As filed with the Securities and Exchange Commission on July 18, 2003
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ X /
PRE-EFFECTIVE AMENDMENT NO.___
/ /
POST-EFFECTIVE AMENDMENT NO.__
/ /
OPPENHEIMER GROWTH FUND
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Centennial, Colorado 80112
(Address of Principal Executive Offices)
303-768-3200
(Registrant's Telephone Number)
Robert G. Zack, Esq.
Senior Vice President amp;amp; General Counsel
OppenheimerFunds, Inc.
498 Seventh Avenue, New York, New York 10148
(212) 323-0250
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement
becomes effective.
(Approximate Date of Proposed Public Offering)
Title of Securities Being Registered: Class A, Class B,
Class C, Class N and Class Y shares of Oppenheimer Growth
Fund.
It is proposed that this filing will become effective on
August 17, 2003 pursuant to Rule 488.
No filing fee is due because of reliance on Section 24(f)
of the Investment Company Act of 1940.
- ------------------------------------------------------------------------------
The Registrant hereby amends the Registration statement on
such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a),
shall determine.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages
and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Mercury Advisers Focus Growth Fund, a
series of Oppenheimer Select Managers and Prospectus for
Oppenheimer Growth Fund
Exhibit A - Agreement and Plan of Reorganization between
Mercury Advisers Focus Growth Fund, a series of Oppenheimer
Select Mangers and Oppenheimer Growth Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
SHAREHOLDER LETTER
John V. Murphy
- --------------
President amp;amp;
Chief Executive Officer OppenheimerFunds Logo
498 Seventh Avenue, 10th Floor
New York, NY 10018
www.oppenheimerfunds.com
August 25, 2003
Dear Shareholder of Mercury Advisers Focus Growth Fund, a
series of Oppenheimer Select Managers,
One of the things we are proud of at OppenheimerFunds, Inc.
is our commitment to our Fund shareholders. I am writing to
you today to let you know about a positive change that has
been proposed for Mercury Advisers Focus Growth Fund, a
series of Oppenheimer Select Managers.
After careful consideration, the Board of Trustees has
determined that it would be in the best interest of
shareholders of Mercury Advisers Focus Growth Fund, a
series of Oppenheimer Select Managers ("MAFG Fund") to
reorganize into another Oppenheimer fund, Oppenheimer
Growth Fund ("Growth Fund"). A shareholder meeting has
been scheduled in October, and all Mercury Advisers Focus
Growth Fund shareholders of record as of July 29, 2003 are
being asked to vote either in person or by proxy, on the
proposed reorganization. You will find a proxy statement
detailing the proposal, a ballot card, a Growth Fund
prospectus, instruction for voting by telephone and a
postage-paid return envelope enclosed for your use.
Why does the Board of Trustees recommend this change?
- -----------------------------------------------------
Mercury Advisers Focus Growth Fund and Growth Fund have
similar objectives. Growth Fund seeks capital appreciation
and Mercury Advisers Focus Growth Fund seeks long-term
growth of capital. Additionally both Funds invest
primarily in the common stocks of U.S. companies. Both
Mercury Advisers Focus Growth Fund and Growth Fund may
invest in foreign equity and debt securities.
Among other factors, the Mercury Advisers Focus Growth Fund
Board considered that the expense ratio of Growth Fund has
been lower than the expense ratio of Mercury Advisers Focus
Growth Fund. Although past performance is not predictive
of future results, shareholders of Mercury Advisers Focus
Growth Fund would have an opportunity to become
shareholders of a Fund with a better long-term performance
history.
How do you vote?
- ----------------
To cast your vote, simply mark, sign and date the enclosed
proxy ballot and return it in the postage-paid envelope
today. You may also vote by telephone by following the
instructions on the proxy ballot. Using a touch-tone
telephone to cast your vote saves you time and helps reduce
the Fund's expenses. If you vote by phone, you do not need
to mail the proxy ballot.
Remember, it can be expensive for the Fund--and ultimately
for you as a shareholder--to remail ballots if not enough
responses are received to conduct the meeting. If your
vote is not received before the scheduled meeting, you may
receive a telephone call asking you to vote.
Please read the enclosed proxy statement for complete
details on the proposal. Of course, if you have any
questions, please contact your financial advisor or call us
at 1.800.708.7780. As always, we appreciate your
confidence in OppenheimerFunds and look forward to serving
you for many years to come.
Sincerely,
John V. Murphy
Enclosures
NOTICE OF MEETING
MERCURY ADVISOR FOCUS GROWTH FUND,
a series of Oppenheimer Select Managers
6803 South Tucson Way, Centennial, CO 80112
1.800.708.7780
Notice of Special Meeting of Shareholders
To Be Held
October 10, 2003
To the Shareholders of Mercury Advisers Focus Growth Fund,
a series of Oppenheimer Select Managers:
Notice is hereby given that a Special Meeting of the
Shareholders of Mercury Advisers Focus Growth Fund, a
series of Oppenheimer Select Managers, a registered
investment management company, will be held at 6803 South
Tucson Way, Centennial, CO 80112 at 1:00 P.M., Mountain
time, on October 10, 2003, or any adjournments thereof (the
"Meeting"), for the following purposes:
1. To approve an Agreement and Plan of Reorganization
between Mercury Advisers Focus Growth Fund, a series of
Oppenheimer Select Managers ("MAFG Fund") and
Oppenheimer Growth Fund ("Growth Fund"), and the
transactions contemplated thereby, including (a) the
transfer of substantially all the assets of Mercury
Advisers Focus Growth Fund to Growth Fund in exchange
for Class A, Class B, Class C, Class N and Class Y
shares of Growth Fund, (b) the distribution of these
shares of Growth Fund to the corresponding Class A,
Class B, Class C, Class N and Class Y shareholders of
Mercury Advisers Focus Growth Fund in complete
liquidation of Mercury Advisers Focus Growth Fund and
(c) the cancellation of the outstanding shares of
Mercury Advisers Focus Growth Fund (all of the foregoing
being referred to as the "Proposal").
2. To act upon such other matters as may properly come
before the Meeting.
Shareholders of record at the close of business on July 29,
2003 are entitled to notice of, and to vote at, the
Meeting. The Proposal is more fully discussed in this
Prospectus Proxy Statement. Please read it carefully
before telling us, through your proxy or in person, how you
wish your shares to be voted. The Board of Trustees of
Mercury Advisers Focus Growth Fund, a series of Oppenheimer
Select Managers recommends a vote in favor of the
Proposal. WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE
ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Robert G. Zack, Secretary
August 25, 2003
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Shareholders who do not expect to attend the Meeting are
requested to indicate voting instructions on the enclosed
proxy and to mark, date, sign and return it in the
accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly
mailing your proxy no matter how large or small your
holdings may be.
PROXY CARD
PROXY CARD
Mercury Advisors Focus Growth Fund, a Series of
Oppenheimer Select Managers
Proxy For a Special Shareholders Meeting To Be Held
on OCTOBER 31, 2003
The undersigned, revoking prior proxies, hereby appoints
Brian Wixted, Philip Vottiero, Kate Ives and Philip
Masterson, and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of
substitution, to vote shares held in the name of the
undersigned on the record date at the Special Meeting of
Shareholders of Mercury Advisors Focus Growth Fund, a
series of Oppenheimer Select Managers (the "Fund") to be
held at 6803 South Tucson Way, Centennial, Colorado, 80112,
on October 31, 2003, at 1:00 p.m. Mountain time, or at any
adjournment thereof, upon the proposal described in the
Notice of Meeting and accompanying Proxy Statement, which
have been received by the undersigned.
This proxy is solicited on behalf of the Fund's Board of
Trustees, and the proposal (set forth on the reverse side
of this proxy card) has been proposed by the Board of
Trustees. When properly executed, this proxy will be voted
as indicated on the reverse side or "FOR" a proposal if no
choice is indicated. The proxy will be voted in accordance
with the proxy holders' best judgment as to any other
matters that may arise at the Meeting.
VOTE VIA THE TELEPHONE:
1-800-597-7836
CONTROL NUMBER: 999 9999
9999 999
Note: Please sign this proxy
exactly as your name or names
appear hereon. Each joint
owner should sign. Trustees
and other fiduciaries should
indicate the capacity in
which they sign. If a
corporation, partnership or
other entity, this signature
should be that of a duly
authorized individual who
should state his or her title.
Signature
Signature of joint owner, if
any
Date
PLEASE VOTE ON THE REVERSE SIDE, SIGN AND DATE THIS PROXY
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
The Proposal:
To approve an Agreement and Plan of Reorganization between
Mercury Advisors Focus Growth Fund, a series of Oppenheimer
Select Managers ("MAFG Fund"), and Oppenheimer Growth Fund
("Growth Fund") and the transactions contemplated thereby,
including: (a) the transfer of substantially all assets of
MAFG Fund to Growth Fund in exchange for Class A, Class B,
Class C, Class N and Class Y shares of Growth Fund, (b) the
distribution of such shares of Growth Fund to the
corresponding Class A, Class B, Class C, Class N and Class
Y shareholders of MAFG Fund in complete liquidation of MAFG
Fund and (c) the cancellation of the outstanding shares of
MAFG Fund.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example:[ ]
FOR [___] AGAINST [___] ABSTAIN [___]
TELEPHONE VOTING INSTRUCTIONS
Telephone Voting Instructions
1.800.597.7836
Vote your OppenheimerFunds proxy over the phone
Voting your proxy is important.
And now OppenheimerFunds has
made it easy. Vote at your
convenience, 24 hours a day, and
save postage costs, ultimately
reducing fund expenses. Read
your Proxy Card carefully. To
exercise your proxy, just follow
these simple steps:
1. Call the toll free number: 1.800.597.7836.
2. Enter the 14-digit Control Number, located on your
Proxy Card.
3. Follow the voice instructions.
If you vote by phone, please do not mail your Proxy Card.
COMBINED PROSPECTUS AND PROXY STATEMENT
MERCURY ADVISORS FOCUS GROWTH FUND,
a Series of OPPENHEIMER SELECT MANAGERS
6803 South Tucson Way, Centennial CO 80112
1.800.708.7780
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held
October 31, 2003
To the Shareholders of Mercury Advisors Focus Growth Fund, a
series of Oppenheimer Select Managers:
Notice is hereby given that a Special Meeting of the
Shareholders of Mercury Advisors Focus Growth Fund, a series
of Oppenheimer Select Managers, ("MAFG Fund") a registered
management investment company, will be held at 6803 South
Tucson Way, Centennial, CO 80112 at 1:00 P.M., Mountain time,
on October 31, 2003, or any adjournments thereof (the
"Meeting"), for the following purposes:
1. To approve an Agreement and Plan of Reorganization
between MAFG Fund and Oppenheimer Growth Fund ("Growth
Fund"), and the transactions contemplated thereby, including
(a) the transfer of all the assets of Mercury Advisors Focus
Growth Fund to Growth Fund in exchange for Class A, Class B,
Class C, Class N and Class Y shares of Growth Fund, (b) the
distribution of these shares of Growth Fund to the
corresponding Class A, Class B, Class C, Class N and Class Y
shareholders of MAFG Fund in complete liquidation of Mercury
Advisors Focus Growth Fund and (c) the cancellation of the
outstanding shares of MAFG Fund (all of the foregoing being
referred to as the "Proposal").
2. To act upon such other matters as may properly come
before the Meeting.
Shareholders of record at the close of business on August 12,
2003 are entitled to notice of, and to vote at, the Meeting.
The Proposal is more fully discussed in the Prospectus and
Proxy Statement. Please read it carefully before telling us,
through your proxy or in person, how you wish your shares to
be voted. The Board of Trustees of Mercury Advisors Focus
Growth Fund, a series of Oppenheimer Select Managers
recommends a vote in favor of the Proposal. WE URGE YOU TO
MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Robert G. Zack, Secretary
September 8, 2003
- --------------------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are
requested to indicate voting instructions on the enclosed
proxy and to mark, date, sign and return it in the
accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly
mailing your proxy no matter how large or small your holdings
may be.
Oppenheimer Growth Fund
6803 South Tucson Way, Centennial CO 80112
1.800.708.7780
COMBINED PROSPECTUS AND PROXY STATEMENT
DATED SEPTEMBER 8, 2003
Acquisition of the Assets of Mercury Advisors Focus
Growth Fund,
a series of Oppenheimer Select Managers
By and in exchange for Class A, Class B, Class C, Class N and
Class Y shares of
Oppenheimer Growth Fund
This combined Prospectus and Proxy Statement solicits
proxies from the shareholders of MAFG Fund to be voted at a
Special Meeting of Shareholders (the "Meeting") to approve
the Agreement and Plan of Reorganization (the "Reorganization
Agreement") and the transactions contemplated thereby (the
"Reorganization") between MAFG Fund and Growth Fund. This
combined Prospectus and Proxy Statement constitutes the
Prospectus of Growth Fund and the Proxy Statement of MAFG
Fund filed on Form N-14 with the Securities and Exchange
Commission ("SEC"). If shareholders vote to approve the
Reorganization Agreement and the Reorganization, the net
assets of MAFG Fund will be acquired by and in exchange for
shares of Growth Fund. The Meeting will be held at the
offices of OppenheimerFunds, Inc. at 6803 South Tucson Way,
Centennial, CO 80112 at 1:00 P.M., Mountain time, on October
31, 2003 or any adjournment thereof. The Board of Trustees
of MAFG Fund is soliciting these proxies on behalf of MAFG
Fund. This Prospectus and Proxy Statement will first be sent
to shareholders on or about September 8, 2003.
If the shareholders vote to approve the Reorganization
Agreement, you will receive Class A shares of Growth Fund
equal in value to the value as of the business day preceding
the Closing Date (as such term is defined in the
Reorganization Agreement, attached hereto as Exhibit A) of
the Reorganization (the "Valuation Date") of your Class A
shares of MAFG Fund; Class B shares of Growth Fund equal in
value to the value as of the Valuation Date of your Class B
shares of MAFG Fund; Class C shares of Growth Fund equal in
value to the value as of the Valuation Date of your Class C
shares of MAFG Fund; Class N shares of Growth Fund equal in
value to the value as of the Valuation Date of your Class N
shares of MAFG Fund; and Class Y shares of Growth Fund equal
in value to the value as of the Valuation Date of your Class
Y shares of MAFG Fund. MAFG Fund will then be liquidated and
de-registered under the Investment Company Act of 1940 (the
"Investment Company Act").
Growth Fund's investment objective is to seek capital
appreciation. Growth Fund invests mainly in common stocks of
growth companies. Growth Fund currently focuses on stocks of
companies having a large or mid-size market capitalization,
but this focus could change over time. The Fund can invest
in domestic companies and foreign companies, although most of
its investments are in stocks of U.S. companies. Normally
the Fund invests in between 20 - 60 companies across
relatively few industries to focus the portfolio.
This Prospectus and Proxy Statement gives information
about Class A, Class B, Class C, Class N and Class Y shares
of Growth Fund that you should know before investing. You
should retain it for future reference. A Statement of
Additional Information relating to the Reorganization
described in this Prospectus and Proxy Statement, dated
September 8, 2003 (the "Proxy Statement of Additional
Information") has been filed with the Securities and Exchange
Commission ("SEC") as part of the Registration Statement on
Form N-14 (the "Registration Statement") and is incorporated
herein by reference. You may receive a copy free of charge
by written request to OppenheimerFunds Services (the
"Transfer Agent") at P.O. Box 5270, Denver, Colorado, 80217 or
by calling the toll-free number 1.800.708.7780. The Proxy
Statement of Additional Information incorporates by reference
the following documents: (i) audited financial statements for
the 12-month period ended August 31, 2002 and unaudited
financial statements for the six-month period ended February
28, 2003 of Growth Fund; (ii) audited financial statements
for the 12-month period ended November 30, 2002 and unaudited
financial statements for the sixth-month period ended May 31,
2003 of MAFG Fund; (iii) Growth Fund's Statement of
Additional Information dated October 23, 2002, revised
February 12, 2003, supplemented March 31, 2003; and (iv) MAFG
Fund's Statement of Additional Information dated March 28,
2003.
The Prospectus of Growth Fund dated October 23, 2002,
as supplemented May 1, 2003, is enclosed herewith and
considered a part of this Prospectus and Proxy Statement and
is intended to provide you with information about Growth Fund.
The following documents have been filed with the SEC
and are available without charge upon written request to
OppenheimerFunds Services (the "Transfer Agent") or by
calling the toll-free number shown above: (i) a Prospectus
for MAFG Fund, dated March 28, 2003, as supplemented May 7,
2003; (ii) a Statement of Additional Information for MAFG
Fund, dated March 28, 2003; and (iii) a Statement of
Additional Information for Growth Fund, dated October 23,
2002, revised February 12, 2003, as supplemented March 31,
2003.
Mutual fund shares are not deposits or obligations of any
bank, and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other U.S. government
agency. Mutual fund shares involve investment risks
including the possible loss of principal.
As with all mutual funds, the SEC has not approved or
disapproved these securities or passed upon the adequacy of
this Prospectus and Proxy Statement. Any representation to
the contrary is a criminal offense.
This Prospectus and Proxy Statement is dated September 8,
2003.
TABLE OF CONTENTS
COMBINED PROSPECTUS AND PROXY STATEMENT
Page
----
SYNOPSIS
What am I being asked to vote on?.........................................................
What are the general tax consequences of the
Reorganization?........................
COMPARISONS OF SOME IMPORTANT FEATURES
How do the investment objectives and policies of the Funds
compare?...............
Who manages the Funds?.....................................................................
What are the fees and expenses of each Fund and those
expected after the
Reorganization?.............................................................................
Where can I find more financial information about the
Funds?...........................
What are the capitalizations of the Funds and what would
the capitalizations be after the
Reorganization?..............................................................................
How have the Funds performed?.............................................................
What are other Key Features of the Funds?.................................................
Investment Management and Fees...................................................
Transfer Agency and Custody Services.............................................
Distribution Services...................................................................
Purchases, Redemptions, Exchanges and other
Shareholder Services..........
Dividends and Distributions..........................................................
WHAT ARE THE PRINCIPAL RISKS OF AN INVESTMENT IN MAFG FUND
AND GROWTH FUND?..........................
REASONS FOR THE REORGANIZATION
INFORMATION ABOUT THE REORGANIZATION
How will the Reorganization be Carried Out?
..................................................
Who will pay the Expenses of the Reorganization?
...........................................
What are the Tax Consequences of the Reorganization?
.....................................
What should I know about Class A, Class B, Class C, Class
N and Class Y shares of
each Fund?...................................................................................
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
Are there any significant differences between the
investment objectives and strategies of
the Funds?.....................................................................................
What are the Main Risks Associated with an Investment in
the Funds?.....................
How do the Investment Policies of the Funds
compare?..................................
What are the Fundamental Investment Restrictions of the
Funds?........................
How do the Account Features and Shareholder Services for
the Funds Compare?....
Investment Management............................................................
Distribution..............................................................................
Purchases and Redemptions..........................................................
Shareholder Services..................................................................
Dividends and Distributions.........................................................
VOTING INFORMATION
How many votes are necessary to approve the Reorganization
Agreement?...........
How do I ensure my vote is accurately recorded?
..........................................
Can I revoke my proxy?.....................................................................
What other matters will be voted upon at the Meeting?
..................................
Who is entitled to vote?......................................................................
What other solicitations will be made?....................................................
Are there any appraisal rights?.............................................................
INFORMATION ABOUT GROWTH FUND
INFORMATION ABOUT MAFG FUND
PRINCIPAL SHAREHOLDERS
Exhibit A - Agreement and Plan of Reorganization by and
between Mercury Advisors Focus Growth Fund, a series of
Oppenheimer Select Managers and Oppenheimer Growth Fund
Enclosures:
Prospectus of Oppenheimer Growth Fund dated October 23, 2002,
as supplemented May 1, 2003.
Semi-Annual Report of Oppenheimer Growth Fund dated February
28, 2003 (available without charge upon request, by calling
1.800.708.7780)
SYNOPSIS
This is only a summary and is qualified in its entirety
by the more detailed information contained in or incorporated
by reference in this Prospectus and Proxy Statement and by
the Reorganization Agreement which is attached as Exhibit A.
Shareholders should carefully review this Prospectus and
Proxy Statement and the Reorganization Agreement in their
entirety and, in particular, the current Prospectus of Growth
Fund which accompanies this Prospectus and Proxy Statement
and is incorporated herein by reference.
