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
October 31, 2002
Oppenheimer
MidCap Fund
Annual Report
Financial Statements
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
13 | OPPENHEIMER MIDCAP FUND
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.
14 | OPPENHEIMER MIDCAP FUND
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
============
15 | OPPENHEIMER MIDCAP FUND
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.
16 | OPPENHEIMER MIDCAP FUND
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.
17 | OPPENHEIMER MIDCAP FUND
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.
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.
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER MIDCAP FUND
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.
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER MIDCAP FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer MidCap Fund (the Fund) is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Fund's investment objective is to seek capital appreciation. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares are sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have
identical
rights and voting privileges. Earnings, net assets and net asset value per
share may differ by minor amounts due to each class having its own expenses
directly attributable to that class. Classes A, B, C and N have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale
price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the
last
sale price on the prior trading day, if it is within the spread of the
closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market
type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of
the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement 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
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other
than
those attributable to a specific class), gains and losses are allocated
daily
to each class of shares
24 | OPPENHEIMER MIDCAP FUND
based upon the relative proportion of net assets represented by such class.
Operating expenses directly attributable to a specific class are charged
against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by capital loss carryforwards, if any, to
shareholders.
Therefore, no federal income or excise tax provision is required.
During the fiscal year ended October 31, 2002, the Fund did not utilize
any
capital loss carryforward.
As of October 31, 2002, the Fund had available for federal income tax
purposes
unused capital loss carryforwards as follows:
Expiring
----------------------
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
==============
- --------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted a nonfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 2002, the Fund's projected benefit obligations were increased by
$21,596 and payments of $3,871 were made to retired trustees, resulting in an
accumulated liability of $148,071 as of October 31, 2002.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all
or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is invested for the Board of
Trustees
in shares of one or more Oppenheimer funds selected by the trustee. The
amount
paid to the Board of Trustees under the plan will be determined based upon
the
performance of the selected funds. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect
the
Fund's assets, liabilities or net investment income per share.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during
the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the
25 | OPPENHEIMER MIDCAP FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
fiscal year in which amounts are distributed may differ from the fiscal year
in
which the income or net realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended October 31, 2002, amounts have been reclassified to reflect a
decrease in paid-in capital of $14,177,832, a decrease in accumulated net
investment loss of $14,173,604, and a decrease in accumulated net realized
loss
on investments of $4,228. Net assets of the Fund were unaffected by the
reclassifications.
No distributions were paid during the years ended October 31, 2002 and
October 31, 2001.
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)
================
- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or
upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income
and
expenses during the reporting period. Actual results could differ from those
estimates.
26 | OPPENHEIMER MIDCAP FUND
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
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)
==============
27 | OPPENHEIMER MIDCAP FUND
NOTES TO financial statements Continued
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities Continued
The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund. Effective March 1, 2002 the
agreement provides for an annual fee of 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.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund.
The Fund pays OFS a $19.75 per account fee.
Additionally, Class Y shares are subject to minimum fees of $5,000 for
assets of less than $10 million and $10,000 for assets of $10 million or
more.
The Class Y shares are subject to the minimum fees in the event that the per
account fee does not equal or exceed the applicable minimum fees. OFS may
voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent
fees up to an annual rate of 0.25% of average net assets of Class Y shares
and
for all other classes, up to an annual rate of 0.35% of average net assets of
each class. Beginning November 1, 2002, transfer agent fees for Class Y
shares
are limited to 0.35% of the Fund's average daily net assets. This undertaking
may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan (12b-1) Fees. Under its General Distributor's
Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Fund's principal underwriter in the continuous
public
offering of the different classes of shares of the Fund.
28 | OPPENHEIMER MIDCAP FUND
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
- --------------------------------------------------------------------------------
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. For the year ended October 31, 2002, payments
under
the Class A Plan totaled $1,057,057, all of which were paid by the
Distributor
to recipients, and included $67,315 paid to an affiliate of the Manager. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares
in
any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
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. Under the plans, the Fund pays the Distributor an annual
asset-based
sales charge of 0.75% per year on Class B shares and on Class C shares and
the
Fund pays the Distributor an annual asset-based sales charge of 0.25% per
year
on Class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
Distribution fees paid to the Distributor for the year ended October 31,
2002,
were as follows:
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
29 | OPPENHEIMER MIDCAP FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
5. Illiquid or Restricted Securities
As of October 31, 2002, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may
also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 15% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of
illiquid
or restricted securities subject to this limitation as of October 31, 2002
was
$407,063, which represents 0.05% of the Fund's net assets, all of which is
considered restricted. Information concerning restricted securities is as
follows:
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
- --------------------------------------------------------------------------------
6. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes, provided
asset coverage for borrowings exceeds 300%. The Fund has entered into an
agreement which enables it to participate with other Oppenheimer funds in an
unsecured line of credit with a bank, which permits borrowings up to $400
million, collectively. Interest is charged to each fund, based on its
borrowings, at a rate equal to the Federal Funds Rate plus 0.45%. Borrowings
are payable within 30 days after such loan is executed. The Fund also pays a
commitment fee equal to its pro rata share of the average unutilized amount
of
the credit facility at a rate of 0.08% per annum.
