $29,100,099)
407,063
Principal Market
Value
Amount See Note
1
- -------------------------------------------------------------------------------
Short-Term Notes--12.4%
Federal Home Loan Bank,
1.65%, 11/1/02
(Cost $91,900,000) $91,900,000 $
91,900,000
- -------------------------------------------------------------------------------
Total Investments,
at Value
(Cost $814,387,140) 100.2%
744,570,097
- -------------------------------------------------------------------------------
Liabilities
in Excess of
Other Assets (0.2)
(1,575,163)
- ---------------------
Net Assets 100.0%
$742,994,934
=====================
Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended October 31,
2002.
The aggregate fair value of securities of affiliated companies held by the
Fund
as of October 31, 2002, amounts to $407,063. Transactions during the period in
which the issuer was an affiliate are as follows:
Shares Gross
Gross Shares Unrealized
October 31, 2001 Additions
Reductions October 31, 2002 Depreciation
- --------------------------------------------------------------------------------------------------------------
Stocks and/or Warrants
Axsun Technologies, Inc., Cv., Series C 771,208 --
- -- 771,208 $8,805,653
fusionOne, Inc., 8% Non-Cum. Cv., Series D 1,675,894 --
- -- 1,675,894 9,060,386
ITF Optical Technologies, Inc., Cv., Series A 200,000 --
- -- 200,000 4,827,000
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES October 31, 2002
- -------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $791,287,038)
$744,163,034
Affiliated companies (cost $23,100,102)
407,063
- ------------
744,570,097
- -------------------------------------------------------------------------------
Cash
633,163
- -------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold
504,590
Interest and dividends
32,700
Other
3,514
- ------------
Total assets
745,744,064
- -------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed
1,316,489
Transfer and shareholder servicing agent fees
570,941
Shareholder reports
520,419
Distribution and service plan fees
176,144
Trustees' compensation
149,414
Other
15,723
- ------------
Total liabilities
2,749,130
- -------------------------------------------------------------------------------
Net Assets
$742,994,934
============
- -------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital
$1,964,895,912
- -------------------------------------------------------------------------------
Accumulated net investment loss
(148,073)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions
(1,151,935,862)
- -------------------------------------------------------------------------------
Net unrealized depreciation on investments
(69,817,043)
- ------------
Net Assets
$742,994,934
============
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $351,983,074 and 30,807,812 shares of beneficial
interest outstanding)
$11.43
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price)
$12.13
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $291,397,281 and 26,436,653 shares of beneficial
interest outstanding)
$11.02
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $83,350,524 and 7,564,308 shares of beneficial
interest outstanding)
$11.02
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $8,845,527 and 776,988 shares of beneficial interest
outstanding)
$11.38
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $7,418,528 and 633,293 shares of
beneficial interest outstanding)
$11.71
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS For the Year Ended October 31, 2002
- --------------------------------------------------------------------------------
Investment Income
Interest $
2,549,328
- --------------------------------------------------------------------------------
Dividends
1,509,526
- --------------
Total investment income
4,058,854
- --------------------------------------------------------------------------------
Expenses
Management fees
6,671,502
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A
1,057,057
Class B
3,863,200
Class C
1,125,590
Class N
32,790
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A
2,855,278
Class B
2,489,606
Class C
721,127
Class N
35,437
- --------------------------------------------------------------------------------
Shareholder reports
1,388,561
- --------------------------------------------------------------------------------
Trustees' compensation
47,863
- --------------------------------------------------------------------------------
Custodian fees and expenses
7,039
- --------------------------------------------------------------------------------
Other
1,458
- --------------
Total expenses
20,296,508
Less reduction to custodian expenses
(1,322)
Less voluntary waiver of transfer and shareholder servicing
agent fees -- Classes A, B, C and N
(2,045,003)
- --------------
Net expenses
18,250,183
- --------------------------------------------------------------------------------
Net Investment Loss
(14,191,329)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
(235,633,991)
Foreign currency transactions
377,802
- --------------
Net realized loss
(235,256,189)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments
31,615,304
- --------------
Net realized and unrealized loss
(203,640,885)
- --------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations
$(217,832,214)
==============
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
2002 2001
- ----------------------------------------------------------------------------------------------------
Operations
Net investment loss $
(14,191,329) $ (7,086,697)
- ----------------------------------------------------------------------------------------------------
Net realized loss
(235,256,189) (765,345,545)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
31,615,304 (463,263,091)
- ----------------------------------
Net decrease in net assets resulting from operations
(217,832,214) (1,235,695,333)
- ----------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A
(79,503,847) 72,996,958
Class B
(59,860,957) 59,856,987
Class C
(19,236,764) 22,021,277
Class N
8,462,388 2,566,730
Class Y
4,409,028 6,333,492
- ----------------------------------------------------------------------------------------------------
Net Assets
Total decrease
(363,562,366) (1,071,919,889)
- ----------------------------------------------------------------------------------------------------
Beginning of period
1,106,557,300 2,178,477,189
- ----------------------------------
End of period [including accumulated net
investment losses of $148,073 and $130,348, respectively]
$742,994,934 $1,106,557,300
==================================
See accompanying Notes to Financial Statements.