If shareholders of MAFG Fund approve the
Reorganization, the net assets of MAFG Fund will be
transferred to Growth Fund, in exchange for an equal value of
shares of Growth Fund. The shares of Growth Fund will then
be distributed to MAFG Fund shareholders and MAFG Fund will
be liquidated. As a result of the Reorganization, you will
cease to be a shareholder of MAFG Fund and will become a
shareholder of Growth Fund. For federal income tax purposes,
the holding period of your MAFG Fund shares will be carried
over to the holding period for shares you receive in
connection with the Reorganization. This exchange will occur
on the Closing Date (as such term is defined in the Agreement
and Plan of Reorganization attached hereto as Exhibit A) of
the Reorganization.
What am I being asked to vote on?
Your Fund's administrator, OppenheimerFunds, Inc.
("OFI" or "Manager"), proposed to the Board of Trustees a
reorganization of your Fund, MAFG Fund, with and into Growth
Fund so that shareholders of MAFG Fund may become
shareholders of a substantially larger fund advised by the
same investment advisor with generally more favorable
long-term performance, and investment objectives and policies
similar to those of their current Fund. The Board considered
the differences in investment focus, discussed below. The
Board also considered the fact that the surviving fund has
the potential for lower overall operating expenses. In
addition, the Board considered that both Funds have Class A,
Class B, Class C, Class N and Class Y shares offered under
identical sales charge arrangements. The Board also
considered that the Reorganization would be a tax-free
reorganization, and there would be no sales charge imposed in
effecting the Reorganization. In addition, due to the
relatively moderate costs of the Reorganization, the Boards
of both Funds concluded that neither Fund would experience
dilution as a result of the Reorganization.
A reorganization of MAFG Fund with and into Growth Fund
is recommended by the OFI based on the fact that both funds
have similar investment practices and relatively similar
investment strategies.
At a meeting held on April 28, 2003, the Board of
Trustees of MAFG Fund approved a reorganization transaction
that will, if approved by shareholders, result in the
transfer of the net assets of MAFG Fund to Growth Fund, in
exchange for an equal value of shares of Growth Fund. The
shares of Growth Fund will then be distributed to MAFG Fund
shareholders and MAFG Fund will subsequently be liquidated.
As a result of the Reorganization, you will cease to be a
shareholder of MAFG Fund and will become a shareholder of
Growth Fund. This exchange will occur on the Closing Date of
the Reorganization.
Approval of the Reorganization means you will receive
Class A shares of Growth Fund equal in value to the value as
of the Valuation Date of your Class A shares of MAFG Fund;
Class B shares of Growth Fund equal in value to the value as
of the Valuation Date of your Class B shares of MAFG Fund;
Class C shares of Growth Fund equal in value to the value as
of the Valuation Date of your Class C shares of MAFG Fund;
Class N shares of Growth Fund equal in value to the value as
of the Valuation Date of your Class N shares of MAFG Fund;
and Class Y shares of Growth Fund equal in value as of the
Valuation Date of your Class Y shares of MAFG Fund. The
shares you receive will be issued at net asset value without
a sales charge or the payment of a contingent deferred sales
charge ("CDSC") although if your shares of MAFG Fund are
subject to a CDSC, your Growth Fund shares will continue to
be subject to the same CDSC applicable to your shares and the
period during which you held your MAFG Fund shares will carry
over to your Growth Fund shares for purposes of determining
the CDSC holding period.
For the reasons set forth in the "Reasons for the
Reorganization" section below, the Board of MAFG Fund has
determined that the Reorganization is in the best interests
of the shareholders of MAFG Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
What are the general tax consequences of the Reorganization?
It is expected that shareholders of MAFG Fund who are
U.S. citizens will not recognize any gain or loss for federal
income tax purposes, as a result of the exchange of their
shares for shares of Growth Fund. You should, however,
consult your tax advisor regarding the effect, if any, of the
Reorganization in light of your individual circumstances.
You should also consult your tax advisor about state and
local tax consequences. For further information about the
tax consequences of the Reorganization, please see the
"Information About the Reorganization - What are the Tax
Consequences of the Reorganization?"
Comparisons of Some Important Features
How do the investment objectives and policies of the Funds
compare?
Both Funds have similar investment objectives. Through
its master/feeder structure described below, MAFG Fund seeks
long-term capital appreciation while Growth Fund seeks
capital appreciation.
In seeking its investment objective, MAFG Fund invests
all of its assets in the Master Focus Twenty Trust (the
"Master Fund"), a mutual fund that has the same goals as the
Fund. The Master Fund invests at least 65% of its total
assets in equity securities. The Master Fund normally
invests in 20 to 30 companies having a market capitalization
greater than $5 billion. All investments are made by the
Master Fund. This structure is sometimes referred to as a
"master/feeder" structure. Growth Fund normally invests in
the common stocks of "growth companies" currently focusing on
stocks of between 20 and 60 companies having a market
capitalization of $2 billion and above across relatively few
industries. Currently, the Manager implements that investment
approach by looking for: companies that have exceptional
revenue growth, companies with above-average earnings growth,
companies that can sustain exceptional revenue and earnings
growth and companies that are well established as leaders in
high growth markets.
Please refer to the Semi-Annual and Annual Reports of
both Funds for a complete listing of the investments for each
Fund.
Who Manages the Funds?
The day-to-day management of the business and affairs
of Growth Fund is the responsibility of the Manager. Fund
Asset Management L.P., doing business as Mercury Advisors,
the investment adviser to the Master Fund (the "Adviser")
handles the day-to-day portfolio management of the Master
Fund which MAFG Fund invests. The OFI maintains certain
books and records on behalf of MAFG Fund and prepares certain
reports pursuant to an Administrative Agreement with the
Master Fund on behalf of MAFG Fund. Growth Fund is an
open-end, diversified management investment company with an
unlimited number of authorized shares of beneficial
interest. It was organized as a Maryland corporation in 1972
and reorganized as a Massachusetts business trust in July
1988. MAFG Fund, is a series of Oppenheimer Select Managers,
an open-end, non-diversified management investment company
with an unlimited number of authorized shares of beneficial
interest organized as a Massachusetts business trust on
November 10, 2000. It commenced operations on February 16,
2001. Both Funds are governed by a Board of Trustees which
is responsible for protecting the interests of shareholders
under Massachusetts law. Both Funds are located at 6803 S.
Tucson Way, Centennial, CO 80112.
The Manager, located at 498 Seventh Avenue, New York,
New York 10018, acts as investment advisor to Growth Fund.
MAFG Fund is managed by the Adviser, which is located at 800
Scudders Road, Plainsboro, NJ 08536.
The portfolio manager for Growth Fund is Bruce
Bartlett. Mr. Bartlett is a Vice President of the Fund and a
Senior Vice President of the Manager and is a portfolio
manager of other Oppenheimer funds. Mr. Bartlett became the
Fund's portfolio manager in December 1998. Prior to joining
the Manager in April 1995, Mr. Bartlett was a Vice President
and Senior Portfolio Manager with First of America Investment
Corporation.
The portfolio manager of MAFG Fund is Michael S. Hahn,
who is employed by the Advisor. Mr. Hahn has been the
portfolio manager of MAFG Fund and of the Master Fund since
November 2001. He has been a portfolio manager of Merrill
Lynch Investment managers since 2000 and was an associated
portfolio manager from 1999-2000. Mr. Hahn was a portfolio
manager and analyst for the PBHG family of mutual funds from
1996-1999.
Additional information about the Funds and the Manager
is set forth below in "Comparison of Investment Objectives
and Policies."
What are the Fees and Expenses of each Fund and those
expected after the Reorganization?
MAFG Fund and Growth Fund each pay a variety of
expenses directly for administration, distribution of their
shares and other services and in the case of Growth Fund,
management of assets. MAFG Fund pays indirectly through its
investment in the Master Fund for management of its assets.
Those expenses are subtracted from each Fund's assets to
calculate the Fund's net asset value per share. Shareholders
pay these expenses indirectly. Shareholders for both Funds
pay other expenses directly, such as sales charges.
The following tables are provided to help you
understand and compare the fees and expenses of investing in
shares of MAFG Fund with the fees and expenses of investing
in shares of Growth Fund. The pro forma expenses of the
surviving Growth Fund show what the fees and expenses are
expected to be after giving effect to the Reorganization.
PRO FORMA FEE TABLE
For the 12 month period ended 3/31/03
- ------------------------------------------------------------------------------------
Pro Forma Surviving
MAFG Fund Growth Fund Growth Fund
Class A shares Class A Shares Class A shares
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Shareholder Transaction Expenses (charges paid directly from a shareholder's
investment):
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Maximum Sales Charge (Load) 5.75% 5.75% 5.75%
on purchases (as a % of
offering price)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a % of the lower
of the original offering None 1 None 1 None 1
price or redemption proceeds)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Annual Fund Operating Expenses (deducted from Fund assets) (as a percentage of
average daily net assets)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Management Fees 0.60% 0.65% 0.65%
- ------------------------------------------------------------------------------------
Distribution and/or Service 0.25% 0.23% 0.23%
(12b-1) Fees
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Other Expenses5 1.58% 0.46% 0.46%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Annual Operating 2.43% 1.34% 1.34%
Expenses
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Pro Forma Surviving
MAFG Fund Growth Fund Growth Fund
Class B shares Class B Shares Class B shares
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Shareholder Transaction Expenses (charges paid directly from a shareholder's
investment):
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Maximum Sales Charge (Load) None None None
on purchases (as a % of
offering price)
- ------------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a % of the lower
of the original offering 5%2 5%2 5%2
price or redemption proceeds)
- ------------------------------------------------------------------------------------
Annual Fund Operating Expenses (deducted from Fund assets) (as a percentage of
average daily net assets)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Management Fees 0.60% 0.65% 0.65%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Distribution and/or Service 1.00% 1.00% 1.00%
(12b-1) Fees
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Other Expenses5 1.61% 0.47% 0.47%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Annual Operating 3.21% 2.12% 2.12%
Expenses
- ------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Pro Forma
MAFG Fund Growth Fund Surviving Growth
Class C Shares Class C Shares Fund
Class C Shares
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Shareholder Transaction Expenses (charges paid directly from a shareholder's
investment):
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Sales Charge (Load)
on purchases (as a % of None None None
offering price)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a % of the lower 1%3 1%3 1%3
of the original offering
price or redemption proceeds)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Annual Fund Operating Expenses (deducted from Fund assets) (as a percentage of
average daily net assets)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Management Fees 0.60% 0.65% 0.65%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Distribution and/or Service 1.00% 1.00% 1.00%
(12b-1) Fees
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Other Expenses5 1.71% 0.45% 0.45%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Annual Operating 3.31% 2.10% 2.10%
Expenses
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Pro Forma
MAFG Fund Growth Fund Surviving Growth
Class N shares Class N Shares Fund
Class N shares
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Shareholder Transaction Expenses (charges paid directly from a shareholder's
investment):
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Sales Charge (Load) None None None
on purchases (as a % of
offering price)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a % of the lower
of the original offering 1%4 1%4 1%4
price or redemption proceeds)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Annual Fund Operating Expenses (deducted from Fund assets) (as a percentage of
average daily net assets)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Management Fees 0.60% 0.65% 0.65%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Distribution and/or Service 0.50% 0.50% 0.50%
(12b-1) Fees
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Other Expenses5 2.02% 0.11% 0.11%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Annual Operating 3.12% 1.26% 1.26%
Expenses
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Pro Forma
MAFG Fund Growth Fund Surviving Growth
Class Y Shares Class Y Shares Fund
Class Y Shares
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Shareholder Transaction Expenses (charges paid directly from a shareholder's
investment):
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Sales Charge (Load) None None None
on purchases (as a % of
offering price)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as a % of the lower
of the original offering None None None
price or redemption proceeds)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Annual Fund Operating Expenses (as a percentage of average daily net assets)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Management Fees 0.60% 0.65% 0.65%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Distribution and/or Service N/A N/A N/A
(12b-1) Fees
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Other Expenses5 7.99% 0.53% 0.53%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Annual Operating 8.59% 1.18% 1.18%
Expenses
- -----------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more
($500,000
for retirement plan accounts) of Class A shares. See
"How to Buy Shares" in each Fund's Prospectus.
2. Applies to redemptions within the first year after
purchase. The contingent deferred sales charge declines to
1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of
purchase.
4. Applies to shares redeemed within 18 months of
retirement plan's first purchase of Class N shares.
5. Expenses may vary in future years. "Other Expenses"
include transfer agent fees and custodial, accounting
and legal expenses. For MAFG Fund, "Other Expenses"
also include administration fees paid to the OFI and the
Fund's pro rata share of the expenses of the Master
Fund. "Other Expenses" are based on, among other
things, the fees the Funds would have paid if the
transfer agent had not waived a portion of its fee under
a voluntary undertaking to the Funds to limit these fees
to 0.35% of average daily net assets per fiscal year for
all classes. After that waiver, the actual "Other
Expenses" and "Total Annual Operating Expenses" for
Growth Fund were 0.42% and 1.30% for Class A shares,
0.45% and 2.10% for Class B shares and 0.45% and 1.10%
for Class Y shares. Class C and Class N shares were
unchanged. "Other Expenses" and "Total Annual Operating
Expenses" for MAFG Fund were further reduced by a
voluntary expense assumption undertaken by the OFI.
With that expense assumption and the transfer agent
waiver, "Total Annual Operating Expenses" for MAFG Fund
were 1.72% for Class A shares, 2.46% for Class B shares,
2.48% for Class C shares, 1.97% for Class N shares and
0.81% for Class Y shares. After the waiver, the actual
"Other Expenses" and "Total Annual Operating Expenses" as
percentages of average daily net assets for the combined
fund were 0.42% and 1.30% for Class A shares, 0.45% and
2.10% for Class B shares and 0.45% and 1.10% for Class Y
shares. Class C and Class N shares were unchanged.
The management fee listed for MAFG Fund is the fee paid
by the Master Fund and incurred indirectly by MAFG Fund.
MAFG Fund does not pay a management fee directly to the
Adviser. The Adviser has entered into a contractual
arrangement with the Master Fund to provide that the
management fee for the Master Fund, when combined with
administrative fees of certain funds that invest in the
Master Fund (other than this Fund), will not exceed a
specific amount. As a result of this contractual arrangement
the Adviser currently receives management fees of 0.60% of
the average daily net assets of the Master Fund. This
arrangement has a one-year term and is renewable.
Examples
These examples below are intended to help you compare
the cost of investing in each Fund and the proposed surviving
Growth Fund. These examples assume that you invest $10,000
in a class of shares for the time periods indicated, an
annual return for each class of 5%, the operating expenses
described above and reinvestment of your dividends and
distributions.
Your actual costs may be higher or lower because
expenses will vary over time. For each $10,000 investment,
you would pay the following projected expenses if you sold
your shares after the number of years shown or held your
shares for the number of years shown without redeeming,
according to the following examples.
12 Months Ended 3/31/03
-----------------------
MAFG Fund
- --------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $807 $1,289 $1,796 $3,182
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $824 $1,289 $1,878 $3,1701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $434 $1,018 $1,726 $3,604
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $415 $963 $1,635 $3,430
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $844 $2,042 $3,527 $6,796
- --------------------------------------------------------------------------------
MAFG Fund
- --------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $807 $1,289 $1,796 $3,182
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $324 $989 $1,678 $3,1701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $334 $1,018 $1,726 $3,604
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $315 $963 $1,635 $3,430
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $844 $2,042 $3,527 $6,796
- --------------------------------------------------------------------------------
Growth Fund
- --------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $704 $975 $1,267 $2,095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $715 $964 $1,339 $2,0701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $313 $658 $1,129 $2,431
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $228 $400 $692 $1,523
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
Growth Fund
- --------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $704 $975 $1,267 $2,095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $215 $664 $1,139 $2,070
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $213 $658 $1,129 $2,431
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $128 $400 $692 $1,523
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
Pro Forma Surviving Growth Fund
- --------------------------------------------------------------------------------
If shares are redeemed: 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $704 $975 $1,267 $2,095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $715 $964 $1,339 $2,0701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $313 $658 $1,129 $2,431
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $228 $400 $692 $1,523
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
Pro Forma Surviving Growth Fund
- --------------------------------------------------------------------------------
If shares are not 1 year 3 years 5 years 10 years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A $704 $975 $1,267 $2,095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B $215 $664 $1,139 $2,0701
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C $213 $658 $1,129 $2,431
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N $128 $400 $692 $1,523
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
In the "If shares are redeemed" examples, expenses
include the initial sales charge for Class A and the
applicable Class B, Class C or Class N contingent
deferred sales charge. In the "If shares are not
redeemed" examples, the Class A expenses include the sales
charge, but Class B, Class C and Class N expenses do not
include the contingent deferred sales charges. There is
no sales charge on Class Y shares.
1 Class B expenses for years 7 through 10 are based on
Class A expenses, since Class B shares automatically
convert to Class A after 6 years.
Where can I find more financial information about the Funds?
Performance information for both Growth Fund and MAFG
Fund is set forth in each Fund's Prospectus under the section
"The Fund's Past Performance." Growth Fund's Prospectus
accompanies this Prospectus and Proxy Statement and is
incorporated by reference.
The financial statements of Growth Fund and additional
information with respect to its performance during its fiscal
year ended August 31, 2002 (and the six month semi-annual
period ended February 28, 2003), including a discussion of
factors that materially affected its performance and relevant
market conditions during that fiscal year are set forth in
Growth Fund's Annual Report dated as of August 31, 2002 (and
with the exception of that discussion, in its Semi-Annual
Report dated February 28, 2003) that is included in the Proxy
Statement of Additional Information and incorporated herein
by reference. These documents are available upon request.
See section entitled "Information About Growth Fund."
The financial statements of MAFG Fund and additional
information with respect to the Fund's performance during its
fiscal year ended November 30, 2002 (and the six month
semi-annual period ended May 31, 2003), including a
discussion of factors that materially affected its
performance and relevant market conditions during that fiscal
year is set forth in MAFG Fund's Annual Report dated as of
November 30, 2002 (and with the exception of that discussion,
in its Semi-Annual Report dated May 31, 2003), that is
included in the Proxy Statement of Additional Information and
incorporated herein by reference. These documents are
available upon request. See section entitled "Information
About MAFG Fund."
What are the capitalizations of the Funds and what would the
capitalization be after the Reorganization?
The following table sets forth the capitalization
(unaudited) of MAFG Fund and Growth Fund as of March 31,
2003 and indicates the pro forma combined capitalization as
of March 31, 2003 as if the Reorganization had occurred on
that date.
As of March 31, 2003 , the value of the assets of MAFG
Fund was less than 10% of the value of the assets of Growth
Fund.
Net
Asset
Shares
Value
Net Assets Outstanding
Per Share
MAFG Fund
Class A $1,793,017 773,533 $2.32
Class B $ 774,807 339,752 $2.28
Class C $ 597,308 261,943 $2.28
Class N $ 74,061 32,055 $2.31
Class Y $ 235 100 $2.35
-------------- ----------
TOTAL $3,239,428 1,407,383
Growth Fund
Class A $1,022,985,552 46,002,874 $22.24
Class B $ 256,756,346 12,310,904 $20.86
Class C $ 68,159,153 3,214,405 $21.20
Class N $ 5,465,885 245,260 $22.29
Class Y $ 57,378,361 2,573,084 $22.30
---------------- ---------
TOTAL $1,410,745,297 64,346,527
Growth Fund
(Pro Forma Surviving Fund)*
Class A $1,024,778,569 46,083,505 $22.24
Class B $ 257,531,153 12,348,054 $20.86
Class C $ 68,756,461 3,242,574 $21.20
Class N $ 5,539,946 248,583 $22.29
Class Y $ 57,378,596 2,573,095 $22.30
---------------- ---------
TOTAL $1,413,984,725 64,495,811
*Reflects the issuance of 80,631 Class A shares, 37,150 Class
B shares, 28,169 Class C shares, 3,323 Class N, and 11 Class
Y shares of Growth Fund in a tax-free exchange for the net
assets of MAFG Fund, aggregating $3,239,428.
How have the Funds performed?