The Fund had no borrowings outstanding during the year ended or at October
31, 2002.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Oppenheimer Select Managers Gartmore Millennium Growth Fund II:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Select Managers Gartmore Millennium Growth Fund II, which is a
series of Oppenheimer Select Managers, including the statement of investments,
as of November 30, 2002, and the related statement of operations for the year
then ended, the statements of changes in net assets and the financial highlights
for the periods indicated. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with 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 November 30, 2002, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Select Managers Gartmore Millennium Growth Fund II as of November
30, 2002, the results of its operations for the year then ended, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Denver, Colorado
December 20, 2002
STATEMENT OF INVESTMENTS
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Common Stocks--104.4%
- ----------------------------------------------------------------
Consumer Discretionary--19.9%
- ----------------------------------------------------------------
Auto Components--1.5%
CarMax, Inc. 1 1,913 $ 37,686
- ----------------------------------------------------------------
Gentex Corp. 1 472 14,165
------------
51,851
- ----------------------------------------------------------------
Hotels, Restaurants & Leisure--3.4%
CBRL Group, Inc. 807 21,999
- ----------------------------------------------------------------
Cheesecake Factory, Inc. (The) 1 1,021 36,409
- ----------------------------------------------------------------
Darden Restaurants, Inc. 938 20,289
- ----------------------------------------------------------------
International Game Technology 1 310 23,901
- ----------------------------------------------------------------
Yum! Brands, Inc. 1 712 17,024
------------
119,622
- ----------------------------------------------------------------
Household Durables--1.4%
Mohawk Industries, Inc. 1 353 21,748
- ----------------------------------------------------------------
Newell Rubbermaid, Inc. 877 27,819
------------
49,567
- ----------------------------------------------------------------
Internet & Catalog Retail--2.0%
Amazon.com, Inc. 1 1,520 35,492
- ----------------------------------------------------------------
eBay, Inc. 1 510 35,149
------------
70,641
- ----------------------------------------------------------------
Media--2.0%
Getty Images, Inc. 1 859 25,658
- ----------------------------------------------------------------
Insight Communications Co., Inc. 1 1,427 19,764
- ----------------------------------------------------------------
Regal Entertainment Group 1,212 27,391
------------
72,813
- ----------------------------------------------------------------
Multiline Retail--1.3%
99 Cents Only Stores 1 714 19,970
- ----------------------------------------------------------------
Family Dollar Stores, Inc. 920 27,131
------------
47,101
- ----------------------------------------------------------------
Specialty Retail--8.3%
Advance Auto Parts, Inc. 1 604 31,136
- ----------------------------------------------------------------
AutoZone, Inc. 1 280 22,876
- ----------------------------------------------------------------
Bed Bath & Beyond, Inc. 1 1,890 65,564
- ----------------------------------------------------------------
GameStop Corp. 1 3,487 64,858
- ----------------------------------------------------------------
Guitar Center, Inc. 1 1,190 23,753
- ----------------------------------------------------------------
Rent-A-Center, Inc. 1 309 15,354
- ----------------------------------------------------------------
Tiffany & Co. 657 18,646
- ----------------------------------------------------------------
TJX Cos., Inc. (The) 874 17,104
- ----------------------------------------------------------------
Tractor Supply Co. 1 448 19,926
- ----------------------------------------------------------------
Williams-Sonoma, Inc. 1 683 17,990
------------
297,207
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Consumer Staples--3.2%
- ----------------------------------------------------------------
Beverages--1.3%
Constellation Brands, Inc., Cl. A 1 920 $ 21,638
- ----------------------------------------------------------------
Pepsi Bottling Group, Inc. (The) 827 23,752
------------
45,390
- ----------------------------------------------------------------
Food & Drug Retailing--0.8%
Whole Foods Market, Inc. 1 557 29,604
- ----------------------------------------------------------------
Food Products--1.1%
Wrigley, William Jr. Co. 720 38,729
- ----------------------------------------------------------------
Energy--4.0%
- ----------------------------------------------------------------
Energy Equipment & Services--2.3%
Nabors Industries Ltd. 1 580 20,532
- ----------------------------------------------------------------
Pride International, Inc. 1 2,160 30,197
- ----------------------------------------------------------------
Smith International, Inc. 1 936 31,824
------------
82,553
- ----------------------------------------------------------------
Oil & Gas--1.7%
Burlington Resources, Inc. 596 25,104
- ----------------------------------------------------------------