Class Y Year Ended October 31 2002
2001 2000 1999 1998 1
- ---------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $14.69
$30.86 $20.07 $10.88 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.08)
(.08) (.02) (.01) .01
Net realized and unrealized gain (loss) (2.90)
(16.09) 10.81 9.22 .87
- -------------------------------------------------------
Total from investment operations (2.98)
(16.17) 10.79 9.21 .88
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions in excess of net realized gain --
- -- -- (.02) --
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.71
$14.69 $30.86 $20.07 $10.88
=======================================================
- ---------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 (20.29)%
(52.40)% 53.76% 84.69% 8.80%
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $7,419
$4,759 $115 $2 $1
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,449
$2,720 $33 $2 $1
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.39)%
(0.12)% 0.60% (0.06)% 0.05%
Expenses 0.83%
1.07% 0.74% 1.03% 1.09% 4
Expenses, net of voluntary waiver of
transfer agent fees and/or reduction to
custodian expenses 0.83%
1.02% 0.74% 1.03% 1.09%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51%
84% 23% 61% 117%
1. For the period from December 1, 1997 (inception of offering) to October 31,
1998.
2. Assumes an investment on the business day before the first day of the
fiscal
period (or inception of offering), 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 for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.
- ----------------------
2006 $ 2,792,572
2007 3,516,822
2008 142,020,390
2009 764,990,986
2010 237,892,098
--------------
Total $1,151,212,868
==============
As of October 31, 2002, the components of distributable earnings on a tax
basis
were as follows:
Accumulated net investment loss $ (148,073)
Accumulated net realized loss (1,151,935,862)
Net unrealized depreciation (69,817,043)
----------------
Total $(1,221,900,978)
================
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:
Year Ended October 31,
2002 Year Ended October 31, 2001 1
Shares
Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------
Class A
Sold 10,246,014 $ 140,041,291
21,601,589 $ 431,618,994
Redeemed (16,353,774) (219,545,138)
(19,413,730) (358,622,036)
- ------------------------------------------------------------------------------
Net increase (decrease) (6,107,760)
$(79,503,847) 2,187,859 $72,996,958
==============================================================================
- -------------------------------------------------------------------------------------------------------------
Class B
Sold 5,434,402 $ 72,796,103
12,038,231 $ 240,307,506
Redeemed (10,300,242) (132,657,060)
(10,102,864) (180,450,519)
- ------------------------------------------------------------------------------
Net increase (decrease) (4,865,840) $
(59,860,957) 1,935,367 $ 59,856,987
==============================================================================
- -------------------------------------------------------------------------------------------------------------
Class C
Sold 2,545,426 $
33,944,222 4,550,109 $ 87,698,946
Redeemed (4,128,477) (53,180,986)
(3,716,188) (65,677,669)
- ------------------------------------------------------------------------------
Net increase (decrease) (1,583,051) $
(19,236,764) 833,921 $ 22,021,277
==============================================================================
- -------------------------------------------------------------------------------------------------------------
Class N
Sold 900,502 $
11,916,305 167,066 $ 2,704,211
Redeemed (281,019)
(3,453,917) (9,561) (137,481)
- ------------------------------------------------------------------------------
Net increase 619,483 $
8,462,388 157,505 $ 2,566,730
==============================================================================
- -------------------------------------------------------------------------------------------------------------
Class Y
Sold 505,761 $
7,112,046 499,899 $ 9,750,294
Redeemed (196,412)
(2,703,018) (179,670) (3,416,802)
- ------------------------------------------------------------------------------
Net increase 309,349 $
4,409,028 320,229 $ 6,333,492
==============================================================================
1. For the year ended October 31, 2001, for Class A, B, C and Y shares and
for
the period from March 1, 2001 (inception of offering) to October 31, 2001,
for
Class N shares.