The past performance information for each Fund is set
forth below and in each Fund's respective Prospectus: (i) a
bar chart detailing annual total returns of Class A shares of
each Fund as of December 31st for each of the ten most recent
full calendar years (for MAFG Fund, since that Fund's
inception); and (ii) a table showing how the average annual
total returns of the Funds' shares, both before and after
taxes, compare to those of broad-based market indices. The
after-tax returns are shown for Class A shares only and are
calculated using the historical highest individual federal
marginal income tax rates in effect during the periods shown
and do not reflect the impact of state or local taxes. In
certain cases, the figure representing "Return After Taxes on
Distributions and Sale of Fund Shares" may be higher than the
other return figures for the same period. A higher after-tax
return results when a capital loss occurs upon redemption and
translates into an assumed tax deduction that benefits the
shareholder. The after-tax returns are calculated based on
certain assumptions mandated by regulation and your actual
after-tax returns may differ from those shown, depending on
your individual tax situation. The after-tax returns set
forth below are not relevant to investors who hold their Fund
shares through tax-deferred arrangements such as 401(k) plans
or IRAs or to institutional investors not subject to tax.
Each Fund's past investment performance, before and after
taxes, is not necessarily an indication of how each Fund will
perform in the future.
Annual total returns for MAFG Fund (Class A) (as of
12/31/02), are as follows:
[See appendix to Prospectus and Proxy Statement for data in
bar chart showing annual total returns for MAFG Fund.]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
For the period from 1/1/03 through 3/31/03, the cumulative
return for MAFG Fund (not annualized) before taxes for Class
A shares was -0.43%. During the period shown in the bar
chart, the highest return (not annualized) before taxes for a
calendar quarter for MAFG Fund was 2.19% (4thQtr'02) and the
lowest return (not annualized) before taxes for a calendar
quarter was -20.56% (3rdQtr'02).
Annual total returns for Growth Fund (Class A) (as of
12/31/02) are as follows:
[See appendix to Prospectus and Proxy Statement for data in
bar chart showing annual total returns for Growth Fund.]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
For the period from 1/1/03 through 3/31/03, the cumulative
return for Growth Fund (not annualized) before taxes for
Class A shares was -0.85%. During the period shown in the bar
chart, the highest return (not annualized) before taxes for a
calendar quarter for the Growth Fund was 30.16% (4th Q'99)
and the lowest return (not annualized) before taxes for a
calendar quarter was -25.55% (4th Q'00).
Average annual total returns for the Funds for the period
ended December 31, 2002 are as follows:
- ----------------------------------------------------------
MAFG Fund Life of Class
1 Year
- ----------------------------------------------------------
- ----------------------------------------------------------
Class A Shares (inception
2/16/01) -42.51% -55.45%
Return Before Taxes -42.51% -55.45%
Return After Taxes on -25.89% -40.68%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
- ----------------------------------------------------------
NASDAQ Composite Index -31.53% -22.91%
(from 2/28/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Samp;amp;P Barra Growth Index -23.59% -15.48%
(from 2/28/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class B Shares (inception -42.50% -55.32%
2/16/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class C Shares (inception -40.08% -54.33%
2/16/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class N Shares (inception -39.62% -49.92%
3/1/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class Y Shares (inception -39.06% -53.91%
2/16/01)
- ----------------------------------------------------------
- ------------------------------------------------------------------------
Growth Fund 1 Year 5 Years 10 Years
(or life of (or life of
class, if class, if
less) less)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class A Shares (inception
03/15/73) -29.98% -5.24% 4.69%
Return Before Taxes -29.98% -6.27% 2.68%
Return After Taxes on -18.25% -3.85% 3.49%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Samp;amp;P 500 Index (from 12/31/92) -22.09% -0.58% 9.34%
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class B Shares (inception -30.05% -5.18% 5.24%
08/17/93)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class C Shares (inception -27.08% -4.86% 1.75%
11/01/95)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class N Shares (inception -25.49% -21.40% N/A
3/1/01)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class Y Shares (inception -25.60% -3.88% 5.93%
06/01/94)
- ------------------------------------------------------------------------
Average annual total returns for the Funds for the period
ended March 31, 2003 are as follows:
- ----------------------------------------------------------
MAFG Fund 1 Year
Life of Class
- ----------------------------------------------------------
- ----------------------------------------------------------
Class A Shares (inception
2/16/01) -39.09% -51.10%
Return Before Taxes -39.09% -51.10%
Return After Taxes on -24.00% -36.98%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
- ----------------------------------------------------------
NASDAQ Composite Index (from -27.32% -20.30%
2/28/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Samp;amp;P 500 Barra Growth Index -23.61% -14.10%
(from 2/28/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class B Shares (inception -39.16% -50.84%
2/16/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class C Shares (inception -36.60% -50.13%
2/16/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class N Shares (inception -36.30% -45.81%
3/1/01)
- ----------------------------------------------------------
- ----------------------------------------------------------
Class Y Shares (inception -34.72% -49.41%
2/16/01)
- ----------------------------------------------------------
- ------------------------------------------------------------------------
Growth Fund 1 Year 5 Years
(or life of 10 Years
class, if
less)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class A Shares (inception
03/15/73) -28.19% -7.15% 4.62%
Return Before Taxes -28.19% -8.16% 2.61%
Return After Taxes on -17.31% -5.29% 3.45%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Samp;amp;P 500 Index (from 3/31/93) -24.75% -3.76% 8.53%
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class B Shares (inception -28.20% -7.07% 5.01%
08/17/93)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class C Shares (inception -25.20% -6.78% 1.55%
11/01/95)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class N Shares (inception -23.85% -19.60% N/A
3/1/01)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Class Y Shares (inception -23.68% -5.81% 5.66%
06/01/94)
- ------------------------------------------------------------------------
MAFG Fund's average annual total returns include
applicable sales charges: for Class A, the current
maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charge of 5% (1-year) and 4%
(life of class); and for Class C and Class N, the 1%
contingent deferred sales charge for the 1-year period.
There is no sales charge for Class Y. The returns
measure the performance of a hypothetical account and
assume that all dividends and capital gains
distributions have been reinvested in additional shares.
The performance of the Fund's Class A shares is compared
to the Samp;amp;P 500 Barra Growth Index and the NASDAQ
Composite Index. The Samp;amp;P 500 Barra Growth Index is
widely recognized, unmanaged index of common stock
prices. The NASDAQ Composite Index is an unmanaged
broad-based index comprised of common stocks. The index
performance includes reinvestment of income but does not
reflect transaction costs, expenses or taxes. The Fund
will have investments vary from those in the index.
Growth Fund's average annual total returns include
applicable sales charges: for Class A, the current
maximum initial sales charge of 5.75%; for Class B, the
contingent deferred sales charge of 5% (1-year) and 2%
(5-year); and for Class C and Class N, the 1% contingent
deferred sales charge for the 1-year period. Because
Class B shares convert to Class A shares 72 months after
purchase Class B 10-year or "life-of-class" performance
does not include any contingent deferred sales charge
and uses Class A performance for the period after
conversion. There is no sales charge for Class Y
shares. The returns measure the performance of a
hypothetical account and assume that all dividends and
capital gains distributions have been reinvested in
additional shares. The performance of the Fund's Class A
shares is compared to the Samp;amp;P 500 Index, an unmanaged
index of equity securities. The index performance
includes reinvestment of income but does not reflect
transaction costs. The Fund's investments vary from
those in the index.
How Has Growth Fund Performed? - Below is a discussion
by the Manager of Growth Fund's performance during its fiscal
year ended August 31, 2002, followed by a graphical
comparison of Growth Fund's performance to an appropriate
broad-based market index.
Management's Discussion of Performance - During the
one-year period that ended August 31, 2002, Growth Fund's
performance outperformed its benchmark and the majority of
its peers amid widespread declines in stock prices. The
Fund's above-average performance can be attributed to a
disciplined investment strategy that focuses on the quality
and sustainability of a company's growth, rather than on the
sheer magnitude of its growth. Growth Fund's best-performing
stocks were concentrated in the health care area,
particularly among health care services and medical products
companies and market-sensitive financials. Other attractive
areas of investment proved to be consumer products companies
and market-sensitive financials. Growth Fund's relative
performance was hurt by declines in capital goods holdings,
cable industry holdings, and individual stocks in a variety
of other sectors.
Comparing Growth Fund's Performance to the Market - The
graphs that follow show the performance of a hypothetical
$10,000 investment in each class of shares of Growth Fund
held until August 31, 2002. Class A performance is shown for
a 10-year period. For each other class, performance is
measured from inception of the class: from August 17, 1993
for Class B, from November 1, 1995 for Class C shares, from
March 1, 2001 for Class N, and from June 1, 1994 for Class Y
shares. Growth Fund's performance reflects the deduction of
the maximum initial sales charge on Class A shares, the
applicable contingent deferred sales charge on Class B, Class
C and Class N shares, and reinvestment of all dividends and
capital gain distributions. Growth Fund's performance is
compared to the performance of the Standard amp;amp; Poor's 500
Index ("Samp;amp;P 500 Index"), a broad-based index of equity
securities widely regarded as a general measure of the
performance of the U.S. equity securities market. Index
performance reflects the reinvestment of dividends but does
not reflect transaction costs, and none of the data in the
graphs that follow shows the effect of taxes. Growth Fund's
performance reflects the effects of Fund business and
operating expenses. While index comparisons may be useful to
provide a benchmark for Growth Fund's performance, it must be
noted that Growth Fund's investments are not limited to the
securities in the index shown.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Growth Fund (Class A) and Samp;amp;P 500 Index.
[Line Graph]
- ----------------------------------------------------------------------
Date Value of Investment in Samp;amp;P 500 Index
Fund
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1992 9,425 10,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1992 9,977 10,315
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1992 11,173 10,834
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1993 11,153 11,306
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1993 11,016 11,361
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1993 11,233 11,653
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1993 11,476 11,923
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1994 11,228 11,472
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1994 11,045 11,520
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1994 11,783 12,082
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1994 11,749 12,080
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1995 12,882 13,255
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1995 14,298 14,518
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1995 15,495 15,671
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1995 15,856 16,614
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1996 16,803 17,505
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1996 17,300 18,290
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/19961 17,434 17,852
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1996 19,737 20,839
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1997 20,478 21,872
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1997 21,718 23,584
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1997 23,541 25,104
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1997 23,232 26,778
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1998 24,705 29,524
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1998 25,008 30,814
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1998 20,806 27,142
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1998 24,500 33,120
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1999 25,880 35,358
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1999 26,922 37,295
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1999 29,001 37,947
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1999 32,953 40,040
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/29/2000 44,082 39,504
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2000 37,899 41,200
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2000 48,461 44,135
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2000 33,287 38,348
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2001 29,216 36,267
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2001 27,269 36,854
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2001 24,291 33,377
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2001 24,832 33,665
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2002 23,679 32,819
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2002 22,927 31,755
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2002 20,219 27,373
- ----------------------------------------------------------------------
1. The Fund changed its fiscal year from June to August
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Growth Fund (Class B) and Samp;amp;P 500 Index.
[Line Graph]
- ----------------------------------------------------------------------
Date Value of Investment in Samp;amp;P 500 Index
Fund
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/17/1993 10,000 10,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1993 10,217 9,923
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1993 10,414 10,153
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1994 10,161 9,769
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1994 9,980 9,810
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1994 10,625 10,288
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1994 10,571 10,287
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1995 11,557 11,287
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1995 12,796 12,363
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1995 13,837 13,345
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1995 14,126 14,147
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1996 14,937 14,907
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1996 15,349 15,575
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/19961 15,443 15,202
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1996 17,445 17,745
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1997 18,064 18,625
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1997 19,121 20,083
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1997 20,683 21,377
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1997 20,372 22,803
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1998 21,621 25,141
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1998 21,841 26,240
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1998 18,136 23,113
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1998 21,313 28,204
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1999 22,468 30,109
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1999 23,324 31,759
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1999 25,087 32,314
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1999 28,506 34,096
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/29/2000 38,134 33,640
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2000 32,785 35,084
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2000 41,921 37,583
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2000 28,795 32,656
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2001 25,274 30,883
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2001 23,590 31,383
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2001 21,013 28,422
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2001 21,481 28,667
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2002 20,484 27,947
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2002 19,833 27,041
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2002 17,490 23,310
- ----------------------------------------------------------------------
1. The Fund changed its fiscal year from June to August
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Growth Fund (Class C) and Samp;amp;P 500 Index.
[Line Graph]
- ----------------------------------------------------------------------
Date Value of Investment in Samp;amp;P 500 Index
Fund
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/01/1995 10,000 10,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1995 10,128 10,640
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1996 10,711 11,211
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1996 11,006 11,713
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/19961 11,073 11,432
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1996 12,507 13,345
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1997 12,952 14,007
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1997 13,710 15,104
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1997 14,830 16,077
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1997 14,607 17,149
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1998 15,502 18,907
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1998 15,662 19,734
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1998 13,001 17,382
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1998 15,280 21,211
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1999 16,107 22,643
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1988 16,726 23,884
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1999 17,977 24,301
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1999 20,389 25,642
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/29/2000 27,225 25,299
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2000 23,360 26,385
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2000 29,819 28,264
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2000 20,441 24,559
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2001 17,908 23,226
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2001 16,681 23,602
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2001 14,831 21,375
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2001 15,133 21,559
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2002 14,403 21,018
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2002 13,917 20,336
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2002 12,252 17,530
- ----------------------------------------------------------------------
1. The Fund changed its fiscal year from June to August
Class N Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Growth Fund (Class N) and Samp;amp;P 500 Index.
[Line Graph]
- ----------------------------------------------------------------------
Date Value of Investment in Samp;amp;P 500 Index
Fund
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/01/2001 10,000 10,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2001 9,246 10,162
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2001 8,231 9,203
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2001 8,406 9,283
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2002 8,011 9,049
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2002 7,752 8,756
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2002 6,764 7,548
- ----------------------------------------------------------------------
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical
Investments in:
Growth Fund (Class Y) and Samp;amp;P 500 Index.
[Line Graph]
- ----------------------------------------------------------------------
Date Value of Investment in Samp;amp;P 500 Index
Fund
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/01/1994 10,000 10,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1994 9,487 9,755
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1994 10,132 10,231
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1994 10,103 10,230
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1995 11,077 11,224
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1995 12,294 12,294
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
09/30/1995 13,328 13,271
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/1995 13,641 14,069
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
03/31/1996 14,456 14,824
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
06/30/1996 14,889 15,489
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/19961 15,009 15,117
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1996 17,000 17,647
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1997 17,648 18,522
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1997 18,728 19,972
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1997 20,316 21,259
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1997 20,065 22,677
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1998 21,350 25,002
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1998 21,630 26,095
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1998 18,005 22,985
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1998 21,213 28,047
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/1999 22,421 29,942
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/1999 23,332 31,583
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/1999 25,161 32,135
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/1999 28,603 33,907
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/29/2000 38,284 33,453
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2000 32,940 34,889
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2000 42,159 37,375
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2000 28,963 32,475
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2001 25,437 30,712
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2001 23,766 31,209
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2001 21,176 28,264
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11/30/2001 21,675 28,508
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
02/28/2002 20,680 27,792
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
05/31/2002 20,038 26,891
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
08/31/2002 17,682 23,181
- ----------------------------------------------------------------------
1. The Fund changed its fiscal year from June to August
Total returns and the ending account values in the
graphs include changes in share price and reinvestment
of dividends and capital gains distributions in a
hypothetical investment for the periods shown. Past
performance does not predict future performance. The
Fund's total returns shown do not reflect the deduction
of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or
gains paid by the Fund or any gains you may realize if
you sell your shares.
What are other Key Features of the Funds?
The description of certain key features of the Funds
below is supplemented by each Fund's Prospectus and Statement
of Additional Information, which are incorporated by
reference.
Investment Management and Fees - Under Growth Fund's
investment advisory agreement, the Fund pays the Manager an
advisory fee at an annual rate that declines on additional
assets as the Fund grows.
The Management Fees received by the Adviser of MAFG
Fund and paid indirectly by MAFG Fund are described below.
MAFG Fund does note directly pay a management fee to OFI,
however, the Master Fund pays the Adviser a management fee at
the annual rate of 0.60% of its average daily net assets. The
fees and expenses that the Master Fund pays, including the
management fee it pays to the Adviser, are passed directly
through to MAFG Fund in proportion to the number of shares of
the Master Fund owned by MAFG Fund.
- ----------------------------------------------------------------------------------
MAFG Fund Growth Fund
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
The Adviser is entitled to receive 0.75% of the first $200 million of average
a monthly management fee at the annual net assets of the Fund,
annual contractual rate of 0.60%
of the average daily net assets of
the Master Fund. MAFG invests all
of its assets in shares of the
Master Fund. Accordingly, all
portfolio management occurs at the
level of the Master Fund. The
Master Fund has entered into an
investment management agreement
with the Adviser. The Adviser has
entered into a contractual
arrangement with the Master Fund
that provides that the management
fee for the Master Fund, when
combined with administration fees
of certain funds that invest in
the Master Fund (other than MAFG
Fund), will not exceed a specific
amount.
- ----------------------------------------------------------------------------------
-----------------------------------------------
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 $1.0 billion,
-----------------------------------------------
-----------------------------------------------
0.56% of the next $2.0 billion, and
-----------------------------------------------
-----------------------------------------------
0.54% of the average annual net assets in
excess of $4.5 billion.
-----------------------------------------------
As indicated in the table below, the management fee for
MAFG Fund for the twelve months ended March 31, 2003 was an
annual rate of 0.60% of the average annual daily net assets
of the Master Fund. The management fee for Growth Fund for
the twelve months ended March 31, 2003 was 0.65% of the
average annual net assets for each class of shares. The
12b-1 distribution plans for both Funds are substantially
similar.
Annual Fund Operating Expense table
for the 12 months ended March 31, 2003
(as a percentage of average daily net assets)
- ----------------------------------------------------------------------------------
MAFG Fund Combined Pro Forma
Growth Fund Growth Fund
Class A Shares Class A Shares Class A Shares
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Management Fee 0.60% 0.65% 0.65%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Distribution and/or 0.25%
Service (12b-1) fees 0.23%1 0.23%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Other Expenses 1.58% 0.46% 0.46%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Annual Operating 1.34% 1.34%
Expenses 2.43%
- ----------------------------------------------------------------------------------
"Other Expenses" include transfer agent fees and custodial,
accounting and legal expenses the Funds pay. This chart is
for illustrative purposes only.
OppenheimerFunds, Inc. has entered into an
Administration Agreement with MAFG Fund whereby
OppenheimerFunds, Inc. will maintain certain books and
records on behalf of the Fund and prepare certain reports.
OppenheimerFunds, Inc. shall also be responsible for filing
with the SEC any state securities regulators certain
disclosure documents. Under the Agreement, the Fund pays an
Administration Fee to OppenheimerFunds, Inc. of 0.50% of the
average annual net assets of each such Fund. The Adviser has
entered into a sub-administration agreement with
OppenheimerFunds, Inc. Under that agreement, the Adviser
maintains certain books and records and prepares certain
reports on behalf of MAFG Fund.
The net assets under management for Growth Fund on
March 31, 2003 were $1,410,745,297 as compared to $3,239,428
for MAFG Fund. Effective upon the Closing of the
Reorganization, the management fee rate for the surviving
Fund is expected to be 0.65% of average annual net assets
based on combined assets of the Funds as of March 31, 2003.
Additionally, the "Other Expenses" and "Total Annual
Operating Expenses" of the surviving Fund are expected to be
substantially less than the "Other Expenses" and "Total
Annual Operating Expenses" of MAFG Fund.
For a detailed description of each Fund's investment
management agreement, see the section below entitled
"Comparison of Investment Objectives and Policies - How do the
Account Features and Shareholder Services for the Funds
Compare?"
Transfer Agency and Custody Services - Both Funds
receive shareholder accounting and other clerical services
from OppenheimerFunds Services in its capacity as transfer
agent and dividend paying agent. It acts on a fixed fee
basis for both Funds. The terms of the transfer agency
agreement for both Funds are substantially similar.
Citibank, N.A., located at 111 Wall Street, New York,
NY 10005, acts as custodian of the securities and other
assets of both MAFG Fund and Growth Fund.
Distribution Services - OppenheimerFunds Distributor,
Inc. (the "Distributor") acts as the principal underwriter in
a continuous public offering of shares of both Funds, but is
not obligated to sell a specific number of shares. Both
Funds have adopted service plans under Rule 12b-1 of the
Investment Company Act for their Class A shares and
distribution and service plans under Rule 12b-1 for their
Class B, Class C and Class N shares.