Noble Energy, Inc. 947 35,048
------------
60,152
- ----------------------------------------------------------------
Financials--7.7%
- ----------------------------------------------------------------
Banks--2.3%
Charter One Financial, Inc. 755 22,726
- ----------------------------------------------------------------
Investors Financial Services Corp. 577 20,183
- ----------------------------------------------------------------
Synovus Financial Corp. 1,840 38,327
------------
81,236
- ----------------------------------------------------------------
Diversified Financials--3.3%
Federated Investors, Inc., Cl. B 679 18,367
- ----------------------------------------------------------------
Moody's Corp. 589 25,928
- ----------------------------------------------------------------
Portfolio Recovery Associates, Inc. 1 2,283 40,158
- ----------------------------------------------------------------
SLM Corp. 337 32,935
------------
117,388
- ----------------------------------------------------------------
Insurance--1.4%
AMBAC Financial Group, Inc. 806 50,383
- ----------------------------------------------------------------
Real Estate--0.7%
Host Marriott Corp. 1 2,767 25,318
- ----------------------------------------------------------------
Health Care--23.8%
- ----------------------------------------------------------------
Biotechnology--3.1%
Biogen, Inc. 1 510 22,573
- ----------------------------------------------------------------
Gilead Sciences, Inc. 1 715 28,185
- ----------------------------------------------------------------
IDEC Pharmaceuticals Corp. 1 610 20,069
- ----------------------------------------------------------------
Medimmune, Inc. 1 1,120 29,546
- ----------------------------------------------------------------
Millennium Pharmaceuticals, Inc. 1 920 9,209
------------
109,582
6 OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Health Care Equipment & Supplies--6.9%
Biomet, Inc. 1,530 $ 42,075
- ----------------------------------------------------------------
Boston Scientific Corp. 1 602 25,284
- ----------------------------------------------------------------
Dentsply International, Inc. 786 26,370
- ----------------------------------------------------------------
ResMed, Inc. 1 1,127 36,526
- ----------------------------------------------------------------
St. Jude Medical, Inc. 1 1,100 38,302
- ----------------------------------------------------------------
Stryker Corp. 506 31,296
- ----------------------------------------------------------------
Varian Medical Systems, Inc. 1 572 26,707
- ----------------------------------------------------------------
Zimmer Holdings, Inc. 1 540 20,326
------------
246,886
- ----------------------------------------------------------------
Health Care Providers & Services--11.2%
Advisory Board Co. (The) 1 546 16,926
- ----------------------------------------------------------------
AmerisourceBergen Corp. 250 14,505
- ----------------------------------------------------------------
Anthem, Inc. 1 303 17,953
- ----------------------------------------------------------------
Caremark Rx, Inc. 1 920 16,247
- ----------------------------------------------------------------
Community Health Systems, Inc. 1,486 30,537
- ----------------------------------------------------------------
Express Scripts, Inc. 1 564 28,544
- ----------------------------------------------------------------
First Health Group Corp. 1 716 17,084
- ----------------------------------------------------------------
Health Management Assn., Inc., Cl. A 1,084 19,002
- ----------------------------------------------------------------
ICON plc, Sponsored ADR 1 1,757 40,938
- ----------------------------------------------------------------
Laboratory Corp. of America Holdings 1 596 14,304
- ----------------------------------------------------------------
McKesson Corp. 648 16,796
- ----------------------------------------------------------------
Medical Staffing Network
Holdings, Inc. 1 1,033 16,993
- ----------------------------------------------------------------
Pharmaceutical Product
Development, Inc. 1 1,020 30,549
- ----------------------------------------------------------------
Priority Healthcare Corp., Cl. B 1 1,377 30,322
- ----------------------------------------------------------------
Schein (Henry), Inc. 1 334 14,215
- ----------------------------------------------------------------
Triad Hospitals, Inc. 1 884 26,653
- ----------------------------------------------------------------
Universal Health Services, Inc., Cl. B 1 410 18,347
- ----------------------------------------------------------------
WellPoint Health Networks, Inc. 1 447 29,426
------------
399,341
- ----------------------------------------------------------------
Pharmaceuticals--2.6%
Allergan, Inc. 550 32,334
- ----------------------------------------------------------------
Barr Laboratories, Inc. 1 161 10,631
- ----------------------------------------------------------------
IVAX Corp. 1 1,037 14,010
- ----------------------------------------------------------------
Medicis Pharmaceutical Corp., Cl. A 1 391 18,084
- ----------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 610 18,294
------------
93,353
- ----------------------------------------------------------------
Industrials--15.7%
- ----------------------------------------------------------------