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended October 31, 2002, were
$429,305,001 and $472,379,621, respectively.
As of October 31, 2002, unrealized appreciation (depreciation) based on cost
of
securities for federal income tax purposes of $815,110,135 was composed of:
Gross unrealized appreciation $ 74,529,012
Gross unrealized depreciation (145,069,050)
--------------
Net unrealized depreciation $ (70,540,038)
==============
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the
period indicated.
Aggregate Class A Concessions
Concessions Concessions Concessions
Front-End Front-End on Class A on
Class B on Class C on Class N
Sales Charges Sales Charges Shares
Shares Shares Shares
on Class A Retained by Advanced by
Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor 1
Distributor 1 Distributor 1 Distributor 1
- ----------------------------------------------------------------------------------------------------------------------
October 31, 2002 $1,724,680 $534,240 $141,003
$2,277,844 $265,000 $76,769
1. The Distributor advances concession payments to dealers for certain sales
of
Class A shares and for sales of Class B, Class C and Class N shares from its
own resources at the time of sale.
Class A Class B Class
C Class N
Contingent Contingent
Contingent Contingent
Deferred Deferred
Deferred Deferred
Sales Charges Sales Charges Sales
Charges Sales Charges
Retained by Retained by Retained
by Retained by
Year Ended Distributor Distributor
Distributor Distributor
- -----------------------------------------------------------------------------------------------
October 31, 2002 $19,229 $1,380,533
$33,503 $17,023
Distributor's
Distributor's Aggregate
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained
Expenses of Net Assets
Under Plan by Distributor Under
Plan of Class
- ---------------------------------------------------------------------------------------------------------
Class B Plan $3,863,200 $3,108,386
$18,327,906 6.29%
Class C Plan 1,125,590 316,558
3,097,912 3.72
Class N Plan 32,790 30,509
216,093 2.44
Valuation as of Unrealized
Security Acquisition Dates Cost
Oct. 31, 2002 Depreciation
- -----------------------------------------------------------------------------------------------------------
Stocks and/or Warrants
Axsun Technologies, Inc.,
Cv., Series C 12/13/00
$8,999,997 $194,344 $8,805,653
- -----------------------------------------------------------------------------------------------------------
Centerpoint Broadband
Technologies, Inc., Cv., Series D 10/23/00
5,999,997 -- 5,999,997
- -----------------------------------------------------------------------------------------------------------
fusionOne, Inc., 8% Non-Cum.