The 12b-1 fees for Class A shares of both MAFG Fund and
Growth Fund are service plan fees which are a maximum of
0.25% of average annual net assets of Class A shares. The
12b-1 fees for the other classes of both Funds are
Distribution and Service plan fees which include a service
fee of 0.25% of average annual net assets for Class B, Class
C and Class N shares and an asset-based sales charge of 0.75%
of average annual net assets for Class B and Class C shares
and 0.25% of average annual net assets for Class N shares.
For a detailed description of each Fund's
distribution-related services, see the section below titled
"Comparison of Investment Objectives and Policies - How do the
Account Features and Shareholder Services for the Funds
Compare?"
Purchases, Redemptions, Exchanges and other Shareholder
Services - Both Funds have nearly the same requirements and
restrictions in connection with purchases, redemptions and
exchanges. In addition, each Fund also offers the same types
of shareholder services. More detailed information regarding
purchases, redemptions, exchanges and shareholder services
can be found below in the section below titled "Comparison of
Investment Objectives and Policies - How do the Account
Features and Shareholder Services for the Funds Compare?"
Dividends and Distributions - Both Funds declare
dividends separately for each class of shares from net
investment income annually and pay those dividends to
shareholders in December on a date selected by the Board of
each Fund. Both Funds may realize capital gains on the sale
of portfolio holdings. If they do, they will make
distributions out of any short-term or long-term capital
gains in December of each year. There can be no assurance
that either Fund will pay any dividends or capital gains
distributions in a particular year.
For a detailed description of each Fund's policy on
dividends and distributions, see the section entitled
"Comparison of Investment Objectives and Policies - How do the
Account Features and Shareholder Services for the Funds
Compare?"
WHAT ARE THE PRINCIPAL RISKS OF AN INVESTMENT IN MAFG FUND
AND GROWTH FUND?
In evaluating whether to approve the Reorganization and
invest in Growth Fund, shareholders should carefully consider
the following risk factors, the other information set forth
in this Prospectus and Proxy Statement and the more complete
description of risk factors set forth in the documents
incorporated by reference herein, including the Prospectuses
of the Funds and their respective Statements of Additional
Information.
General
The main investment risks of the Funds are
substantially similar. All investments have risks to some
degree. Both Funds' investments are subject to changes in
their value from a number of factors described below. There
is also the risk that poor security selection by the Manager
or the Adviser will cause the Funds to underperform other
funds having similar objectives.
These risks collectively form the risk profiles of the
Funds, and can affect the value of the Funds' investments,
investment performance and prices per share. These risks mean
that you can lose money by investing in either fund. When you
redeem your shares, they may be worth more or less than what
you paid for them. There is no assurance that either fund
will achieve its investment objective.
Risks of Investing in Stocks. Stocks fluctuate in price, and
their short-term volatility at times may be great. Because
both Funds invest primarily in common stocks of U.S.
companies, the value of each Fund's portfolio will be
affected by changes in the U.S. stock markets. Market risk
will affect the Funds' net asset values per share, which will
fluctuate as the values of the Funds' portfolio securities
change. The prices of individual stocks do not all move in
the same direction uniformly or at the same time. Different
stock markets may behave differently from each other. Because
both Funds can buy foreign stocks, they could both be
affected by changes in foreign stock markets.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
The Manager may increase the relative emphasis of Growth
Fund's investments in a particular industry from time to
time. Stocks of issuers in a particular industry may be
affected by changes in economic conditions, changes in
government regulations, availability of basic resources or
supplies, or other events that affect that industry more than
others. To the extent that Growth Fund increases the
relative emphasis of its investments in a particular
industry, its share values may fluctuate in response to
events affecting that industry.
Sector Risk. To the extent that the Funds concentrate their
investments in a specific sector or relatively few industry
sectors, there is the possibility that the investments within
those sectors will decline in price due to industry specific
market or economic developments. There is the possibility
that each Fund's share price will be more volatile than funds
that have broader sector exposure.
Risks of Foreign Investing. Both Funds can buy foreign equity
and debt securities. While foreign securities offer special
investment opportunities, they are subject to special risks
that can reduce the Funds' share prices and returns.
The change in value of a foreign currency against the
U.S. dollar will result in a change in the U.S. dollar value
of securities denominated in that foreign currency. Currency
rate changes can also affect the distributions the Fund makes
from the income it receives from foreign securities. Foreign
investing can result in higher transaction and operating
costs for the Fund. Foreign issuers are not subject to the
same accounting and disclosure requirements to which U.S.
companies are subject. The value of foreign investments may
be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental
economic or monetary policy in the U.S. or abroad, or other
political and economic factors. ADRs may not necessarily be
denominated in the same currency as the securities into which
they may be converted.
How Risky are the Funds Overall? The risks described above
collectively form the overall risk profile of the Funds, and
can affect the value of the Funds' investments, their
investment performance and their prices per share.
Particular investments and investment strategies have risks.
Both Funds are also subject to the risk that the stocks the
Manager or Adviser selects will underperform the stock
market, the relevant indices or other funds with similar
investment objectives and investment strategies. By focusing
on a comparatively smaller number of investments and industry
sectors, Growth Fund's risk is increased because each
investment has a greater effect on its performance.
In the short term, the stock markets can be volatile,
and the prices of the Funds' shares can go up and down
substantially. Growth stocks may be more volatile than other
equity investments. Growth Fund generally does not use
income-oriented investments to help cushion the Fund's total
return from changes in stock prices.
REASONS FOR THE REORGANIZATION
At a meeting of the Board of Trustees of MAFG Fund held
April 28, 2003, the Board considered whether to approve the
proposed Reorganization and reviewed and discussed with OFI
and independent legal counsel the materials provided by OFI
relevant to the proposed Reorganization. Included in the
materials was information with respect to the Funds'
respective investment objectives and policies, management
fees, distribution fees and other operating expenses,
historical performance and asset size.
The Board reviewed information demonstrating that MAFG
Fund is a relatively smaller fund with approximately $3.2
million in net assets as of April 23, 2003. The Board
anticipates that MAFG Fund's assets will not increase
substantially in size in the near future and that its expense
ratio might remain high as fixed expenses are borne by a
relatively small fund. In comparison, Growth Fund had
approximately $1.4 billion in net assets as of April 23,
2003. After the Reorganization, the shareholders of MAFG
Fund would become shareholders of a larger fund that is
anticipated to have lower overall operating expenses than
MAFG Fund. There can be no assurances that lower operating
expenses will continue into the future. Economies of scale
may benefit shareholders of MAFG Fund.
The Board considered the fact that both Funds have
similar investment objectives of seeking capital
appreciation. MAFG Fund invests in the Master Fund that has
the same goals as the Fund. The Master Fund will invest at
least 65% of its assets in equity securities. Growth Fund
currently focuses on stocks of companies having a large or
mid-size market capitalization meaning above $2 million.
MAFG Fund invests in the common stock of approximately 20 to
30 companies that have earnings growth and capital
appreciation potential and currently emphasizes common stocks
of companies with large stock market capitalizations (greater
than $5 billion). It currently emphasizes companies having a
large market capitalization meaning greater than $5 billion.
The Board noted that each Fund is designed for long-term
investors.
The Board also considered that the procedures for
purchases, exchanges and redemptions of shares of both Funds
are very similar and that both Funds offer the same investor
services and options.
The Board also considered the terms and conditions of
the Reorganization, including that there would be no sales
charge imposed in effecting the Reorganization and that the
Reorganization is expected to be a tax-free reorganization.
The Board concluded that MAFG Fund's participation in the
transaction is in the best interests of the Fund and its
shareholders, notwithstanding that the lower pro forma
expenses of the combined Funds (relative to MAFG Fund) and
the historically better performance of Growth Fund are
subject to change and that the Reorganization would not
result in a dilution of the interests of existing
shareholders of MAFG Fund.
After consideration of the above factors, and such
other factors and information as the Board of MAFG Fund
deemed relevant, the Board, including the Trustees who are
not "interested persons" (as defined in the Investment
Company Act) of either MAFG Fund or OFI (the "Independent
Trustees"), unanimously approved the Reorganization and the
Reorganization Agreement and voted to recommend its approval
to the shareholders of MAFG Fund.
The Board of Growth Fund also determined that the
Reorganization was in the best interests of Growth Fund and
its shareholders and that no dilution would result to those
shareholders. Growth Fund shareholders do not vote on the
Reorganization. The Board of Growth Fund, including the
Independent Trustees, unanimously approved the Reorganization
and the Reorganization Agreement.
For the reasons discussed above, the Board, on behalf
of MAFG Fund, recommends that you vote FOR the Reorganization
Agreement. If shareholders of MAFG Fund do not approve the
Reorganization Agreement, the Reorganization will not take
place.
INFORMATION ABOUT THE REORGANIZATION
This is only a summary of the Reorganization Agreement. You
should read the actual form of Reorganization Agreement. It
is attached as Exhibit A.
How Will the Reorganization be Carried Out?
If the shareholders of MAFG Fund approve the
Reorganization Agreement, the Reorganization will take place
after various conditions are satisfied by MAFG Fund and
Growth Fund, including delivery of certain documents. The
Closing Date is presently scheduled for November 7, 2003 and
the Valuation Date is presently scheduled for November 6,
2003.
If shareholders of MAFG Fund approve the Reorganization
Agreement, MAFG Fund will deliver to Growth Fund
substantially all of its net assets on the Closing Date. In
exchange, shareholders of MAFG Fund will receive Class A,
Class B, Class C, Class N and Class Y Growth Fund shares that
have a value equal to the dollar value of the assets
delivered by MAFG Fund to Growth Fund. MAFG Fund will then
be liquidated and its outstanding shares will be cancelled.
The stock transfer books of MAFG Fund will permanently be
closed at the close of business on the Valuation Date. Only
redemption requests received by the Transfer Agent in proper
form on or before the close of business on the Valuation Date
will be fulfilled by MAFG Fund. Redemption requests received
after that time will be considered requests to redeem shares
of Growth Fund.
Shareholders of MAFG Fund who vote their Class A, Class
B, Class C, Class N and Class Y shares in favor of the
Reorganization will be electing in effect to redeem their
shares of MAFG Fund at net asset value on the Valuation Date,
after MAFG Fund subtracts a cash reserve, and reinvest the
proceeds in Class A, Class B, Class C, Class N and Class Y
shares of Growth Fund at net asset value. The cash reserve
is that amount retained by MAFG Fund, which is deemed
sufficient in the discretion of the Board for the payment of
the Fund's outstanding debts, taxes and expenses of
liquidation. The cash reserve is estimated to be
approximately $24,000 cash. Any debts paid out of the cash
reserve will be those debts, taxes or expenses of liquidation
incurred by the MAFG Fund on or before the Closing Date.
Growth Fund is not assuming any debts of MAFG Fund except
debts for unsettled securities transactions and outstanding
dividend and redemption checks. MAFG Fund will recognize
capital gains or losses on any sales of portfolio securities
made prior to the Reorganization. The sales contemplated in
the Reorganization are anticipated to be in the ordinary
course of business of MAFG Fund's activities.
Under the Reorganization Agreement, within one year
after the Closing Date, MAFG Fund shall: (a) either pay or
make provision for all of its debts and taxes; and (b) either
(i) transfer any remaining amount of the cash reserve to
Growth Fund, if such remaining amount is not material (as
defined below) or (ii) distribute such remaining amount to
the shareholders of MAFG Fund who were shareholders on the
Valuation Date. The remaining amount shall be deemed to be
material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one
cent per share of the number of MAFG Fund shares outstanding
on the Valuation Date. In order to qualify for this rebate,
it is not necessary for a shareholder of MAFG Fund to
continue to hold shares of the combined entity after the
Closing Date. If the cash reserve is insufficient to satisfy
any of MAFG Fund's liabilities, OFI will assume
responsibility for any such unsatisfied liability. Within
one year after the Closing Date, MAFG Fund will complete its
liquidation.
Under the Reorganization Agreement, either MAFG Fund or
Growth Fund may abandon and terminate the Reorganization
Agreement for any reason and there shall be no liability for
damages or other recourse available to the other Fund,
provided, however, that in the event that one of the Funds
terminates this Agreement without reasonable cause, it shall,
upon demand, reimburse the other Fund for all expenses,
including reasonable out-of-pocket expenses and fees incurred
in connection with this Agreement.
To the extent permitted by law, the Funds may agree to
amend the Reorganization Agreement without shareholder
approval. They may also agree to terminate and abandon the
Reorganization at any time before or, to the extent permitted
by law, after the approval of shareholders of MAFG Fund.
Who Will Pay the Expenses of the Reorganization?
The cost of printing and mailing the proxies and this
Prospectus and Proxy Statement will be borne by MAFG Fund.
Those printing and mailing costs are estimated to be $11,247
and $3,337, respectively. With respect to the Reorganization
the Manager will bear the cost of the tax opinion and audits
for Growth Fund, while MAFG Fund will bear the cost of its
respective tax opinion. Any documents such as existing
prospectuses or annual reports that are included in the proxy
mailing or at a shareholder's request will be a cost of the
Fund issuing the document. Any other out-of-pocket expenses
associated with the Reorganization will be paid by the Funds
in the amounts incurred by each. The approximate cost of the
Reorganization is $__________ for MAFG Fund.
The Manager and the Board of Trustees for Growth Fund
believe the shareholders of Growth Fund will benefit from the
proposed merger by acquiring securities without transaction
costs that Growth Fund would otherwise want to acquire for
its portfolio and by adding a shareholder account base that
will present additional marketing opportunities to Growth
Fund. Nonetheless, the Board asked the Manager whether it
would be willing to absorb Growth Fund's portion of the
Reorganziation costs in light of the relatively small amount
of assets and shareholder accounts that Growth Fund would
acquire as a result of the reorganization. While the
estimated reorganization costs are anticipated to be only
slightly greater than the cost of acquiring MAFG Fund's
securities on the open market using reasonable estimates
(that could ultimately be more or less than estimated), the
Manager agreed to absorb Growth Fund's portion of the
reorganization costs in order to avoid any possibility of
dilution of the interests of Growth Fund's shareholders.
Those costs are estimated to be $________.
What are the tax consequences of the Reorganization?
The Reorganization is intended to qualify as a tax-free
reorganization for federal income tax purposes under Section
368(a)(1) of the Internal Revenue Code of 1986, as amended.
Based on certain assumptions and representations received
from MAFG Fund and Growth Fund, it is expected to be the
opinion of Deloitte amp;amp; Touche LLP, tax advisor to MAFG Fund,
that shareholders of MAFG Fund will not recognize any gain or
loss for federal income tax purposes as a result of the
exchange of their shares for shares of Growth Fund, and that
shareholders of Growth Fund will not recognize any gain or
loss upon receipt of MAFG Fund's assets. In addition,
neither Fund is expected to recognize a gain or loss as a
result of the Reorganization. The holding period of Growth
Fund shares received in that exchange will include the period
that MAFG Fund shares were held (provided such shares were
held as a capital asset on the Closing Date). If this type of
tax opinion is not forthcoming by the Closing Date, the Fund
may still choose to go forward with the Reorganization,
pending re-solicitation of shareholders and shareholder
approval.
Immediately prior to the Valuation Date, MAFG Fund will
pay a dividend which will have the effect of distributing to
MAFG Fund's shareholders all of MAFG Fund's net investment
company taxable income for taxable years ending on or prior
to the Closing Date (computed without regard to any deduction
for dividends paid) and all of its net capital gains, if any,
realized in taxable years ending on or prior to the Closing
Date (after reduction for any available capital loss
carry-forward). Such dividends will be included in the
taxable income of MAFG Fund's shareholders as ordinary income
and capital gain, respectively.
You will continue to be responsible for tracking the
purchase cost and holding period of your shares and should
consult your tax advisor regarding the effect, if any, of the
Reorganization in light of your individual circumstances.
You should also consult your tax advisor as to state and
local and other tax consequences, if any, of the
Reorganization because this discussion only relates to
federal income tax consequences.
What should I know about Class A, Class B, Class C, Class N
and Class Y shares of each Fund?
The rights of shareholders of both Funds are
substantially the same. Both Funds are organized as
Massachusetts business trusts. Both Funds Declaration of
Trusts and By-Laws are substantially similar with respect to
voting rights for the election of Trustees and rights for
mergers, liquidations and distributions and redemptions.
Shareholders of Growth Fund have voting rights that are
greater on significant matters that shareholders of MAFG Fund
do not have. Class A, Class B, Class C, Class N and Class Y
shares of Growth Fund will be distributed to shareholders of
Class A, Class B, Class C, Class N and Class Y shares of MAFG
Fund, respectively, in connection with the Reorganization.
Each share will be fully paid and nonassessable when issued,
will have no preemptive or conversion rights and will be
transferable on the books of Growth Fund. Each Fund's
Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations,
and provides for indemnification and reimbursement of
expenses out of its property for any shareholder held
personally liable for its obligations. Neither Fund permits
cumulative voting. The shares of Growth Fund will be
recorded electronically in each shareholder's account.
Growth Fund will then send a confirmation to each
shareholder. Shareholders of Class A shares of MAFG Fund
holding certificates representing their shares will not be
required to surrender their certificates in connection with
the reorganization. However, former Class A shareholders of
MAFG Fund whose shares are represented by outstanding share
certificates will not be allowed to redeem, transfer, or
pledge class shares of Growth Fund they receive in the
Reorganization until the certificates for the exchanged MAFG
Fund have been returned to the Transfer Agent. Shareholders
of Class B, Class C, Class N and Class Y shares of MAFG Fund
do not have certificates representing their shares. Their
shares will be cancelled.
Like MAFG Fund, Growth Fund does not routinely hold
annual shareholder meetings.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
This section describes key investment policies of MAFG
Fund and Growth Fund, and certain noteworthy differences
between the investment objectives and policies of the two
Funds. For a complete description of Growth Fund's
investment policies and risks, please review its Prospectus
dated October 23, 2002 as supplemented May 1, 2003 and the
Statement of Additional Information dated October 23, 2002
revised February 12, 2003 as supplemented March 31, 2003.
That Prospectus is attached to this Prospectus and Proxy
Statement as an enclosure and is incorporated herein by
reference.
Are there any significant differences between the investment
objectives and strategies of the Funds?
In considering whether to approve the Reorganization,
shareholders of MAFG Fund should consider the differences in
investment objectives, policies and risks of the Funds.
Additional information about both Funds is set forth their
respective Statements of Additional Information and Annual
Reports, which may be obtained upon request to the Transfer
Agent. See "Information about MAFG Fund" and "Information
about Growth Fund."
MAFG Fund and Growth Fund have similar investment
objectives. Growth Fund seeks capital appreciation. MAFG
Fund seeks long-term capital appreciation. MAFG Fund invests
in equity securities, mainly 20 to 30 companies having a
market capitalization greater than $5 billion. Growth Fund
invests primarily in common stocks of U.S. companies and
focuses the portfolio by investing in between 20 to 60
companies having a market capitalization of $2 billion and
above. Furthermore, both Funds may invest in foreign
securities.
What are the Main Risks Associated with an Investment in the
Funds?
Like all investments, an investment in both of the
Funds involves risk. There is no assurance that either Fund
will meet its investment objective. The achievement of the
Funds' goals depends upon market conditions, generally, and
on the portfolio manager's analytical and portfolio
management skills. The risks described below collectively
form the risk profiles of the Funds, and can affect the value
of the Funds' investments, investment performance and prices
per share. There is also the risk that poor securities
selection by the Manager or Adviser will cause the Fund to
underperform other funds having a similar objective. These
risks mean that you can lose money by investing in either
Fund. When you redeem your shares, they may be worth more or
less than what you paid for them.
How Do the Investment Policies of the Funds Compare?
MAFG Fund invests primarily in large-cap stocks and
currently focuses on common stock of 20 to 30 companies the
Adviser believes has earnings growth and capital appreciation
potential. Growth Fund invests mainly in common stocks of
U.S. companies. To focus its portfolio, Growth Fund normally
invests in between 20 and 60 companies of relatively few
industries having a large capitalization or mid-size
capitalization, although this could change over time.
Through its master/feeder structure MAFG Fund invests all
of its assets in the Master Fund that has the same goals as
the Fund. All investments are made by the Master Fund. The
Fund is non-diversified. The Fund's investment results will
correspond directly to the investment results of the Master
Fund. As such, MAFG Fund is vulnerable to the effects of
economic changes that effect shares of the Master Fund.
Risks of Growth Stocks. MAFG Funds invests in stocks of
growth companies, particularly newer companies, which may
offer opportunities for greater long-term capital
appreciation but may be more volatile than stocks of larger,
more established companies. They have greater risks if the
company's earnings growth or stock price fails to increase as
expected.