Aerospace & Defense--0.4%
InVision Technologies, Inc. 1 510 14,755
- ----------------------------------------------------------------
Airlines--1.0%
JetBlue Airways Corp. 1 988 36,576
- ----------------------------------------------------------------
Building Products--1.0%
Masco Corp. 1,784 35,983
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Commercial Services & Supplies--11.0%
Administaff, Inc. 1 2,287 $ 15,552
- ----------------------------------------------------------------
Apollo Group, Inc., Cl. A 1 775 31,969
- ----------------------------------------------------------------
Automatic Data Processing, Inc. 400 17,388
- ----------------------------------------------------------------
BISYS Group, Inc. (The) 1 604 12,249
- ----------------------------------------------------------------
Career Education Corp. 1 323 12,568
- ----------------------------------------------------------------
CheckFree Corp. 1 1,120 21,941
- ----------------------------------------------------------------
ChoicePoint, Inc. 1 1,046 39,309
- ----------------------------------------------------------------
Cintas Corp. 510 25,740
- ----------------------------------------------------------------
Corporate Executive Board Co. 1 503 16,599
- ----------------------------------------------------------------
First Data Corp. 510 17,666
- ----------------------------------------------------------------
Fiserv, Inc. 1 1,330 45,114
- ----------------------------------------------------------------
H&R Block, Inc. 1,001 38,368
- ----------------------------------------------------------------
Iron Mountain, Inc. 1 883 29,218
- ----------------------------------------------------------------
Stericycle, Inc. 1 978 32,586
- ----------------------------------------------------------------
Weight Watchers International, Inc. 1 762 34,480
------------
390,747
- ----------------------------------------------------------------
Electrical Equipment--0.5%
AU Optronics Corp., ADR 1 2,400 16,464
- ----------------------------------------------------------------
Machinery--1.5%
Danaher Corp. 410 25,764
- ----------------------------------------------------------------
SureBeam Corp., Cl. A 1 5,310 28,621
------------
54,385
- ----------------------------------------------------------------
Trading Companies & Distributors--0.3%
Fastenal Co. 310 11,076
- ----------------------------------------------------------------
Information Technology--27.7%
- ----------------------------------------------------------------
Communications Equipment--3.3%
3Com Corp. 1 3,600 18,540
- ----------------------------------------------------------------
Avaya, Inc. 1 6,900 20,010
- ----------------------------------------------------------------
CommScope, Inc. 1 1,000 9,000
- ----------------------------------------------------------------
Comverse Technology, Inc. 1 1,300 15,756
- ----------------------------------------------------------------
JDS Uniphase Corp. 1 2,700 9,207
- ----------------------------------------------------------------
Sycamore Networks, Inc. 1 5,600 17,360
- ----------------------------------------------------------------
Tellabs, Inc. 1 3,000 26,610
------------
116,483
- ----------------------------------------------------------------
Computers & Peripherals--3.9%
ATI Technologies, Inc. 1 4,600 37,122
- ----------------------------------------------------------------
Dell Computer Corp. 1 720 20,592
- ----------------------------------------------------------------
Lexmark International, Inc., Cl. A 1 200 13,228
- ----------------------------------------------------------------
Pinnacle Systems, Inc. 1 1,600 22,608
- ----------------------------------------------------------------
SanDisk Corp. 1 1,200 33,300
- ----------------------------------------------------------------
Sigma Designs, Inc. 1 2,600 10,501
------------
137,351
7 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Electronic Equipment & Instruments--3.2%
Fisher Scientific International, Inc. 1 1,140 $ 34,155
- ----------------------------------------------------------------
PerkinElmer, Inc. 3,600 30,816
- ----------------------------------------------------------------
ScanSource, Inc. 1 356 25,988
- ----------------------------------------------------------------
Waters Corp. 1 904 24,227
------------
115,186
- ----------------------------------------------------------------
Internet Software & Services--1.0%
Ameritrade Holding Corp. 1 3,300 16,995
- ----------------------------------------------------------------
Yahoo!, Inc. 1 1,100 20,097
------------
37,092
- ----------------------------------------------------------------
IT Consulting & Services--1.7%
Anteon International Corp. 1 720 16,812
- ----------------------------------------------------------------
MPS Group, Inc. 1 2,660 15,960
- ----------------------------------------------------------------
Unisys Corp. 1 2,500 28,000
------------
60,772
- ----------------------------------------------------------------
Office Electronics--0.6%
Zebra Technologies Corp., Cl. A 1 351 22,541
- ----------------------------------------------------------------
Semiconductor Equipment & Products--6.0%
Altera Corp. 1 1,500 21,795
- ----------------------------------------------------------------
Analog Devices, Inc. 1 320 9,821
- ----------------------------------------------------------------