Cv., Series D 9/6/01
9,100,105 39,719 9,060,386
- -----------------------------------------------------------------------------------------------------------
ITF Optical Technologies, Inc.,
Cv., Series A 4/7/00
5,000,000 173,000 4,827,000
Appendix A
Industry Classifications
------------------------
Aerospace & Defense Household Durables
Air Freight & Couriers Household Products
Airlines Industrial Conglomerates
Auto Components Insurance
Automobiles Internet & Catalog Retail
Banks Internet Software & Services
Beverages Information Technology Consulting &
Services
Biotechnology Leisure Equipment & Products
Building Products Machinery
Chemicals Marine
Commercial Services & Supplies Media
Communications Equipment Metals & Mining
Computers & Peripherals Multiline Retail
Construction & Engineering Multi-Utilities
Construction Materials Office Electronics
Containers & Packaging Oil & Gas
Distributors Paper & Forest Products
Diversified Financials Personal Products
Diversified Telecommunication Pharmaceuticals
Services
Electric Utilities Real Estate
Electrical Equipment Road & Rail
Electronic Equipment & Instruments Semiconductor Equipment & Products
Energy Equipment & Services Software
Food & Drug Retailing Specialty Retail
Food Products Textiles & Apparel
Gas Utilities Tobacco
Health Care Equipment & Supplies Trading Companies & Distributors
Health Care Providers & Services Transportation Infrastructure
Hotels Restaurants & Leisure Water Utilities
Wireless Telecommunication Services
Appendix B
OppenheimerFunds Special Sales Charge Arrangements and Waivers
- --------------------------------------------------------------
In certain cases, the initial sales charge that applies to purchases of Class
A shares1 of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.2 That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares
of those funds are not available for purchase by or on behalf of retirement
plans. Other waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans3
4) Group Retirement Plans4
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"), including traditional
IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and
special arrangements may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this
document as the "Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain
Cases
- ------------------------------------------------------------------------------
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to
Initial Sales Charge but May Be Subject to the Class A Contingent Deferred
Sales Charge (unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."5 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was permitted to
purchase such shares at net asset value but subject to a contingent
deferred sales charge prior to March 1, 2001. That included plans
(other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
costing $500,000 or more, 2) had at the time of purchase 100 or more
eligible employees or total plan assets of $500,000 or more, or 3)
certified to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored 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 those
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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner &
Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch
Investment Management, L.P. ("MLIM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual
fund's principal underwriter or distributor, and (b) funds
advised or managed by MLIM (the funds described in (a) and (b)
are referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is performed on a
daily valuation basis by a 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
record keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets (excluding assets
invested in money market funds) invested in Applicable
Investments.
3) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan
sponsor signs that agreement, the Plan has 500 or more eligible
employees (as determined by the Merrill Lynch plan conversion
manager).
II. Waivers of Class A Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------------------------
A. 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 (and no concessions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans
for their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and
which are identified as such to the Distributor) or with the
Distributor. The purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients. Those clients
may be charged a transaction fee by their dealer, broker, bank or
advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary
that has made special arrangements with the Distributor for those
purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy
shares for their own accounts may also purchase shares without sales
charge but only if their accounts are linked to a master account of
their investment advisor or financial planner on the books and
records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements . Each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for
those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the
company or trust which is the beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|_| Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| 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.
|_| A qualified Retirement Plan 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, if that
arrangement was consummated and share purchases commenced by
December 31, 1996.
B. Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.
Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts for
which reinvestment arrangements have been made with the Distributor.
|_| Shares purchased through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's
customers to purchase and pay for shares of Oppenheimer funds using
the proceeds of shares redeemed in the prior 30 days from a mutual
fund (other than a fund managed by the Manager or any of its
subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also applies to shares
purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner. This waiver
must be requested when the purchase order is placed for shares of
the Fund, and the Distributor may require evidence of qualification
for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an
affiliate acts as sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| 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.6
5) Under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code, or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.
9) Separation from service.7
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) if the plan has made special
arrangements with the Distributor.
11) Plan termination or "in-service distributions," if the
redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
|_| For distributions from retirement plans that have $10 million or more
in plan assets and that have entered into a special agreement with
the Distributor.
|_| For distributions from retirement plans which are part of a retirement
plan product or platform offered by certain banks, broker-dealers,
financial advisors, insurance companies or record keepers which have
entered into a special agreement with the Distributor.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
Funds
- --------------------------------------------------------------------------------
The Class B, Class C and Class N contingent deferred sales charges will not
be applied to shares purchased in certain types of transactions or redeemed
in certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder. The death or
disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of
disability by the Social Security Administration.
|_| The contingent deferred sales charges are generally not waived
following the death or disability of a grantor or trustee for a
trust account. The contingent deferred sales charges will only be
waived in the limited case of the death of the 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.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into
a special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $500,000 or more and
made more than 12 months after the Retirement Plan's first purchase
of Class C shares, if the redemption proceeds are invested in Class
N shares of one or more Oppenheimer funds.
|_| Distributions8 from Retirement 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 in an Oppenheimer fund.
2) To return excess contributions made to a participant's account.
3) To return contributions made due to a mistake of fact.
4) To make hardship withdrawals, as defined in the plan.9
5) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.10
9) On account of the participant's separation from service.11
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option in a
Retirement Plan if the plan has made special arrangements with
the Distributor.