Other Equity Securities. Both Funds emphasize investments in
common stocks. However, they can both buy preferred stocks
and securities convertible into common stock. MAFG Fund may
also invest in American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs"), warrants and rights
that can be exercised to obtain stock, and real estate
investment trusts.
Risks of Non-Diversification. MAFG is "non-diversified."
That means that compared to funds that are diversified, MAFG
Fund can invest a greater portion of its net assets in the
securities of one issuer, such as the Master Fund. As such,
MAFG Fund is vulnerable to the effects of economic changes
that affect shares of the Master Fund. In contrast, Growth
Fund is diversified and is not subject to the risks of
non-diversification.
Industry Focus. Stocks of issuers in a particular industry
might be affected by changes in economic conditions or by
changes in government regulations, availability of basic
resources or supplies, or other events that affect that
industry more than others. To the extent that the Funds have
a greater emphasis on investments in a particular industry,
their share values may fluctuate in response to events
affecting that industry.
Cyclical Opportunities. Both Funds may also seek to take
advantage of changes in the business cycle by investing in
companies that are sensitive to those changes if the Manager
or Adviser believes they have growth potential. For example,
when the economy is expanding, companies in the consumer
durables and technology sectors may benefit and offer
long-term growth opportunities. Other cyclical industries
include insurance and forest products, for example. The Funds
focus on seeking growth over the long term, but may seek to
take tactical advantage of short-term market movements or
events affecting particular issuers or industries.
Foreign Investing. Growth Fund can purchase foreign equity
and debt securities. Growth Fund currently limits its
investments in foreign securities to not more than 10% of its
total assets, although it has the ability to invest up to 25%
of its total assets. MAFG Fund can invest without limit in
the securities of foreign companies in the form of ADRs. In
addition, MAFG Fund may invest up to 10% of its total assets
in other forms of securities of foreign companies including
EDRs or other securities convertible into securities of
foreign companies.
MAFG Fund may purchase the securities of certain
foreign investment corporations called passive foreign
investment companies ("PFICs") and is subject to certain
percentage limitations under the Investment Company Act
relating to the purchase of securities of investment
companies, and, consequently, MAFG Fund may have to subject
any of its investments in other investment companies,
including PFICs, to the limitation that no more than 10% of
the value of the MAFG Fund's total assets may be invested in
such securities.
While foreign securities may offer special investment
opportunities, they also have special risks that can reduce a
Fund's share prices and income. The change in value of
foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in
that foreign currency. Currency rate changes can also affect
the distributions a Fund makes from the income it receives
from foreign securities if foreign currency values change
against the U.S. dollar. Foreign investing can result in
higher transaction and operating costs for the Fund investing
in them. Foreign issuers are not subject to the same
accounting and disclosure requirements that U.S. companies
are subject to. The value of foreign investments may be
affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental,
economic or monetary policy in the U.S. or abroad, or other
political and economic factors. The risks of investing in
foreign securities are generally greater for investments in
emerging markets.
Special Risks of Emerging Markets. MAFG Fund can invest in
emerging markets. In contrast, Growth Fund does not.
Emerging and developing markets abroad may also offer special
opportunities for growth investing but have greater risks
than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even
less liquidity in their securities markets, and settlements
of purchases and sales of securities may be subject to
additional delays. MAFG Fund is subject to greater risks of
limitations on the repatriation of income and profits because
of currency restrictions imposed by local governments. Those
countries may also be subject to the risk of greater
political and economic instability, which can greatly affect
the volatility of prices of securities in those countries.
Illiquid and Restricted Securities. Both Funds can invest in
illiquid or restricted securities. Growth Fund will not
invest more than 10% of its net assets in illiquid or
restricted securities. The Board can increase that limit to
15%. MAFG Fund will not invest more than 15% of its net
assets in illiquid or restricted securities. Investments may
be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them
promptly at an acceptable price. A restricted security is
one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the
Securities Act of 1933. Certain restricted securities that
are eligible for resale to qualified institutional purchasers
may not be subject to that limit. Both the Manager and the
Adviser monitor holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain
adequate liquidity.
Derivative Investments. Both Funds can invest in a number of
different kinds of "derivative" investments. However,
neither Fund uses or contemplates using derivatives or
hedging instruments to a significant degree and the Funds are
not obligated to use them in seeking their objectives. In
general terms, a derivative investment is an investment
contract whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index.
Options, futures contracts, structured notes such as indexed
securities or inverse securities, equity-linked debt
securities of an issuer, collateralized mortgage obligations
("CMOs"), swaps, and hedging instruments are derivative
instruments MAFG Fund can use. Options, futures contracts,
equity-linked debt securities of an issuer and other hedging
instruments may be considered derivative investments for
Growth Fund. In addition to using derivatives for hedging,
including anticipatory hedging for MAFG Fund, both Funds
might use other derivative investments because they offer the
potential for increased income and/or principal value.
Derivatives have risks. If the issuer of the
derivative does not pay the amount due, the Funds can lose
money on the investment. The underlying security or
investment on which the derivative is based, and the
derivative itself, might not perform the way the Manager of
Growth Fund and the Adviser of MAFG Fund expected it to
perform. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of
derivatives. As a result of these risks, both Funds could
realize less principal or income from the investment than
expected or their hedge might be unsuccessful. If that
happens, the Funds' share prices could fall. Certain
derivative investments held by the Funds may be illiquid.
Certain types of investments or trading strategies
(such as borrowing money to increase the amount of
investment) may be subject to leverage risk. This means a
relatively small market movement may result in large changes
in the value of an investment. Certain investments or trading
strategies that involve leverage can result in losses that
greatly exceed the amount originally invested. Derivatives
may be difficult or impossible to sell at the time that the
seller would like or at the price that the seller believes
the security is currently worth.
Hedging. Both Funds can buy and sell futures contracts, put
and call options and forward contracts and in the case of
MAFG Fund, swaps. These are all referred to as "hedging
instruments." The Funds are not required to hedge to seek
their objectives. The Funds have limits on their use of
hedging and types of hedging instruments that can be used,
and do not use them for speculative purposes.
Some of these strategies could be used to hedge the
Funds' portfolio against price fluctuations. Other hedging
strategies, such as buying futures and call options, could
increase the Funds' exposure to the securities market.
Forward contracts can be used to try to manage foreign
currency risks on the Funds' foreign investments. Foreign
currency options can be used to try to protect against
declines in the dollar value of foreign securities the Funds
own, or to protect against an increase in the dollar cost of
buying foreign securities.
There are also special risks in particular hedging
strategies. Options trading involves the payment of premiums
and has special tax effects on the Funds. If the Adviser for
MAFG Fund, and the Manager for Growth Fund used a hedging
instrument at the wrong time or judged market conditions
incorrectly, the hedge might fail and the strategy could
reduce the Funds' return. Both Funds could also experience
losses if the prices of their futures and options positions
were not correlated with their other investments or if they
could not close out a position because of an illiquid market.
Portfolio Turnover. Both Funds can engage in short-term
trading to achieve their objective. Portfolio turnover
affects brokerage costs the Funds pay. Both Funds may have a
portfolio turnover rate in excess of 100%. If both Funds
realize capital gains when they sell their portfolio
investments, generally they must pay out those gains to
shareholders, increasing taxable distributions.
Investing in Small, Unseasoned Companies. Both Funds can
invest in small unseasoned companies. MAFG Fund can invest
without limit and, as a fundamental policy, Growth Fund will
not invest more than 15% of total assets (current intent is
not to exceed 5% of net assets) in securities of small
unseasoned companies. These are companies that have been in
operation for less than three years, including the operations
of any predecessors. Securities of these companies may be
subject to volatility in their prices. They may have a
limited trading market, which may adversely affect the Funds'
ability to dispose of them and can reduce the price the Funds
might be able to obtain for them. Other investors that own a
security issued by a small, unseasoned issuer for which there
is limited liquidity might trade the security when the Funds
are attempting to dispose of their holdings of that
security. In that case the Funds might receive a lower price
for their holdings than might otherwise be obtained. These
are more speculative securities and can increase the Funds'
overall portfolio risks.
Investment in Other Investment Companies. Both Funds can
under certain circumstances, invest in other investment
companies. MAFG Fund is a feeder fund that invests 100% of
its assets in a corresponding Master Fund, which is a
registered investment company. The Master Fund can also
invest its assets in shares of investment companies when
permitted by applicable law. As a non-fundamental policy,
Growth Fund generally cannot invest in securities of other
investment companies, except to the extent permitted under
the Investment Company Act, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules
or regulations may be amended or interpreted from time to
time.
An investment in another investment company may involve
the payment of substantial premiums above the value of such
investment company's portfolio securities and is subject to
limitations under the Investment Company Act. As a
shareholder in an investment company, a fund would be subject
to its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same
time, that Fund would bear its own management fees and other
expenses.
Repurchase Agreements. Both Funds can acquire securities
subject to repurchase agreements. In a repurchase
transaction, the Funds buy a security from, and
simultaneously resell it to, an approved vendor for delivery
on an agreed-upon future date. The resale price exceeds the
purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include
U.S. commercial banks, U.S. branches of foreign banks, or
broker-dealers that have been designated as primary dealers
in government securities. They must meet credit requirements
set by the Growth Fund's Boards of Trustees and MAFG Fund's
Advisor from time to time.
The majority of these transactions run from day to day,
and delivery pursuant to the resale typically occurs within
one to five days of the purchase. Repurchase agreements
having a maturity beyond seven days are subject to the Funds'
limits on holding illiquid investments. The Funds will not
enter into a repurchase agreement that causes more than 15%
of MAFG Fund's net assets and 10% of Growth Fund's net assets
to be subject to repurchase agreements having a maturity
beyond seven days. There is no limit on the amount of the
Funds' net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Pursuant to an Exemptive Order issued by the SEC, the
Funds, along with other affiliated entities managed by the
Manager, may transfer uninvested cash balances into one or
more joint repurchase accounts. These balances are invested
in one or more repurchase agreements, secured by U.S.
government securities. Securities that are pledged as
collateral for repurchase agreements are held by a custodian
bank until the agreements mature. Each joint repurchase
arrangement requires that the market value of the collateral
be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the
agreement, retention or sale of the collateral may be subject
to legal proceedings.
Loans of Portfolio Securities. Both Funds can lend their
portfolio securities to brokers, dealers and other types of
financial institutions approved by the Funds' Boards of
Trustees to raise cash for liquidity purposes. These loans
are limited to not more than 25% of the value of Growth
Fund's total assets and 33 1/3% of the value of MAFG Fund's
total assets. Growth Fund currently does not intend to
engage in loans of securities, but if it does so, such loans
will not likely exceed 5% of the Fund's total assets. The
Master Fund has received an exemptive order from the SEC
permitting it to lend portfolio securities to Merrill Lynch
Pierce, Fenner amp;amp; Smith Incorporated ("Merrill Lynch") or its
affiliates and to retain an affiliated of the Master Fund as
a lending agent.
There are some risks in connection with securities
lending. The Funds might experience a delay in receiving
additional collateral to secure a loan, or a delay in
recovery of the loaned securities if the borrower defaults.
The Funds must receive collateral for a loan.
When they lend securities, the Funds receive amounts
equal to the dividends or interest on loaned securities. It
also receives one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, and (c) interest
on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the
borrower. The Funds may also pay reasonable finder's,
custodian and administrative fees in connection with these
loans. The terms of the Funds' loans must meet applicable
tests under the Internal Revenue Code and must permit the
Funds to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
Real Estate Investment Trusts. Only MAFG Fund may invest in
equity Real Estate Investment Trusts ("REITs"). REITs are
entities which either own properties or make construction or
mortgage loans. Equity REITs may also include operating or
financing companies. Equity REITs own real estate directly
and the value of, and income earned by, the Fund depends upon
the income of the underlying properties and the rental income
they earn. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. The value
of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management
skill. They are also subject to heavy cash flow dependency,
defaults by borrowers or tenants, self-liquidation, the
possibility of failing to qualify for tax-free status under
the Internal Revenue Code, and failing to maintain exemption
from the Investment Company Act. Because REITs normally pay
an advisory fee and other expenses, a shareholder in these
Funds may be subject to duplicative fees and expenses.
Growth Fund cannot invest in REITs.
Short Sales. MAFG Fund may invest in short positions, while
Growth Fund cannot. MAFG Fund may make short sales of
securities, either as a hedge against potential declines in
value of a portfolio security or to realize appreciation when
a security that the Fund does not own declines in value.
MAFG Fund will not make a short sale if, after giving effect
to such sale, the market value of all securities sold short
exceeds 5% of the value of its total assets. MAFG Fund may
also make short sales "against the box" without being subject
to such limitations. In this type of short sale, at the time
of the sale, the Fund owns or has the immediate and
unconditional right to acquire the identical security at no
additional cost.
Temporary Defensive and Interim Investments. In times of
adverse or unstable market, economic or political conditions,
both Funds can invest up to 100% of their assets in temporary
defensive investments that are inconsistent with the Funds'
principal investment strategies. Generally they would be cash
equivalents (such as commercial paper), money market
instruments, short-term debt securities, U.S. government
securities, repurchase agreements and in the case of MAFG
Fund, purchase and sales contracts. They could include other
investment grade debt securities. MAFG Fund can also invest
in such short-term securities for cash management purposes.
Growth Fund might also hold these types of securities pending
the investment of proceeds from the sale of Fund's shares or
portfolio securities or to meet anticipated redemptions of
Fund shares. To the extent the Funds invest defensively in
these securities, they might not achieve their investment
objectives.
What are the Fundamental Investment Restrictions of the Funds?
Both MAFG Fund and Growth Fund have certain additional
investment restrictions that are fundamental policies,
changeable only by shareholder approval. Both Funds'
investment objectives are fundamental policies. Generally,
the investment restrictions are similar between the Funds and
are discussed below:
Diversification: Growth Fund cannot buy securities issued or
guaranteed by any one issuer if more than 5% of their total
assets would be invested in securities of that issuer or if
they would then own more than 10% of that issuer's voting
securities. That restriction applies to 75% of the Fund's
total assets. The limit does not apply to securities issued
by the U.S. Government or any of its agencies or
instrumentalities or securities of other investment
companies. MAFG Fund is non-diversified and does not have
similar restrictions.
Commodities: Neither Fund can invest in commodities, except
as described herein. MAFG Fund cannot invest in physical
commodities or physical commodity contracts except to the
extent that the Fund may do so in accordance with applicable
law and the Fund's Prospectus and Statement of Additional
Information, as they may be amended from time to time, and
without registering as a commodity pool operator under the
Commodity Exchange Act. Growth Fund cannot invest in
commodities or commodity contracts other than the hedging
instruments permitted by any of its other fundamental
policies, whether or not such hedging instrument is
considered to be a commodity or commodity contract.
Loans: Neither Fund can make loans, except as described
herein. MAFG Fund cannot make loans except (a) through
lending of securities, (b) through the purchase of debt
instruments, loan participations or similar evidences of
indebtedness, (c) through an inter-fund lending program with
other affiliated funds, and (d) through repurchase
agreements. Growth Fund cannot make loans, except to the
extent permitted under the Investment Company Act, the rules
or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or regulations
may be amended or interpreted from time to time.
Borrowing: Neither Fund can borrow, except as described
herein. MAFG Fund cannot borrow money in excess of 33 1/3%
of the value of its total assets. MAFG Fund may borrow only
from banks and/or affiliated investment companies. With
respect to this fundamental policy, MAFG Fund can borrow only
if it maintains a 300% ratio of assets to borrowings at all
times in the manner set forth in the Investment Company Act.
Growth Fund may not borrow money, except as permitted by the
Investment Company Act, the rules or regulations thereunder
or any exemption therefrom that is applicable to the Fund, as
such statute, rules or regulations may be amended or
interpreted from time to time.
Concentration: Neither Fund can concentrate investments,
meaning that neither Fund can invest 25% or more of its total
assets in companies in any one industry. In the case of
Growth Fund, that limit does not apply to securities issued
or guaranteed by the U.S. government or its agencies and
instrumentalities or securities issued by investment
companies. In the case of MAFG Fund that limit does not
apply to securities of the U.S. government and its agencies
and instrumentalities.
Underwriting: Neither Fund can underwrite securities of other
companies. A permitted exception is in case it is deemed to
be an underwriter under the Securities Act of 1933 when
reselling any securities held in its own portfolio.
Real Estate: Neither Fund can invest in real estate. However,
each Fund can purchase readily-marketable securities of
companies holding real estate or interests in real estate. In
the case of MAFG Fund, to the extent permitted by applicable
law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein.
Senior Securities: Neither Fund can issue "senior
securities." However, that restriction does not prohibit
either Fund from entering into margin, collateral or escrow
arrangements permitted by its other investment policies.
Growth Fund's policy regarding senior securities is an
operating policy which is not a fundamental policy but which
will not be changed without shareholder approval. MAFG Fund
may not issue senior securities to the extent such issuance
would violate applicable law.
Percentage Restrictions: Only Growth Fund has a fundamental
policy pursuant to which the Fund cannot deviate from the
percentage restrictions that apply to its investments in
small, unseasoned companies, borrowing for leverage and loans
of portfolio securities.
Do the Funds have any restrictions that are not fundamental?
The Funds have a number of other investment restrictions that
are not fundamental policies, which means that they can be
changed by vote of a majority of a Fund's Board of Trustees
without shareholder approval (excepted as indicated below).
Investment for Control: MAFG Fund cannot invest in companies
for the purpose of acquiring control or management of them.
Investments by the Fund in wholly-owned investment entities
created under the laws of certain countries will not be
deemed the making of investments for the purpose of
exercising control or management
Senior Securities: As described above, Growth Fund currently
has an operating policy (which is not a fundamental policy
but will not be changed without the approval of a shareholder
vote) that prohibits the Fund from issuing senior
securities. However, that policy does not prohibit the Fund
from entering into margin, collateral or escrow arrangements
permitted by its other investment policies.
How do the Account Features and Shareholder Services for the
Funds Compare?
Investment Management - Pursuant to the Growth Fund
Advisory Agreement, the Manager acts as the investment
advisor for Growth Fund. MAFG Fund invests all of its assets
in shares of a Master Fund. Accordingly, MAFG Fund does not
invest directly in portfolio securities and all portfolio
management occurs at the level of the Master Fund. The
Master Fund has entered into an investment management
agreement with Fund Asset Management, L.P., doing business as
Mercury Advisors, as Adviser (the "Master Fund Advisory
Agreement"). Under the Growth Fund Advisory Agreement and
the Master Fund Advisory Agreement, the Manager or Advisor is
authorized and directed to (i) regularly provide investment
advice and recommendations to each Fund with respect to the
Fund's investments, investment policies and the purchase and
sale of securities and other investments; (ii) supervise and
monitor the investment program of each Fund and the
composition of its portfolio to determine what securities and
other investments shall be purchased or sold by each Fund;
and (iii) arrange for the purchase of securities and other
investments for each Fund and the sale of securities and
other investments held in the portfolio of each Fund.
The advisory agreements state that the Manager or
Adviser will provide administrative services for the Funds,
including compilation and maintenance of records, preparation
and filing of reports required by the SEC, reports to
shareholders, and composition of proxy statements and
registration statements required by federal and state
securities laws. The administrative services to be provided
by the Manager or Adviser under the advisory agreements will
be at its own expense.
Expenses not expressly assumed by the Manager or
Adviser under the advisory agreements or by the Distributor
under the General Distributor's Agreement are paid by the
Funds. The advisory agreements list examples of expenses
paid by the Funds, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain
Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including
litigation costs.
Growth Fund's Advisory Agreement generally provides
that in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or reckless
disregard of its obligations and duties under the advisory
agreement, the Manager is not liable for any loss sustained
by reason of good faith errors or omissions in connection
with any matters to which the agreement(s) relate. The
agreement permits the Manager to act as investment advisor
for any other person, firm or corporation. Pursuant to the
agreement, the Manager is permitted to use the name
"Oppenheimer" in connection with other investment companies
for which it may act as investment advisor or general
distributor. If the Manager shall no longer act as
investment advisor to Growth Fund, the Manager may withdraw
the right of the Fund to use the name "Oppenheimer" as part
of its name.
The Manager is controlled by Oppenheimer Acquisition
Corp., a holding company owned in part by senior officers of
the Manager and ultimately controlled by Massachusetts Mutual
Life Insurance Company, a mutual life insurance company that
also advises pension plans and investment companies. The
Manager has been an investment advisor since January 1960.