ChipPAC, Inc. 1 4,600 20,796
- ----------------------------------------------------------------
Linear Technology Corp. 1,020 33,895
- ----------------------------------------------------------------
National Semiconductor Corp. 1 1,400 28,420
- ----------------------------------------------------------------
Skyworks Solutions, Inc. 1 4,460 53,743
- ----------------------------------------------------------------
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR 4,900 45,080
------------
213,550
- ----------------------------------------------------------------
Software--8.0%
Adobe Systems, Inc. 700 20,671
- ----------------------------------------------------------------
Autodesk, Inc. 1,200 18,588
- ----------------------------------------------------------------
BEA Systems, Inc. 1 1,300 14,378
- ----------------------------------------------------------------
Cadence Design Systems, Inc. 1 1,120 16,150
- ----------------------------------------------------------------
Electronic Arts, Inc. 1 610 41,395
- ----------------------------------------------------------------
Informatica Corp. 1 2,600 17,940
- ----------------------------------------------------------------
Intuit, Inc. 1 500 26,970
- ----------------------------------------------------------------
Network Associates, Inc. 1 1,220 22,265
- ----------------------------------------------------------------
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung),
Sponsored ADR 820 18,245
- ----------------------------------------------------------------
Symantec Corp. 1 800 34,984
- ----------------------------------------------------------------
Take-Two Interactive Software, Inc. 1 600 17,958
- ----------------------------------------------------------------
Veritas Software Corp. 1 1,900 34,542
------------
284,086
Market Value
Shares See Note 1
- ----------------------------------------------------------------
Materials--1.9%
- ----------------------------------------------------------------
Chemicals--1.4%
Ecolab, Inc. 586 $ 29,106
- ----------------------------------------------------------------
International Flavors & Fragrances, Inc. 691 22,817
------------
51,923
- ----------------------------------------------------------------
Metals & Mining--0.5%
Nucor Corp. 363 18,237
- ----------------------------------------------------------------
Telecommunication Services--0.5%
- ----------------------------------------------------------------
Wireless Telecommunication Services--0.5%
Vodafone Group plc, Sponsored ADR 1,000 18,750
------------
Total Common Stocks (Cost $3,686,118) 3,724,674
- ----------------------------------------------------------------
Total Investments, at Value
(Cost $3,686,118) 104.4% 3,724,674
- ----------------------------------------------------------------
Liabilities in Excess of Other Assets (4.4) (158,564)
---------------------
Net Assets 100.0% $ 3,566,110
=====================
Footnotes to Statement of Investments
1. Non-income producing security.
See accompanying Notes to Financial Statements.
8 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
STATEMENT OF ASSETS AND LIABILITIES November 30, 2002
- -----------------------------------------------------------------------------------------
Assets
Investments, at value (cost $3,686,118)--see accompanying statement
$ 3,724,674
- -----------------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold 183,601
Interest and dividends
754
Shares of beneficial interest
sold 458
Other
846
- ------------
Total
assets
3,910,333
- -----------------------------------------------------------------------------------------
Liabilities
Bank
overdraft
86,049
- -----------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased
238,636
Shareholder
reports 9,963
Legal, auditing and other professional
fees 7,659
Transfer and shareholder servicing agent
fees 569
Trustees'
compensation 321
Distribution and service plan
fees 210
Other
816
- ------------
Total
liabilities
344,223
- -----------------------------------------------------------------------------------------
Net Assets
$ 3,566,110
============
- -----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital
$ 5,783,279
- -----------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions
(2,255,725)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation on
investments 38,556
- ------------
Net Assets
$ 3,566,110
============
9 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
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 $3,147,846 and 545,996
shares of beneficial interest
outstanding) $5.77
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering
price) $6.12
- -----------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price
per share (based on net assets of $193,490 and 34,012
shares of beneficial interest
outstanding) $5.69
- -----------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price
per share (based on net assets of $156,099 and 27,452
shares of beneficial interest
outstanding) $5.69
- -----------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price
per share (based on net assets of $68,096 and 11,882
shares of beneficial interest
outstanding) $5.73
- -----------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $579 and 100 shares
of beneficial interest
outstanding) $5.79
See accompanying Notes to Financial Statements.