11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age 59 1/2,
as long as the aggregate value of the distributions does not
exceed 10% of the account's value, adjusted annually.
13) Redemptions of Class B shares under an Automatic Withdrawal
Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
14) For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special arrangement with
the Distributor allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager
or the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in
Section I.A.) of the Fund, the Manager and its affiliates and
retirement plans established by them for their employees.
IV. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
- ------------------------------------------------------------------------------
The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described
below for certain persons who were shareholders of the former Quest for Value
Funds. To be eligible, those persons must have been shareholders on November
24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those
former Quest for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Small Cap Value
Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global
Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on
November 24, 1995:
Quest for Value U.S. Government Income Fund Quest for Value New York
Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest for Value
National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds,
or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities.
The rates in the table apply if that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales Charge Concession as
Number of Eligible Charge as a % of as a % of Net Amount % of Offering
Employees or Members Offering Price Invested Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders 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 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. 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 an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
o 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 value, adjusted
annually, and
o 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 an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S.
Social Security Administration);
o 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 value; adjusted annually, and
o 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 Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
Investment Accounts, Inc.
- ---------------------------------------------------------------------------
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
Oppenheimer U. S. Government Trust,
Oppenheimer Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities Account CMIA LifeSpan Capital
Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|X| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue
to make additional purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A contingent deferred
sales charge that was in effect prior to March 18, 1996 (the "prior Class A
CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1% contingent deferred
sales charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such redemptions,
any shares not subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18,
1996, as a result of direct purchases or purchases pursuant to
the Fund's policies on Combined Purchases or Rights of
Accumulation, who still hold those shares in that Fund or other
Former Connecticut Mutual Funds, and
2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase
shares valued at $500,000 or more over a 13-month period entitled
those persons to purchase shares at net asset value without being
subject to the Class A initial sales charge
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this
arrangement they will be subject to the prior Class A CDSC.
|X| Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
1) any purchaser, provided the total initial amount invested in the
Fund or any one or more of the Former Connecticut Mutual Funds
totaled $500,000 or more, including investments made pursuant to
the Combined Purchases, Statement of Intention and Rights of
Accumulation features available at the time of the initial
purchase and such investment is still held in one or more of the
Former Connecticut Mutual Funds or a Fund into which such Fund
merged;
2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or
more of the Former Connecticut Mutual Funds totaled $500,000 or
more;
3) Directors of the Fund or any one or more of the Former
Connecticut Mutual Funds and members of their immediate families;
4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
6) an institution acting as a fiduciary on behalf of an individual
or individuals, if such institution was directly compensated by
the individual(s) for recommending the purchase of the shares of
the Fund or any one or more of the Former Connecticut Mutual
Funds, provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State
by Connecticut Mutual Life Insurance Company through the Panorama Separate
Account which is beyond the applicable surrender charge period and which was
used to fund a qualified plan, if that holder exchanges the variable annuity
contract proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former Connecticut
Mutual Fund provided that the Class A or Class B shares of the Fund to be
redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were
acquired by exchange from an Oppenheimer fund that was a Former Connecticut
Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund
must have been purchased prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or concession in connection with the purchase of
shares of any registered investment management company;
6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance
America Funds, Inc.
- ------------------------------------------------------------------------------
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund
who acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
- ------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to
purchase those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans
for their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial
institutions that have entered into sales arrangements with those
dealers or brokers (and whose identity is made known to the
Distributor) or with the Distributor, but only if the purchaser
certifies to the Distributor at the time of purchase that the
purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of
the Fund specifically providing for the use of Class M shares of the
Fund in specific investment products made available to their
clients, and
dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
Oppenheimer MidCap Fund
Internet Website
www.oppenheimerfunds.com
------------------------
Investment Advisor
OppenheimerFunds, Inc.
498 Seventh Avenue
New York, New York 10018
Distributor
OppenheimerFunds Distributor, Inc.
498 Seventh Avenue
New York, New York 10018
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL.OPP (225.5677)
Custodian Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown, Rowe & Maw
1675 Broadway
New York, New York 10019
1234
PX745.001.1202