The Manager (and its subsidiaries and controlled affiliates)
managed more than $120 billion in assets as of March 31,
2003, including other Oppenheimer funds with more than seven
million shareholder accounts. The Manager is located at 498
Seventh Avenue, New York, New York 10018. The Adviser is
organized as a limited partnership, the partners of which are
Merrill Lynch amp;amp; Co., Inc., a financial services holding
company and the parent of Merrill Lynch and Princeton
Services, Inc. Merrill Lynch amp;amp; Co., Inc. and Princeton
Services are "controlling persons" of the Adviser as defined
under the Investment Company Act because of their ownership
of its voting securities and their power to exercise a
controlling influence over its management or policies.
OppenheimerFunds Services, a division of the Manager, acts as
transfer and shareholder servicing agent and is paid an
annual per account fee by each of MAFG Fund and Growth Fund
and for certain other open-end funds managed by the Manager
and its affiliates.
Distribution - Pursuant to General Distributor's
Agreements, the Distributor acts as principal underwriter in
a continuous public offering of shares of both Funds, but is
not obligated to sell a specific number of shares. Expenses
normally attributable to sales, including advertising and the
cost of printing and mailing prospectuses other than those
furnished to existing shareholders, are borne by the
Distributor, except for those for which the Distributor is
paid under each Fund's Rule 12b-1 Distribution and Service
Plan described below.
Both Funds have adopted a Service Plan and Agreement
under Rule 12b-1 of the Investment Company Act for their
Class A shares. The Service Plan provides for the
reimbursement to the Distributor for a portion of its costs
incurred in connection with the personal service and
maintenance of accounts that hold Class A shares of the
respective Funds. Under the Service Plans, reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of
the average annual net assets of Class A shares of the
Funds. The Distributor currently uses all of those fees to
compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A
shares of the respective Funds.
Both Funds have adopted Distribution and Service Plans
under Rule 12b-1 of the Investment Company Act for their
Class B, Class C and Class N shares. The Funds' Plans
compensate the Distributor for its services and costs in
connection with the distribution of Class B, Class C and
Class N shares and the personal service and maintenance of
shareholder accounts. Under both Funds' Plans, the Funds pay
the Distributor an asset-based sales charge at an annual rate
of 0.75% of Class B and Class C assets, and an annual
asset-based sales charge of 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% of average
annual net assets under each plan. All fee amounts are
computed on the average annual net assets of the class
determined as of the close of each regular business day of
each Fund. The Distributor uses all of the service fees to
compensate broker-dealers for providing personal services and
maintenance of accounts of their customers that hold shares
of the Funds. The Class B and Class N asset-based sales
charges are retained by the Distributor. After the first
year, the Class C asset-based sales charges are paid to
broker-dealers who hold or whose clients hold Class C shares
as an ongoing concession for shares that have been
outstanding for a year or more.
Purchases and Redemptions - Both Funds are part of the
OppenheimerFunds family of mutual funds. The procedures for
purchases, exchanges and redemptions of shares of the Funds
are nearly identical, however, for MAFG Fund, not only can
shares be redeemed by mail and telephone, but by wire as
well. Shares of either Fund may be exchanged for shares of
the same class of other Oppenheimer funds offering such
shares. Exchange privileges are subject to amendment or
termination at any time.
Both Funds have the same initial and subsequent minimum
investment amounts for the purchase of shares. These amounts
are $1,000 and $50, respectively. Both Funds have a maximum
initial sales charge of 5.75% on Class A shares for purchases
of less than $25,000. The sales charge of 5.75% is reduced
for purchases of Class A shares of $25,000 or more.
Investors who purchase $1 million or more of Class A shares
pay no initial sales charge. Class B shares of the Funds are
sold without a front-end sales charge but investors will pay
an annual asset-based sales charge. If investors sell their
shares within six years of buying them, they will normally
pay a contingent deferred sales charge ("CDSC"). The CDSC
begins at 5% for shares redeemed in the first year and
declines to 1% in the sixth year and is eliminated after
that. Class C shares may be purchased without an initial
sales charge, but investors will pay an annual asset-based
sales charge, and if redeemed within 12 months of buying
them, a CDSC of 1% may be deducted. Class N shares
(available only through certain retirement plans) are
purchased without an initial sales charge, but investors will
pay an annual asset-based sales charge, and if redeemed
within 18 months of the retirement plan's first purchase of
Class N shares, a CDSC of 1% may be deducted.
Class A, Class B, Class C, Class N and Class Y shares
of Growth Fund received in the Reorganization will be issued
at net asset value, without a sales charge and no CDSC will
be imposed on any MAFG Fund shares exchanged for Growth Fund
shares as a result of the Reorganization. However, any CDSC
that applies to MAFG Fund shares as of the date of the
exchange will carry over to Growth Fund shares received in
the Reorganization.
Shareholder Services--Both Funds also offer the
following privileges: (i) Right of Accumulation, (ii) Letter
of Intent, (iii) reinvestment of dividends and distributions
at net asset value, (iv) net asset value purchases by certain
individuals and entities, (v) Asset Builder (automatic
investment) Plans, (vi) Automatic Withdrawal and Exchange
Plans for shareholders who own shares of the Funds valued at
$5,000 or more, (vii) AccountLink and PhoneLink arrangements,
(viii) exchanges of shares for shares of the same class of
certain other funds at net asset value, (ix) telephone and
Internet redemption and exchange privileges and (x) for MAFG
Fund only, wire redemptions of fund shares (for a fee). All
of such services and privileges are subject to amendment or
termination at any time and are subject to the terms of the
Funds' respective prospectuses.
Dividends and Distributions - Both Funds intend to
declare dividends separately for each class of shares from
net investment income on an annual basis and to pay those
dividends to shareholders in December on a date selected by
the Board of Trustees of each Fund. Dividends paid on Class
A and Class Y shares will generally be higher than dividends
for Class B, Class C and Class N shares which normally have
higher expenses than Class A and Class Y shares. Both Funds
have no fixed dividend rates and there can be no guarantee
that either Fund will pay any dividends or distributions.
Either Fund may realize capital gains on the sale of
portfolio securities. If it does, it may make distributions
out of any net short-term or long-term capital gains in
December of each year. The Funds may make supplemental
distributions of dividends and capital gains following the
end of their fiscal years.
VOTING INFORMATION
How many votes are necessary to approve the Reorganization
Agreement?
The affirmative vote of the holders of a majority of
the outstanding voting securities (as defined in the
Investment Company Act) of MAFG Fund voting in the aggregate
and not by class is necessary to approve the Reorganization
Agreement and the transactions contemplated thereby. As
defined in the Investment Company Act, the vote of a majority
of the outstanding shares means the vote of (1) 67% or more
of MAFG Fund's outstanding shares present at a meeting if the
holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (2) more than
50% of the Fund's outstanding shares, whichever is less.
Each shareholder will be entitled to one vote for each full
share, and a fractional vote for each fractional share of
MAFG Fund held on the Record Date. If sufficient votes to
approve the proposal are not received by the date of the
Meeting, the Meeting may be adjourned to permit further
solicitation of proxies. The holders of a majority of shares
entitled to vote at the Meeting and present in person or by
proxy (whether or not sufficient to constitute a quorum) may
adjourn the Meeting to permit further solicitation of proxies.
How do I ensure my vote is accurately recorded?
You can vote in three (3) different ways:
o By mail, with the enclosed proxy card
o In person at the Meeting
o By telephone (please see the insert for instructions)
Voting by telephone is convenient and can help reduce
---------- ----------------
MAFG Fund's expenses. Shareholders must enter a unique
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control number found on their respective proxy ballots before
providing voting instructions by telephone. After a
shareholder provides his or her voting instructions, those
instructions are read back to the shareholder and the
shareholder must confirm his or her voting instructions
before disconnecting the telephone call. The voting
procedures used in connection with telephone voting are
designed to reasonably authenticate the identity of
shareholders to permit shareholders to authorize the voting
of their shares in accordance with their instructions and to
confirm that their instructions have been properly recorded.
Please be advised that the deadline for voting by telephone
is 3:00 P.M. Eastern time ("ET") on the last business day
before the Meeting.
Whichever method you choose, please take the time to
read the full text of the proxy statement before you vote.
Proxy ballots that are properly signed, dated and
received at or prior to the Meeting, or any adjournment
thereof, will be voted as specified. If you simply sign and
date the proxy but give no voting instructions, your shares
will be voted in favor of the Reorganization Agreement.
Can I revoke my proxy?
You may revoke your proxy at any time before it is
voted by (i) writing to the Secretary of MAFG Fund at 6803
South Tucson Way, Centennial, Colorado 80112 (if received in
time to be acted upon); (ii) attending the meeting and voting
in person or (iii) signing and returning a later dated proxy
(if returned and received in time to be voted).
What other matters will be voted upon at the Meeting?
The Board of Trustees of MAFG Fund does not intend to
bring any matters before the Meeting other than those
described in this proxy. It is not aware of any other
matters to be brought before the Meeting by others. If any
other matters legally come before the Meeting, the proxy
ballots confer discretionary authority with respect to such
matters, and it is the intention of the persons named as
attorneys-in-fact to vote proxies to vote in accordance with
their judgment in such matters.
Who is entitled to vote?
Shareholders of record of MAFG Fund at the close of
business on August 12, 2003 (the "record date") will be
entitled to vote at the Meeting or any adjournment of the
Meeting. As of the close of business on August 12, 2003,
there were __________ outstanding shares of MAFG Fund,
consisting of __________ Class A shares, _________ Class B
shares, __________ Class C shares, __________ Class N shares
and _________ Class Y shares. As of the close of business on
August 12, 2003, there were _________ outstanding shares of
Growth Fund, consisting of _________ Class A shares,
_________ Class B shares, __________ Class C shares,
__________ Class N shares and __________ Class Y shares.
Under relevant state law, proxies representing abstentions
and broker non-votes will be included for purposes of
determining whether a quorum is present at the Meeting. For
purposes of the Meeting, a majority of shares outstanding and
entitled to vote, present in person or represented by proxy,
constitutes a quorum. Growth Fund shareholders do not vote
on the Reorganization.
Voting By Broker-Dealers. Shares of MAFG Fund owned of record
by a broker-dealer for the benefit of its customers ("street
account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions
are received, the broker-dealer may (if permitted by
applicable stock exchange rules) vote, as record holder of
such shares, for the Reorganization in the same proportion as
that broker-dealer votes street account shares for which it
has received voting instructions in time to be voted.
Beneficial owners of street account shares cannot vote in
person at the meeting. Only record owners may vote in person
at the meeting.
A "broker non-vote" is deemed to exist when a proxy
received from a broker indicates that the broker does not
have discretionary authority to vote the shares on that
matter. Abstentions and broker non-votes will have the same
effect as a vote against the Reorganization.
Voting by the Trustee for OppenheimerFunds-Sponsored
Retirement Plans. Shares of MAFG Fund held in
OppenheimerFunds-sponsored retirement accounts for which
votes are not received as of the last business day before the
Meeting Date, will be voted by the trustee for such accounts
in the same proportion as shares for which voting
instructions from the MAFG Fund's other shareholders have
been timely received.
What other solicitations will be made?
MAFG Fund will request broker-dealer firms, custodians,
nominees and fiduciaries to forward proxy material to the
beneficial owners of the shares of record, and may reimburse
them for their reasonable expenses incurred in connection
with such proxy solicitation. In addition to solicitations
by mail, officers of MAFG Fund or officers and employees of
OppenheimerFunds Services, without extra pay, may conduct
additional solicitations personally or by telephone or
telegraph. Any expenses so incurred will be borne by
OppenheimerFunds Services.
Proxies also may be solicited by a proxy solicitation
firm hired at MAFG Fund's expense. If a proxy solicitation
firm is hired, it is anticipated that the cost of engaging a
proxy solicitation firm would not exceed $5,000, plus the
additional costs which would be incurred in connection with
contacting those shareholders who have not voted, in the
event of a need for resolicitation of votes.
If MAFG Fund does engage a proxy solicitation firm, as
the Meeting date approaches, certain shareholders may receive
telephone calls from a representative of the solicitation
firm if their vote has not yet been received. Authorization
to permit the solicitation firm to execute proxies may be
obtained by telephonic instructions from shareholders of MAFG
Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures set forth below.
These procedures have been designed to reasonably ensure that
the identity of the shareholder providing voting instructions
is accurately determined and that the voting instructions of
the shareholder are accurately recorded.
In all cases where a telephonic proxy is solicited, the
solicitation firm representative is required to ask for each
shareholder's full name, address, the last four digits of the
shareholder's social security or employer identification
number, title (if the shareholder is authorized to act on
behalf of an entity, such as a corporation) and to confirm
that the shareholder has received the Proxy Statement and
ballot in the mail. If the information solicited agrees with
the information provided to the solicitation firm, the
solicitation firm representative has the responsibility to
explain the process, read the proposals listed on the proxy
ballot, and ask for the shareholder's instructions on such
proposals. The solicitation firm representative, although he
or she is permitted to answer questions about the process, is
not permitted to recommend to the shareholder how to vote.
The solicitation firm representative may read any
recommendation set forth in the Proxy Statement. The
solicitation firm representative will record the
shareholder's instructions. Within 72 hours, the shareholder
will be sent a confirmation of his or her vote asking the
shareholder to call the solicitation firm immediately if his
or her instructions are not correctly reflected in the
confirmation.
Brokers, banks and other fiduciaries may be required to
forward soliciting material to their principals and to obtain
authorization for the execution of proxies. For those
services, they will be reimbursed by MAFG Fund for their
expenses.
If a shareholder wishes to participate in the Meeting,
but does not wish to give his or her proxy telephonically,
the shareholder may still submit the proxy ballot originally
sent with the Prospectus and Proxy Statement in the postage
paid envelope provided or attend in person. Should
shareholders require additional information regarding the
proxy ballot or a replacement proxy ballot, they may contact
us toll-free at 1.800.708.7780. Any proxy given by a
shareholder, whether in writing or by telephone, is revocable
as described above under the paragraph entitled "Can I revoke
my proxy?"
Please take a few moments to complete your proxy ballot
promptly. You may provide your completed proxy ballot,
telephonically or by mailing the proxy ballot in the postage
paid envelope provided. You also may cast your vote by
attending the Meeting in person if you are a record owner.
Are there appraisal rights?
No. Under the Investment Company Act, shareholders do
not have rights of appraisal as a result of the
Reorganization. Although appraisal rights are unavailable,
you have the right to redeem your shares at net asset value
until the Valuation Date for the Reorganization. After the
Closing Date, you may redeem your new Growth Fund shares or
exchange them into shares of certain other funds in the
OppenheimerFunds family of mutual funds, subject to the terms
of the prospectuses of both funds.
INFORMATION ABOUT GROWTH FUND
Information about Growth Fund (File No. 811-2306) is
included in Growth Fund's Prospectus dated October 23, 2002,
as supplemented May 1, 2003, which is attached to and
considered a part of this Prospectus and Proxy Statement.
Additional information about Growth Fund is included in the
Fund's Statement of Additional Information dated October 23,
2002, revised February 12, 2003 as supplemented March 31,
2003, and the Annual Report dated August 31, 2002 and the
succeeding Semi-Annual Report dated February 28, 2003, which
have been filed with the SEC and are incorporated herein by
reference. You may request a free copy of these materials
and other information by calling 1.800.708.7780 or by writing
to Growth Fund at OppenheimerFunds Services, P.O. Box 5270,
Denver, CO 80217-5270. Growth Fund also files proxy
materials, reports and other information with the SEC in
accordance with the informational requirements of the
Securities and Exchange Act of 1934 and the Investment
Company Act. These materials can be inspected and copied at:
the SEC's Public Reference Room in Washington, D.C. (Phone:
1.202.942.8090) or the EDGAR database on the SEC's Internet
website at WWW.SEC.GOV. Copies may be obtained upon payment
-----------
of a duplicating fee by electronic request at the SEC's
e-mail address: PUBLICINFO@SEC.GOV or by writing to the SEC's
------------------
Public Reference Section, Washington, D.C. 20549-0102.
INFORMATION ABOUT MAFG Fund
Information about MAFG Fund (File No. 811-10153) is
included in the current MAFG Fund's Prospectus dated March
28, 2003, as supplemented May 7, 2003. This document has
been filed with the SEC and is incorporated by reference
herein. Additional information about MAFG Fund is also
included in the Fund's Statement of Additional Information
dated March 28, 2003, and the Annual Report dated November
30, 2002 and the succeeding Semi-Annual Report dated May 31,
2003 (to be filed upon availability), which have been filed
with the SEC and are incorporated by reference herein. You
may request free copies of these or other documents relating
to MAFG Fund by calling 1.800.708.7780 or by writing to
OppenheimerFunds Services, P.O. Box 5270, Denver, CO
80217-5270. Reports and other information filed by MAFG Fund
can be inspected and copied at: the SEC's Public Reference
Room in Washington, D.C. (Phone: 1.202.942.8090) or the
EDGAR database on the SEC's Internet website at WWW.SEC.GOV.
-----------
Copies may be obtained upon payment of a duplicating fee by
electronic request at the SEC's e-mail address:
PUBLICINFO@SEC.GOV or by writing to the SEC's Public
- ------------------
Reference Section, Washington, D.C. 20549-0102.
PRINCIPAL SHAREHOLDERS
As of August 12, 2003, the officers and Trustees of
MAFG Fund, as a group, owned less than 1% of the outstanding
voting shares of MAFG Fund. As of August 12, 2003, the only
persons who owned of record or were known by MAFG Fund to own
beneficially 5% or more of any class of the Fund's
outstanding shares were as follows:
5% Shareholder information will be updated
------------------------------------------
As of August 12, 2003, the officers and Trustees of
Growth Fund, as a group, owned less than 1% of the
outstanding voting shares of Growth Fund. As of August 12,
2003, the only persons who owned of record or were known by
Growth Fund to own beneficially 5% or more of any class of
the Fund's outstanding shares were as follows:
5% Shareholder information will be updated
------------------------------------------
By Order of the Board of Trustees
Robert G. Zack, Secretary
September 8, 2003
EXHIBITS TO THE COMBINED PROXY
STATEMENT AND PROSPECTUS
Exhibit
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A Agreement and Plan of Reorganization between Mercury
Advisors Focus Growth Fund, a series of Oppenheimer Select
Managers and Oppenheimer Growth Fund
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
dated as of April 28, 2003 by and between Mercury Advisors
Focus Growth Fund, a series of Oppenheimer Select Managers
("MAFG Fund"), a Massachusetts business trust and Oppenheimer
Growth Fund ("Growth Fund"), a Massachusetts business trust.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment
companies of the management type; and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), of MAFG Fund
through the acquisition by Growth Fund of substantially all
of the assets of MAFG Fund in exchange for the voting shares
of beneficial interest ("shares") of Class A, Class B, Class
C, Class N and Class Y shares of Growth Fund and the
assumption by Growth Fund of certain liabilities of MAFG
Fund, for which Class A, Class B, Class C, Class N and Class
Y shares of Growth Fund are to be distributed by MAFG Fund
pro rata to its shareholders in complete liquidation of MAFG
Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan
of Reorganization (the "Agreement") pursuant to Section
368(a)(1) of the Code as follows: The Reorganization will be
comprised of the acquisition by Growth Fund of substantially
all of the assets of MAFG Fund in exchange for Class A, Class
B, Class C, Class N and Class Y shares of Growth Fund and the
assumption by Growth Fund of certain liabilities of MAFG
Fund, followed by the distribution of such Class A, Class B,
Class C, Class N and Class Y shares of Growth Fund to the
Class A, Class B, Class C, Class N and Class Y shareholders
of MAFG Fund in exchange for their Class A, Class B, Class C,
Class N and Class Y shares of MAFG Fund, all upon and subject
to the terms of the Agreement hereinafter set forth.
The share transfer books of MAFG Fund will be
permanently closed at the close of business on the Valuation
Date (as hereinafter defined) and only redemption requests
received in proper form on or prior to the close of business
on the Valuation Date shall be fulfilled by MAFG Fund;
redemption requests received by MAFG Fund after that date
shall be treated as requests for the redemption of the shares
of Growth Fund to be distributed to the shareholder in
question as provided in Section 5 hereof.