10 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
STATEMENT OF OPERATIONS For the Year Ended November 30, 2002
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $61) $ 9,524
- --------------------------------------------------------------------------------
Interest 3,247
- -------------
Total investment income 12,771
- --------------------------------------------------------------------------------
Expenses
Management fees 46,707
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 593
Class B 1,479
Class C 1,309
Class N 251
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 4,697
Class B 849
Class C 547
Class N 276
Class Y 866
- --------------------------------------------------------------------------------
Shareholder reports 18,055
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 10,667
- --------------------------------------------------------------------------------
Trustees' compensation 3,945
- --------------------------------------------------------------------------------
Custodian fees and expenses 82
- --------------------------------------------------------------------------------
Other 1,680
- -------------
Total expenses 92,003
Less voluntary reimbursement of expenses
(19,411)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Classes A, B, C and N
(1,433)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class Y
(863)
- -------------
Net expenses 70,296
- --------------------------------------------------------------------------------
Net Investment Loss
(57,525)
- --------------------------------------------------------------------------------
Realized and Unrealized Loss
Net realized loss on investments
(885,171)
- --------------------------------------------------------------------------------
Net change in unrealized depreciation on investments
(121,962)
- -------------
Net realized and unrealized loss
(1,007,133)
- --------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations
$(1,064,658)
=============
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended November 30, 2002
2001 1
- ------------------------------------------------------------------------------------
Operations
Net investment loss $ (57,525) $
(37,343)
- ------------------------------------------------------------------------------------
Net realized loss (885,171)
(1,370,554)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (121,962)
160,518
- -----------------------------
Net decrease in net assets resulting from operations (1,064,658)
(1,247,379)
- ------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial
interest transactions:
Class A 79,719
5,282,582
Class B 133,805
88,164
Class C 79,667
118,917
Class N 50,078
28,215
Class Y --
--
- ------------------------------------------------------------------------------------
Net Assets
Total increase (decrease) (721,389)
4,270,499
- ------------------------------------------------------------------------------------
Beginning of period 4,287,499
17,000 2
- -----------------------------
End of period $ 3,566,110 $
4,287,499
=============================
1. For the period from February 16, 2001 (inception of offering) to November
30,
2001.
2. Reflects the value of the Manager's initial seed money investment at
December 22, 2000.
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
FINANCIAL HIGHLIGHTS
Class
A Class B Class C
Year Year Year
Ended Ended Ended
Nov.
30, Nov. 30, Nov. 30,
2002 2001
1 2002 2001 1 2002 2001 1
- ------------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 7.56
$10.00 $ 7.51 $10.00 $ 7.51 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.09)
(.07) (.05) (.14) (.11) (.04)
Net realized and unrealized loss (1.70)
(2.37) (1.77) (2.35) (1.71) (2.45)
- -------------------------------------------------------------------------------
Total from investment operations (1.79)
(2.44) (1.82) (2.49) (1.82) (2.49)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.77 $
7.56 $5.69 $ 7.51 $5.69 $ 7.51
===============================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 (23.68)%
(24.40)% (24.23)% (24.90)% (24.23)% (24.90)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $3,148
$4,046 $193 $ 95 $156 $114
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,560
$4,255 $148 $118 $131 $ 40
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (1.42)%
(1.04)% (2.16)% (1.93)% (2.16)% (1.93)%
Expenses 2.24%
1.75% 3.66% 2.74% 3.51% 2.76%
Expenses, net of voluntary reimbursement of expenses
and/or voluntary waiver of transfer agent fees 1.73%
1.75% 2.77% 2.57% 2.79% 2.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 408%
370% 408% 370% 408% 370%
1. For the period from February 16, 2001 (inception of offering) to November
30,
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.
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
FINANCIAL HIGHLIGHTS Continued
Class
N Class Y
Year Year
Ended Ended
Nov.