2. On the Closing Date (as hereinafter defined), all
of the assets of MAFG Fund on that date, excluding a cash
reserve (the "cash reserve") to be retained by MAFG Fund
sufficient in its discretion for the payment of the expenses
of MAFG Fund's dissolution and its liabilities, but not in
excess of the amount contemplated by Section 10E, shall be
delivered as provided in Section 8 to Growth Fund, in
exchange for and against delivery to MAFG Fund on the Closing
Date of a number of Class A, Class B, Class C, Class N and
Class Y shares of Growth Fund, having an aggregate net asset
value equal to the value of the assets of MAFG Fund so
transferred and delivered.
3. The net asset value of Class A, Class B, Class C, Class
N and Class Y shares of Growth Fund and the value of the
assets of MAFG Fund to be transferred shall in each case be
determined as of the close of business of The New York Stock
Exchange on the Valuation Date. The computation of the net
asset value of the Class A, Class B, Class C, Class N and
Class Y shares of Growth Fund and the Class A, Class B, Class
C, Class N and Class Y shares of MAFG Fund shall be done in
the manner used by Growth Fund and MAFG Fund, respectively,
in the computation of such net asset value per share as set
forth in their respective prospectuses. The methods used by
Growth Fund in such computation shall be applied to the
valuation of the assets of MAFG Fund to be transferred to
Growth Fund.
MAFG Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with
all previous such dividends, shall have the effect of
distributing to MAFG Fund's shareholders all of MAFG Fund's
investment company taxable income for taxable years ending on
or prior to the Closing Date (computed without regard to any
dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing
Date (after reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be at the offices of
OppenheimerFunds, Inc. (the "Agent"), 6803 S Tucson Way,
Centennial, CO 80112, on such time or such other place as the
parties may designate or as provided below (the "Closing
Date"). The business day preceding the Closing Date is herein
referred to as the "Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or any rule, regulation or
order thereunder, suspended the redemption of its shares or
postponed payment therefore, the Closing Date shall be
postponed until the first business day after the date when
both parties have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for
a period of 60 days beyond the Valuation Date, then the other
party to the Agreement shall be permitted to terminate the
Agreement without liability to either party for such
termination.
5. In conjunction with the Closing, MAFG Fund shall
distribute on a pro rata basis to the shareholders of MAFG
Fund as of the Valuation Date Class A, Class B, Class C,
Class N and Class Y shares of Growth Fund received by MAFG
Fund on the Closing Date in exchange for the assets of MAFG
Fund in complete liquidation of MAFG Fund; for the purpose of
the distribution by MAFG Fund of Class A, Class B, Class C,
Class N and Class Y shares of Growth Fund to MAFG Fund's
shareholders, Growth Fund will promptly cause its transfer
agent to: (a) credit an appropriate number of Class A, Class
B, Class C, Class N and Class Y shares of Growth Fund on the
books of Growth Fund to each Class A, Class B, Class C, Class
N and Class Y shareholder of MAFG Fund in accordance with a
list (the "Shareholder List") of MAFG Fund shareholders
received from MAFG Fund; and (b) confirm an appropriate
number of Class A, Class B, Class C, Class N and Class Y
shares of Growth Fund to each Class A, Class B, Class C,
Class N and Class Y shareholder of MAFG Fund; certificates
for Class A shares of Growth Fund will be issued upon written
request of a former shareholder of MAFG Fund but only for
whole shares, with fractional shares credited to the name of
the shareholder on the books of Growth Fund and only after
any share certificates for MAFG Fund are returned to the
transfer agent.
The Shareholder List shall indicate, as of the close of
business on the Valuation Date, the name and address of each
shareholder of MAFG Fund, indicating his or her share
balance. MAFG Fund agrees to supply the Shareholder List to
Growth Fund not later than the Closing Date. Shareholders of
MAFG Fund holding certificates representing their shares
shall not be required to surrender their certificates to
anyone in connection with the Reorganization. After the
Closing Date, however, it will be necessary for such
shareholders to surrender their certificates in order to
redeem, transfer or pledge the shares of Growth Fund which
they received.
6. Within one year after the Closing Date, MAFG Fund shall
(a) either pay or make provision for payment of all of its
liabilities and taxes, and (b) either (i) transfer any
remaining amount of the cash reserve to Growth Fund, if such
remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined
below) or (ii) distribute such remaining amount to the
shareholders of MAFG Fund on the Valuation Date. Such
remaining amount shall be deemed to be material if the amount
to be distributed, after deduction of the estimated expenses
of the distribution, equals or exceeds one cent per share of
MAFG Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination
between the parties as to their respective portfolios so
that, after the Closing, Growth Fund will be in compliance
with all of its investment policies and restrictions. At the
Closing, MAFG Fund shall deliver to Growth Fund two copies of
a list setting forth the securities then owned by MAFG Fund.
Promptly after the Closing, MAFG Fund shall provide Growth
Fund a list setting forth the respective federal income tax
bases thereof.
8. Portfolio securities or written evidence acceptable to
Growth Fund of record ownership thereof by The Depository
Trust Company or through the Federal Reserve Book Entry
System or any other depository approved by MAFG Fund pursuant
to Rule 17f-4 and Rule 17f-5 under the Investment Company Act
shall be endorsed and delivered, or transferred by
appropriate transfer or assignment documents, by MAFG Fund on
the Closing Date to Growth Fund, or at its direction, to its
custodian bank, in proper form for transfer in such condition
as to constitute good delivery thereof in accordance with the
custom of brokers and shall be accompanied by all necessary
state transfer stamps, if any. The cash delivered shall be
in the form of certified or bank cashiers' checks or by bank
wire or intra-bank transfer payable to the order of Growth
Fund for the account of Growth Fund. Class A, Class B, Class
C, Class N and Class Y shares of Growth Fund representing the
number of Class A, Class B, Class C, Class N and Class Y
shares of Growth Fund being delivered against the assets of
MAFG Fund, registered in the name of MAFG Fund, shall be
transferred to MAFG Fund on the Closing Date. Such shares
shall thereupon be assigned by MAFG Fund to its shareholders
so that the shares of Growth Fund may be distributed as
provided in Section 5.
If, at the Closing Date, MAFG Fund is unable to make
delivery under this Section 8 to Growth Fund of any of its
portfolio securities or cash for the reason that any of such
securities purchased by MAFG Fund, or the cash proceeds of a
sale of portfolio securities, prior to the Closing Date have
not yet been delivered to it or MAFG Fund's custodian, then
the delivery requirements of this Section 8 with respect to
said undelivered securities or cash will be waived and MAFG
Fund will deliver to Growth Fund by or on the Closing Date
with respect to said undelivered securities or cash executed
copies of an agreement or agreements of assignment in a form
reasonably satisfactory to Growth Fund, together with such
other documents, including a due bill or due bills and
brokers' confirmation slips as may reasonably be required by
Growth Fund.
9. Growth Fund shall not assume the liabilities (except
for portfolio securities purchased which have not settled and
for shareholder redemption and dividend checks outstanding)
of MAFG Fund, but MAFG Fund will, nevertheless, use its best
efforts to discharge all known liabilities, so far as may be
possible, prior to the Closing Date. The cost of printing
and mailing the proxies and proxy statements will be borne by
MAFG Fund. OppenheimerFunds, Inc. will bear the cost of the
respective tax opinion and audits relating to the
Reorganization for MAFG Fund and Growth Fund will bear the
cost of its respective tax opinion. Any documents such as
existing prospectuses or annual reports that are included in
that mailing will be a cost of the Fund issuing the
document. Any other out-of-pocket expenses of Growth Fund
and MAFG Fund associated with this reorganization, including
legal, accounting and transfer agent expenses, will be borne
by MAFG Fund and Growth Fund, respectively, in the amounts so
incurred by each.
10. The obligations of Growth Fund hereunder shall be
subject to the following conditions:
A. The Board of Trustees of MAFG Fund shall have
authorized the execution of the Agreement, and the
shareholders of MAFG Fund shall have approved the Agreement
and the transactions contemplated hereby, and MAFG Fund shall
have furnished to Growth Fund copies of resolutions to that
effect certified by the Secretary or the Assistant Secretary
of MAFG Fund; such shareholder approval shall have been by
the affirmative vote required by Massachusetts Law and its
charter documents at a meeting for which proxies have been
solicited by the Prospectus and Proxy Statement (as
hereinafter defined).
B. Growth Fund shall have received an opinion dated as
of the Closing Date from counsel to MAFG Fund, to the effect
that (i) MAFG Fund is a business trust duly organized,
validly existing and in good standing under the laws of the
State of Massachusetts with full corporate powers to carry on
its business as then being conducted and to enter into and
perform the Agreement; and (ii) that all action necessary to
make the Agreement, according to its terms, valid, binding
and enforceable on MAFG Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by
MAFG Fund. Massachusetts counsel may be relied upon for this
opinion.
C. The representations and warranties of MAFG Fund
contained herein shall be true and correct at and as of the
Closing Date, and Growth Fund shall have been furnished with
a certificate of the President, or a Vice President, or the
Secretary or the Assistant Secretary or the Treasurer or the
Assistant Treasurer of MAFG Fund, dated as of the Closing
Date, to that effect.
D. On the Closing Date, MAFG Fund shall have furnished to
Growth Fund a certificate of the Treasurer or Assistant
Treasurer of MAFG Fund as to the amount of the capital loss
carry-over and net unrealized appreciation or depreciation,
if any, with respect to MAFG Fund as of the Closing Date.
E. The cash reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
MAFG Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Growth
Fund under the Securities Act of 1933, as amended (the "1933
Act"), containing a preliminary form of the Prospectus and
Proxy Statement, shall have become effective under the 1933
Act.
G. On the Closing Date, Growth Fund shall have received
a letter from Robert G. Zack or other senior executive
officer of OppenheimerFunds, Inc. acceptable to Growth Fund,
stating that nothing has come to his or her attention which
in his or her judgment would indicate that as of the Closing
Date there were any material, actual or contingent
liabilities of MAFG Fund arising out of litigation brought
against MAFG Fund or claims asserted against it, or pending
or to the best of his or her knowledge threatened claims or
litigation not reflected in or apparent from the most recent
audited financial statements and footnotes thereto of MAFG
Fund delivered to Growth Fund. Such letter may also include
such additional statements relating to the scope of the
review conducted by such person and his or her
responsibilities and liabilities as are not unreasonable
under the circumstances.
H. Growth Fund shall have received an opinion, dated as
of the Closing Date, of Deloitte amp;amp; Touche LLP (or an
appropriate substitute tax expert), to the same effect as the
opinion contemplated by Section 11.E. of the Agreement.
I. Growth Fund shall have received at the Closing all of
the assets of MAFG Fund to be conveyed hereunder, which
assets shall be free and clear of all liens, encumbrances,
security interests, restrictions and limitations whatsoever.
11. The obligations of MAFG Fund hereunder shall be
subject to the following conditions:
A. The Board of Trustees of Growth Fund shall have
authorized the execution of the Agreement, and the
transactions contemplated thereby, and Growth Fund shall have
furnished to MAFG Fund copies of resolutions to that effect
certified by the Secretary or the Assistant Secretary of
Growth Fund.
B. MAFG Fund's shareholders shall have approved the
Agreement and the transactions contemplated hereby, by an
affirmative vote required by the Massachusetts Law and its
charter documents and MAFG Fund shall have furnished Growth
Fund copies of resolutions to that effect certified by the
Secretary or an Assistant Secretary of MAFG Fund.
C. MAFG Fund shall have received an opinion dated as of
the Closing Date from counsel to Growth Fund, to the effect
that (i) Growth Fund is a business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts with full powers to carry on
its business as then being conducted and to enter into and
perform the Agreement; (ii) all actions necessary to make the
Agreement, according to its terms, valid, binding and
enforceable upon Growth Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by
Growth Fund, and (iii) the shares of Growth Fund to be issued
hereunder are duly authorized and when issued will be validly
issued, fully-paid and non-assessable, except as set forth
under "Shareholder and Trustee Liability" in Growth Fund's
Statement of Additional Information. Massachusetts counsel
may be relied upon for this opinion.
D. The representations and warranties of Growth Fund
contained herein shall be true and correct at and as of the
Closing Date, and MAFG Fund shall have been furnished with a
certificate of the President, a Vice President or the
Secretary or the Assistant Secretary or the Treasurer or the
Assistant Treasurer of the Trust to that effect dated as of
the Closing Date.
E. MAFG Fund shall have received an opinion of Deloitte
amp;amp; Touche LLP to the effect that the federal tax consequences
of the transaction, if carried out in the manner outlined in
the Agreement and in accordance with (i) MAFG Fund's
representation that there is no plan or intention by any MAFG
Fund shareholder who owns 5% or more of MAFG Fund's
outstanding shares, and, to MAFG Fund's best knowledge, there
is no plan or intention on the part of the remaining MAFG
Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of Growth Fund shares received in the
transaction that would reduce MAFG Fund shareholders'
ownership of Growth Fund shares to a number of shares having
a value, as of the Closing Date, of less than 50% of the
value of all of the formerly outstanding MAFG Fund shares as
of the same date, and (ii) the representation by each of MAFG
Fund and Growth Fund that, as of the Closing Date, MAFG Fund
and Growth Fund will qualify as regulated investment
companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement will
qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code, and under the regulations
promulgated thereunder.
2. MAFG Fund and Growth Fund will each qualify as a
"party to a reorganization" within the meaning of Section
368(b)(2) of the Code.
3. No gain or loss will be recognized by the
shareholders of MAFG Fund upon the distribution of Class A,
Class B, Class C, Class N and Class Y shares of beneficial
interest in Growth Fund to the shareholders of MAFG Fund
pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss
will be recognized by MAFG Fund by reason of the transfer of
substantially all its assets in exchange for Class A, Class
B, Class C, Class N and Class Y shares of Growth Fund.
5. Under Section 1032 of the Code no gain or loss
will be recognized by Growth Fund by reason of the transfer
of substantially all of MAFG Fund's assets in exchange for
Class A, Class B, Class C, Class N and Class Y shares of
Growth Fund and Growth Fund's assumption of certain
liabilities of MAFG Fund.
6. The shareholders of MAFG Fund will have the same
tax basis and holding period for the Class A, Class B, Class
C, Class N and Class Y shares of beneficial interest in
Growth Fund that they receive as they had for MAFG Fund
shares that they previously held, pursuant to Section 358(a)
and 1223(1), respectively, of the Code.
7. The securities transferred by MAFG Fund to Growth
Fund will have the same tax basis and holding period in the
hands of Growth Fund as they had for MAFG Fund, pursuant to
Section 362(b) and 1223(1), respectively, of the Code.
F. The cash reserve shall not exceed 10% of the value
of the net assets, nor 30% in value of the gross assets, of
MAFG Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by
Growth Fund under the 1933 Act, containing a preliminary form
of the Prospectus and Proxy Statement, shall have become
effective under the 1933 Act.
H. On the Closing Date, MAFG Fund shall have received a
letter from Robert G. Zack or other senior executive officer
of OppenheimerFunds, Inc. acceptable to MAFG Fund, stating
that nothing has come to his or her attention which in his or
her judgment would indicate that as of the Closing Date there
were any material, actual or contingent liabilities of Growth
Fund arising out of litigation brought against Growth Fund or
claims asserted against it, or pending or, to the best of his
or her knowledge, threatened claims or litigation not
reflected in or apparent by the most recent audited financial
statements and footnotes thereto of Growth Fund delivered to
MAFG Fund. Such letter may also include such additional
statements relating to the scope of the review conducted by
such person and his or her responsibilities and liabilities
as are not unreasonable under the circumstances.
I. MAFG Fund shall acknowledge receipt of the Class A,
Class B, Class C, Class N and Class Y shares of Growth Fund.
12. MAFG Fund hereby represents and warrants that:
A. The audited financial statements of MAFG Fund as of
November 30, 2002 and unaudited financial statements as of
May 31, 2003 heretofore furnished to Growth Fund, present
fairly the financial position, results of operations, and
changes in net assets of MAFG Fund as of that date, in
conformity with generally accepted accounting principles
applied on a basis consistent with the preceding year; and
that from May 31, 2003 through the date hereof there have not
been, and through the Closing Date there will not be, any
material adverse change in the business or financial
condition of MAFG Fund, it being agreed that a decrease in
the size of MAFG Fund due to a diminution in the value of its
portfolio and/or redemption of its shares shall not be
considered a material adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by MAFG Fund's
shareholders, MAFG Fund has authority to transfer all of the
assets of MAFG Fund to be conveyed hereunder free and clear
of all liens, encumbrances, security interests, restrictions
and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained
in MAFG Fund's Registration Statement under the 1933 Act, as
amended, is true, correct and complete, conforms to the
requirements of the 1933 Act and does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading. The Registration
Statement, as amended, was, as of the date of the filing of
the last Post-Effective Amendment, true, correct and
complete, conformed to the requirements of the 1933 Act and
did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
D. There is no material contingent liability of MAFG
Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the
knowledge of MAFG Fund, threatened against MAFG Fund, not
reflected in such Prospectus;
E. Except for the Agreement, there are no material
contracts outstanding to which MAFG Fund is a party other
than those ordinary in the conduct of its business;
F. MAFG Fund is a Massachusetts business trust duly
organized, validly existing and in good standing under the
laws of the State of Massachusetts; and has all necessary and
material federal and state authorizations to own all of its
assets and to carry on its business as now being conducted;
and MAFG Fund is duly registered under the Investment Company
Act and such registration has not been rescinded or revoked
and is in full force and effect;
G. All federal and other tax returns and reports of
MAFG Fund required by law to be filed have been filed, and
all federal and other taxes shown due on said returns and
reports have been paid or provision shall have been made for
the payment thereof and to the best of the knowledge of MAFG
Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns; and
H. MAFG Fund has elected that MAFG Fund be treated as a
regulated investment company and, for each fiscal year of its
operations, MAFG Fund has met the requirements of Subchapter
M of the Code for qualification and treatment as a regulated
investment company and MAFG Fund intends to meet such
requirements with respect to its current taxable year.
13. Growth Fund hereby represents and warrants that:
A. The audited financial statements of Growth Fund as of
August 31, 2002 and unaudited financial statements as of
February 28, 2003 heretofore furnished to MAFG Fund, present
fairly the financial position, results of operations, and
changes in net assets of Growth Fund, as of that date, in
conformity with generally accepted accounting principles
applied on a basis consistent with the preceding year; and
that from February 28, 2003 through the date hereof there
have not been, and through the Closing Date there will not
be, any material adverse changes in the business or financial
condition of Growth Fund, it being understood that a decrease
in the size of Growth Fund due to a diminution in the value
of its portfolio and/or redemption of its shares shall not be
considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained
in Growth Fund's Registration Statement under the 1933 Act,
is true, correct and complete, conforms to the requirements
of the 1933 Act and does not contain any untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading. The Registration Statement, as amended, was,
as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading;
C. Except for this Agreement, there is no material
contingent liability of Growth Fund and no material claim and
no material legal, administrative or other proceedings
pending or, to the knowledge of Growth Fund, threatened
against Growth Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which
Growth Fund is a party other than those ordinary in the
conduct of its business;
E. Growth Fund is a business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; Growth Fund has all necessary
and material federal and state authorizations to own all its
properties and assets and to carry on its business as now
being conducted; the Class A, Class B, Class C, Class N and
Class Y shares of Growth Fund which it issues to MAFG Fund
pursuant to the Agreement will be duly authorized, validly
issued, fully-paid and non-assessable, except as set forth
under "Shareholder amp;amp; Trustee Liability" in Growth Fund's
Statement of Additional Information, will conform to the
description thereof contained in Growth Fund's Registration
Statement and will be duly registered under the 1933 Act and
in the states where registration is required; and Growth Fund
is duly registered under the Investment Company Act and such
registration has not been revoked or rescinded and is in full
force and effect;
F. All federal and other tax returns and reports of
Growth Fund required by law to be filed have been filed, and
all federal and other taxes shown due on said returns and
reports have been paid or provision shall have been made for
the payment thereof and to the best of the knowledge of
Growth Fund, no such return is currently under audit and no
assessment has been asserted with respect to such returns and
to the extent such tax returns with respect to the taxable
year of Growth Fund ended August 31, 2002 have not been
filed, such returns will be filed when required and the
amount of tax shown as due thereon shall be paid when due;
G. Growth Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its
operations, Growth Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and Growth Fund intends to meet
such requirements with respect to its current taxable year;
H. Growth Fund has no plan or intention (i) to dispose
of any of the assets transferred by MAFG Fund, other than in
the ordinary course of business, or (ii) to redeem or
reacquire any of the Class A, Class B, Class C, Class N and
Class Y shares issued by it in the reorganization other than
pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated
by the Agreement, Growth Fund intends to operate its business
in a substantially unchanged manner.