30, Nov. 30,
2002 2001 1
2002 2001 2
- -----------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 7.53 $ 9.06 $
7.57 $10.00
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.10) (.03)
(.08) (.05)
Net realized and unrealized loss (1.70) (1.50)
(1.70) (2.38)
- -------------------------------------
Total from investment operations (1.80) (1.53)
(1.78) (2.43)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $5.73 $7.53
$5.79 $7.57
=====================================
- -----------------------------------------------------------------------------------------
Total Return, at Net Asset Value 3 (23.90)% (16.89)%
(23.51)% (24.30)%
- -----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $68 $31
$1 $1
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $50 $ 9
$1 $1
Ratios to average net assets: 4
Net investment loss (1.67)% (1.53)%
(0.80)% (0.63)%
Expenses 3.14% 2.27%
88.69% 501.80%
Expenses, net of voluntary reimbursement of expenses
and/or voluntary waiver of transfer agent fees 2.28% 1.74%
1.62% 1.45%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 408% 370%
408% 370%
1. For the period from March 1, 2001 (inception of offering) to November 30,
2001.
2. For the period from February 16, 2001 (inception of offering) to November
30,
2001.
3. 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.
4. Annualized for periods of less than one full year.
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Select Managers Gartmore Millennium Growth Fund II (the Fund), a
series of Oppenheimer Select Managers, is an open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek long-term capital appreciation. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Manager
has entered into a sub-advisory agreement with Gartmore Mutual Fund Capital
Trust (the Sub-Advisor).
The Fund offers Class A, Class B, Class C, Class N and Class Y
shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have
identical
rights and voting privileges. Earnings, net assets and net asset value per
share
may differ by minor amounts due to each class having its own expenses directly
attributable to that class. Classes A, B, C and N have separate distribution
and/or service plans. No such plan has been adopted for Class Y shares. Class
B
shares will automatically convert to Class A shares six years after the date
of
purchase.
The following is a summary of significant accounting policies
consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are
valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of
the
Manager, may transfer uninvested cash balances into one or more joint
repurchase
agreement accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement 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 of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
During the fiscal year ended November 30, 2002, the Fund did not utilize
any
capital loss carryforward.
15 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
As of November 30, 2002, the Fund had available for federal income tax
purposes
unused capital loss carryforwards as follows:
Expiring
-------------------------------------
2009 $1,370,554
2010 880,670
----------
Total $2,251,224
==========
As of November 30, 2002, the Fund had approximately $5,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2011.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of dividends and distributions made during the fiscal
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to
timing
of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net
realized
gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended November 30, 2002, amounts have been reclassified to reflect
decrease in paid-in capital $57,525. Accumulated net investment loss was
decreased by the same amount. Net assets of the Fund were unaffected by the
reclassifications.
No distributions were paid during the year ended November 30, 2002 and the
period ended November 30, 2001.
As of November 30, 2002, the components of distributable earnings on a tax
basis were as follows:
Accumulated net realized loss $(2,255,725)
Net unrealized appreciation 38,556
-----------
Total $(2,217,169)
===========
- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or
upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial state- ments and the reported amounts of income
and expenses during the reporting period. Actual results could differ from
those estimates.
16 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
Year Ended November 30, 2002 Period Ended
November 30, 2001 1
Shares Amount
Shares Amount
- -----------------------------------------------------------------------------------------------
Class A
Sold 30,084 $ 196,309
595,277 $5,822,887
Redeemed (19,548) (116,590)
(61,217) (540,305)
- ----------------------------------------------------------------
Net increase 10,536 $ 79,719
534,060 $5,282,582
================================================================
- -----------------------------------------------------------------------------------------------
Class B
Sold 42,282 $ 258,845
69,186 $ 598,656
Redeemed (20,912) (125,040)
(56,644) (510,492)
- ----------------------------------------------------------------
Net increase 21,370 $ 133,805
12,542 $ 88,164
================================================================
- -----------------------------------------------------------------------------------------------
Class C
Sold 20,939 $ 138,980
15,134 $ 119,151
Redeemed (8,689) (59,313)
(32) (234)
- ----------------------------------------------------------------
Net increase 12,250 $ 79,667
15,102 $ 118,917
================================================================
- -----------------------------------------------------------------------------------------------
Class N
Sold 7,953 $ 51,460
4,166 $ 28,215
Redeemed (237) (1,382)
- -- --
- ----------------------------------------------------------------
Net increase 7,716 $ 50,078
4,166 $ 28,215
================================================================
- -----------------------------------------------------------------------------------------------
Class Y
Sold -- $ --
- -- $ --
Redeemed -- --
- -- --
- ----------------------------------------------------------------
Net increase (decrease) -- $ --
- -- $ --
================================================================
1. For the period from February 16, 2001 (inception of offering) to November
30, 2001, for Class A, B, C and Y shares and for the period from March 1,
2001
(inception of offering) to November 30, 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 November 30, 2002, were $16,210,702 and $15,219,389, respectively.
As of November 30, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $3,686,118 was composed of:
Gross unrealized appreciation $ 251,856
Gross unrealized depreciation (213,300)
---------
Net unrealized appreciation $ 38,556
=========
The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.
17 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with
the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 1.20% of the first $400 million of average annual net assets of
the Fund, 1.10% of the next $400 million, and 1.00% of average annual net
assets
in excess of $800 million. The Manager has voluntarily undertaken to assume
certain Fund expenses. The Manager reserves the right to amend or terminate
that
expense assumption at any time.
- --------------------------------------------------------------------------------
Sub-Advisor Fees. The Manager has retained Gartmore Mutual Fund Capital Trust
as
the Sub-Advisor to provide the day-to-day portfolio management of the Fund.
For
the year ended November 30, 2002, the Manager paid $27,568 to the Sub-Advisor.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund
pays
OFS a $19.75 per account fee.
Additionally, Class Y shares are subject to minimum fees of $5,000 for
assets of less than $10 million and $10,000 for assets of $10 million or more.
The Class Y shares are subject to the minimum fees in the event that the per
account fee does not equal or exceed the applicable minimum fees. OFS may
voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent
fees up to an annual rate of 0.35% for all classes. Effective November 1,
2002,
Class Y shares were changed from 0.25% to 0.35%. This undertaking may be
amended
or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan (12b-1) Fees. Under its General Distributor's
Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the
Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the different classes of shares of the Fund.
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
- -----------------------------------------------------------------------------------------------------------------
November 30, 2002 $2,876 $1,899 $7
$4,524 $926 $279
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 Deferred Contingent
Deferred Contingent Deferred Contingent Deferred
Sales Charges Sales
Charges Sales Charges Sales Charges
Retained by Retained
by Retained by Retained by
Year Ended Distributor
Distributor Distributor Distributor
- ----------------------------------------------------------------------------------------------------------------------------------
November 30, 2002 $--
$2,142 $8 $4
- --------------------------------------------------------------------------------
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. For the year ended November
30,
2002, payments under the Class A Plan totaled $593, all of which were paid by
the Distributor to recipients, and included $167 paid to an affiliate of the
Manager. Any unreimbursed expenses the Distributor incurs with respect to
Class
A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
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. Under the plans, the Fund pays the Distributor an annual asset-based
sales charge of 0.75% per year on Class B shares and on Class C shares and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% per year
on Class N shares. The Distributor also receives a service fee of 0.25% per
year
under each plan.
18 | OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II
Distribution fees paid to the Distributor for the year ended November 30,
2002,
were as follows:
Distributor's Aggregate
Distributor's Aggregate Unreimbursed
Total Payments Amount
Retained Unreimbursed Expenses Expenses as % of
Under Plan by
Distributor Under Plan Net Assets of Class
- ----------------------------------------------------------------------------------------------------------------------------------
Class B Plan $1,479
$1,339 $41,203 21.29%
Class C Plan 1,309
1,025 41,624 26.67
Class N Plan 251
236 5,037 7.40
- --------------------------------------------------------------------------------
5. Borrowing and Lending Arrangements Bank Borrowings. Until November 12, 2002,
the Fund had the ability to borrow from a bank for temporary or emergency
purposes provided asset coverage for borrowings exceeded 300%. The Fund and
other Oppenheimer funds participated in a $400 million unsecured line of credit
with a bank. Under that unsecured line of credit, interest was charged to each
fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus
0.45%. Under that credit facility, the Fund paid a commitment fee equal to its
pro rata share of the average unutilized amount of the credit facility at a rate
of 0.08% per annum.
- --------------------------------------------------------------------------------
Interfund Borrowing and Lending Arrangements. Effective November 12, 2002, the
following interfund borrowing and lending arrangements went into effect.
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. Implementation of interfund lending will be accomplished
consistent with applicable regulatory requirements, including the provisions of
the SEC order. 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. When the Fund lends assets to another affiliated fund, the
Fund is subject to the risk that the borrowing fund fails to repay the loan. The
Fund had no borrowing or lending arrangements outstanding during the year ended
or at November 30, 2002.