14. Each party hereby represents to the other that
no broker or finder has been employed by it with respect to
the Agreement or the transactions contemplated hereby. Each
party also represents and warrants to the other that the
information concerning it in the Prospectus and Proxy
Statement will not as of its date contain any untrue
statement of a material fact or omit to state a fact
necessary to make the statements concerning it therein not
misleading and that the financial statements concerning it
will present the information shown fairly in accordance with
generally accepted accounting principles applied on a basis
consistent with the preceding year. Each party also
represents and warrants to the other that the Agreement is
valid, binding and enforceable in accordance with its terms
and that the execution, delivery and performance of the
Agreement will not result in any violation of, or be in
conflict with, any provision of any charter, by-laws,
contract, agreement, judgment, decree or order to which it is
subject or to which it is a party. Growth Fund hereby
represents to and covenants with MAFG Fund that, if the
reorganization becomes effective, Growth Fund will treat each
shareholder of MAFG Fund who received any of Growth Fund's
shares as a result of the reorganization as having made the
minimum initial purchase of shares of Growth Fund received by
such shareholder for the purpose of making additional
investments in shares of Growth Fund, regardless of the value
of the shares of Growth Fund received.
15. Growth Fund agrees that it will prepare and file
a Registration Statement on Form N-14 under the 1933 Act
which shall contain a preliminary form of Prospectus and
Proxy Statement contemplated by Rule 145 under the 1933 Act.
The final form of such Prospectus and Proxy Statement is
referred to in the Agreement as the "Prospectus and Proxy
Statement." Each party agrees that it will use its best
efforts to have such Registration Statement declared
effective and to supply such information concerning itself
for inclusion in the Prospectus and Proxy Statement as may be
necessary or desirable in this connection. MAFG Fund
covenants and agrees to liquidate and dissolve under the laws
of the State of Massachusetts, following the Closing, and,
upon Closing, to cause the cancellation of its outstanding
shares.
16. The obligations of the parties shall be subject
to the right of either party to abandon and terminate the
Agreement for any reason and there shall be no liability for
damages or other recourse available to a party not so
terminating this Agreement, provided, however, that in the
event that a party shall terminate this Agreement without
reasonable cause, the party so terminating shall, upon
demand, reimburse the party not so terminating for all
expenses, including reasonable out-of-pocket expenses and
fees incurred in connection with this Agreement.
17. The Agreement may be executed in several
counterparts, each of which shall be deemed an original, but
all taken together shall constitute one Agreement. The
rights and obligations of each party pursuant to the
Agreement shall not be assignable.
18. All prior or contemporaneous agreements and
representations are merged into the Agreement, which
constitutes the entire contract between the parties hereto.
No amendment or modification hereof shall be of any force and
effect unless in writing and signed by the parties and no
party shall be deemed to have waived any provision herein for
its benefit unless it executes a written acknowledgment of
such waiver.
19. Growth Fund understands that the obligations of
MAFG Fund under the Agreement are not binding upon any
Trustee or shareholder of MAFG Fund personally, but bind only
MAFG Fund and MAFG Fund's property. Growth Fund represents
that it has notice of the provisions of the Declaration of
Trust of MAFG Fund disclaiming shareholder and trustee
liability for acts or obligations of MAFG Fund.
20. MAFG Fund understands that the obligations of
Growth Fund under the Agreement are not binding upon any
trustee or shareholder of Growth Fund personally, but bind
only Growth Fund and Growth Fund's property. MAFG Fund
represents that it has notice of the provisions of the
Declaration of Trust of Growth Fund disclaiming shareholder
and trustee liability for acts or obligations of Growth Fund.
IN WITNESS WHEREOF, each of the parties has caused the
Agreement to be executed and attested by its officers
thereunto duly authorized on the date first set forth above.
Mercury Advisors
Focus Growth Fund,
a series of
OPPENHEIMER SELECT
MANAGERS
By:
----------------------
Robert G.
Zack
Vice
President and
Secretary
OPPENHEIMER GROWTH
FUND
By:
----------------------
Robert G.
Zack
Secretary
STATEMENT OF ADDITIONAL INFORMATION
TO PROSPECTUS AND PROXY STATEMENT
PART B
Acquisition of the Assets of
MERCURY ADVISORS FOCUS GROWTH FUND,
a Series of OPPENHEIMER SELECT MANAGERS
By and in exchange for Shares of
OPPENHEIMER GROWTH FUND
This Statement of Additional Information to this
Prospectus and Proxy Statement (the "SAI") relates
specifically to the proposed delivery of substantially all of
the assets of Mercury Advisors Focus Growth Fund, a series of
Oppenheimer Select Managers ("MAFG Fund") for shares of
Oppenheimer Growth Fund ("Growth Fund").
This SAI consists of this Cover Page and incorporates
by reference the following documents: (i) audited financial
statements for the 12-month period ended November 30, 2002,
and unaudited financial statements for the six-month period
ended May 31, 2003 of MAFG Fund; (ii) audited financial
statements for the 12-month period ended August 31, 2002, and
unaudited financial statements for the six-month period ended
February 28, 2003 of Growth Fund; (iii) the Statement of
Additional Information of MAFG Fund dated March 28, 2003; and
(iv) Prospectus dated October 23, 2002 as supplemented April
30, 2003 and the Statement of Additional Information for
Growth Fund, dated October 23, 2002, revised February 12,
2003, as supplemented March 31, 2003 for Growth Fund.
This SAI is not a Prospectus; you should read this SAI
in conjunction with the Prospectus and Proxy Statement dated
September 8, 2003, relating to the above-referenced
transaction. You can request a copy of the Prospectus and
Proxy Statement by calling 1.800.708.7780 or by writing
OppenheimerFunds Services at P.O. Box 5270, Denver, Colorado
80217. The date of this SAI is September 8, 2003.
Appendix to Prospectus and Proxy Statement of
Oppenheimer Growth Fund
Graphic material included in the Prospectus of
Oppenheimer Growth Fund under the heading "Annual Total
Returns (Class A) (as of 12/31 each year)":
A bar chart will be included in the Prospectus of the
Fund depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for its ten most
recent calendar years, without deducting sales charges or
taxes. Set forth below are the relevant data points that will
appear on the bar chart.
Calendar
Year Oppenheimer Growth Fund
Ended Class A Shares
- ----- --------------
12/31/93 2.72%
12/31/94 2.38%
12/31/95 34.95%
12/31/96 23.46%
12/31/97 18.12%
12/31/98 10.95%
12/31/99 46.73%
12/31/00 -11.16%
12/31/01 -24.54%
12/31/02 -25.70%
Appendix to Prospectus and Proxy Statement of
Mercury Advisors Focus Growth Fund,
a Series of Oppenheimer Select Managers
Graphic material included in the Prospectus of Mercury
Advisors Focus Growth Fund, a Series of Oppenheimer Select
Managers under the heading "Annual Total Returns (Class A)
(as of 12/31 each year)":
A bar chart will be included in the Prospectus of the
Fund depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for the calendar
year ended 12/31/02, without deducting sales charges or
taxes. Set forth below is the relevant data point that will
appear on the bar chart.
Calendar Mercury Advisors Focus
- -------- -----------------------
Growth Fund,
- ------------
Year a Series of Oppenheimer
- ---- ------------------------
Select Managers
---------------
Ended Class A Shares
- ----- --------------
12/31/02 -39.01%
SUPPLEMENT
Oppenheimer Growth fund
Supplement dated September 1, 2001 to the
Prospectus dated January 1, 2001
The Prospectus is changed by adding the following section
in "About Your Account - How to Buy Shares" before the
sub-section entitled "How Can You Buy Class A Shares?" on
page 15:
Effective September 1, 2001 through November
30, 2001, the Distributor will pay an
additional sales concession of 0.50% on
purchases of Class A shares and Class B shares
and 0.25% on purchases of Class C shares by
customers of A.G. Edwards amp;amp; Sons, Inc.,
provided such purchases are accompanied by an
Asset Builder Plan of at least $100.00 per
month. The additional payout will not be paid
on any Asset Builder Plan purchases.
September 1, 2001 PS0270.017
PROSPECTUS
Oppenheimer
Growth Fund
Prospectus dated October 23, 2002
Oppenheimer Growth Fund is a mutual
fund that seeks capital appreciation
to make your investment grow. It
currently emphasizes investments in
stocks of mid-cap and large-cap
companies.
This Prospectus contains
important information about the
Fund's objective, its investment
policies, strategies and risks. It
also contains important information
about how to buy and sell shares of
the Fund and other account features.
Please read this Prospectus
carefully before you invest and keep
it for future reference about your
account.
As with all mutual funds, the
Securities and Exchange Commission
has not approved or disapproved the
Fund's securities nor has it
determined that this Prospectus is
accurate or complete. It is a
criminal offense to represent
otherwise.
(logo) OppenheimerFunds
The Right Way to Invest
CONTENTS
- ---------------------------------------------------------------------------------
ABOUT THE FUND
3 The Fund's Investment Objective and Strategies
3 Main Risks of Investing in the Fund
4 The Fund's Past Performance
5 Fees and Expenses of the Fund
7 About the Fund's Investments
10 How the Fund is Managed
10
ABOUT YOUR ACCOUNT
11
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Class Y Shares
19
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
22 Retirement Plans
How to Sell Shares
By Mail
23 By Telephone
25
26 How to Exchange Shares
29 Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
- ---------------------------------------------------------------------------------
A B O U T T H E F U N D
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks
capital appreciation.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests
mainly in common stocks of "growth companies." The Fund
currently focuses on stocks of companies having a large
capitalization or mid-size capitalization, but this could
change over time. The Fund can invest in domestic companies
and foreign companies, although most of its investments are
in stocks of U.S. companies.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO
BUY OR SELL? The Fund's portfolio manager looks for
high-growth companies. Currently, the portfolio manager
looks for:
o Companies that have exceptional revenue growth
o Companies with above-average earnings growth
o Companies that can sustain exceptional revenue and
earnings growth
o Companies that are well established as leaders in
high growth markets.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for
investors seeking capital appreciation over the long term.
Those investors should be willing to assume the risks of
short-term share price fluctuations that are typical for a
growth fund focusing on stock investments. Since the Fund
does not seek income and its income from investments will
likely be small, it is not designed for investors needing
current income. Because of its focus on long-term growth,
the Fund may be appropriate for a portion of a retirement
plan investment. However, the Fund is not a complete
investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks are subject to changes in their value
from a number of factors described below. There is also the
risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to
underperform other funds having a similar objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price,
and their short-term volatility at times may be great.
Because the Fund invests primarily in common stocks of U.S.
companies, the value of the Fund's portfolio will be
affected by changes in the U.S. stock markets. Market risk
will affect the Fund's net asset values per share, which
will fluctuate as the values of the Fund's portfolio
securities change. The prices of individual stocks do not
all move in the same direction uniformly or at the same
time. Different stock markets may behave differently from
each other.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes
in government regulations affecting the issuer or its
industry.
The Manager may increase the relative emphasis of the
Fund's investments in a particular industry from time to
time. Stocks of issuers in a particular industry may be
affected by changes in economic conditions, changes in
government regulations, availability of basic resources or
supplies, or other events that affect that industry more
than others. To the extent that the Fund increases the
relative emphasis of its investments in a particular
industry, its share values may fluctuate in response to
events affecting that industry.
HOW RISKY IS THE FUND OVERALL? The risks described above
collectively form the overall risk profile of the Fund, and
can affect the value of the Fund's investments, its
investment performance and its prices per share. Particular
investments and investment strategies also have risks.
These risks mean that you can lose money by investing in
the Fund. When you redeem your shares, they may be worth
more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment
objective.
In the short term, the stock markets can be volatile,
and the price of the Fund's shares can go up and down
substantially. Growth stocks may be more volatile than
other equity investments. The Fund generally does not use
income-oriented investments to help cushion the Fund's
total return from changes in stock prices. In the
OppenheimerFunds spectrum, the Fund is generally more
aggressive than funds that invest in both stocks and bonds
or in investment grade debt securities, but may be less
volatile than small-cap and emerging markets stock funds.
An investment in the Fund is not a deposit of any bank and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing changes in the Fund's
performance for its Class A shares from year to year for
the last 10 calendar years and by showing how the average
annual total returns of the Fund's shares, both before and
after taxes, compare to those of a broad-based market
index.
The after-tax returns are shown for Class A shares
only and are calculated using the historical highest
individual federal marginal income tax rates in effect
during the periods shown, and do not reflect the impact of
state or local taxes. The after-tax returns for the other
classes of shares will vary. In certain cases, the figure
representing "Return After Taxes on Distributions and Sale
of Fund Shares" may be higher than the other return figures
for the same period. A higher after-tax return results
when a capital loss occurs upon redemption and translates
into an assumed tax deduction that benefits the
shareholder. The after-tax returns are calculated based on
certain assumptions mandated by regulation and your actual
after-tax returns may differ from those shown, depending on
your individual tax situation. The after-tax returns set
forth below are not relevant to investors who hold their
fund shares through tax-deferred arrangements such as
401(k) plans or IRAs or to institutional investors not
subject to tax. The Fund's past investment performance,
before and after taxes, is not necessarily an indication of
how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing
annual total returns]
Sales charges and taxes are not included in the
calculations of return in this bar chart, and if those
charges and taxes were included, the returns may be less
than those shown.
For the period from 1/1/02 through 9/30/02, the cumulative
return (not annualized) for Class A shares before taxes was
- -23.65%.
During the period shown in the bar chart, the highest
return (not annualized) before taxes for a calendar quarter
was 30.16% (4th Q'99) and the lowest return (not
annualized) before taxes for a calendar quarter was -25.55%
(4th Q'00).
- -------------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years 10 Years
for the periods ended (or life of
December 31, 2001 class, if less)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class A Shares (inception
03/15/73) -28.88% 3.97% 9.21%
Return Before Taxes -29.02% 2.15% 6.92%
Return After Taxes on -17.59% 2.97% 6.95%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
- -------------------------------------------------------------------------------------
S amp;amp; P 500 Index (reflects no
deduction for fees, expenses
or taxes) -11.88% 10.70% 12.93%1
- -------------------------------------------------------------------------------------
Class B Shares (inception -28.86% 4.09% 9.71%
08/17/93)
- -------------------------------------------------------------------------------------
Class C Shares (inception -25.86% 4.39% 7.22%
11/01/95)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N Shares (inception N/A2 N/A N/A
03/01/01)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class Y Shares (inception -24.31% 5.49% 10.98%
06/01/94)
- -------------------------------------------------------------------------------------
1. From 12/31/91.
2. Because this is a new class of shares, return data for
the period specified is not available.
The Fund's average annual total returns include the
applicable sales charge: for Class A, the current maximum
initial sales charge of 5.75%; for Class B, the contingent
deferred sales charges of 5% (1-year) and 2% (5-year).
Because Class B shares convert to Class A shares 72 months
after purchase, Class B "life-of-class" performance does
not include any contingent deferred sales charge and uses
Class A performance for the period after conversion. For
Class C, average annual total returns include the 1%
contingent deferred sales charge for the 1-year period.
There is no sales charge for Class Y shares.
The returns measure the performance of a hypothetical
account and assume that all dividends and capital gains
distributions have been reinvested in additional shares.
The performance of the Fund's Class A shares is compared to
the Samp;amp;P 500 Index, an unmanaged index of equity
securities. The index performance includes the
reinvestment of income but does not reflect transaction
costs. The Fund's investments vary from the securities in
the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management
of its assets, administration, distribution of its shares
and other services. Those expenses are subtracted from the
Fund's assets to calculate the Fund's net asset values per
share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such
as sales charges and account transaction charges. The
following tables are meant to help you understand the fees
and expenses you may pay if you buy and hold shares of the
Fund. The numbers below are based on the Fund's expenses
during its fiscal year ended August 31, 2002.
Shareholder Fees (charges paid directly from your
investment):
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
Purchases (as % of offering price) 5.75% None None None None
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more
($500,000 for certain retirement plan accounts) of Class
A shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase.
The contingent deferred sales charge declines to 1% in
the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of
purchase.
4. Applies to shares redeemed within 18 months of a
retirement plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Management Fees 0.64% 0.64% 0.64% 0.64% 0.64%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or Service 0.23% 1.00% 1.00% 0.50% None
(12b-1) Fees
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses 0.44% 0.44% 0.44% 0.43% 0.49%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating 1.31% 2.08% 2.08% 1.57% 1.13%
Expenses
Expenses may vary in future years. "Other expenses"
include transfer agent fees, custodial expenses, and
accounting and legal expenses the Fund pays. The "Other
Expenses" in the table are based on, among other things,
the fees the Fund would have paid if the transfer agent had
not waived a portion of its fee under a voluntary
undertaking to the Fund to limit these fees to 0.25% of
average daily net assets per fiscal year for Class Y shares
and 0.35% of average daily net assets per fiscal year for
all other classes. That undertaking was effective January
1, 2002 for Class Y shares and October 1, 2001 for all
other classes, was pro-rated for the remainder of the
fiscal year ending after that date, and may be amended or
withdrawn at any time. After the waiver, the actual "Other
Expenses" and "Total Annual Operating Expenses" as
percentages of average daily net assets were 0.38% and
1.02%, respectively, for Class Y shares and were the same
as shown above for all other classes. Effective November 1,
2002, the limit on transfer agent fees for Class Y shares
will increase to 0.35%. Had that limit been in effect
during the Fund's prior fiscal year, "Other Expenses" and
"Total Annual Operating Expenses" as percentages of daily
net asset for Class Y shares would have been 0.48% and
1.12%, respectively.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that
you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also
assume that your investment has a 5% return each year and
that the class' operating expenses remain the same. Your
actual costs may be higher or lower because expenses will
vary over time. Based on these assumptions your expenses
would be as follows:
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares $701 $966 $1,252 $2,063
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares $711 $952 $1,319 $2,033(1)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares $311 $652 $1,119 $2,410
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class N Shares $260 $496 $ 855 $1,867
---------------------------------- ----------- ------------
------------------------------------------------------------------------------
Class Y Shares $115 $359 $ 622 $1,375
If shares are not redeemed: 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A Shares $701 $966 $1,252 $2,063
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B Shares $211 $652 $1,119 $2,033(1)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C Shares $211 $652 $1,119 $2,410
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class N Shares $160 $496 $ 855 $1,867
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class Y Shares $115 $359 $ 622 $1,375
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge,
but Class B, Class C and Class N expenses do not include
the contingent deferred sales charges. There is no sales
charge on Class Y shares.
1. Class B expenses for years 7 through 10 are based on
Class A expenses since Class B shares automatically
convert to Class A shares after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of
the Fund's portfolio among different investments will vary
over time based on the Manager's evaluation of economic and
market trends. The Fund's portfolio might not always
include all of the different types of investments described
below. The Statement of Additional Information contains
more detailed information about the Fund's investment
policies and risks.
The Manager tries to reduce risks by carefully
researching securities before they are purchased. The Fund
attempts to reduce its exposure to market risks by
diversifying its investments, that is, by not holding a
substantial amount of stock of any one company and by not
investing too great a percentage of the Fund's assets in
any one company. Also, the Fund does not concentrate 25% or
more of its assets in investments in any one industry.
However, changes in the overall market prices of
securities can occur at any time. The share prices of the
Fund will change daily based on changes in market prices of
securities and market conditions and in response to other
economic events.
Stock Investments. The Fund currently focuses on larger,
more established U.S. growth companies that exhibit
strong internal revenue growth. Growth companies, for
example, may be developing new products or services,
or they may be expanding into new markets for their
products. Newer growth companies tend to retain a
large part of their earnings for research, development
or investment in capital assets. Therefore, they do
not tend to emphasize paying dividends and may not pay
any dividends for some time. The Manager looks for
stocks of growth companies for the Fund's portfolio
that the Manager believes will increase in value over
time.
The Fund does not limit its investments to issuers in
a particular market capitalization range or ranges,
although it currently focuses on large-cap and mid-cap
issuers. "Market capitalization" refers to the total
market value of an issuer's common stock. The stock
prices of large-cap issuers tend to be less volatile
than the prices of mid-cap and small-cap companies in
the short term, but these companies may not afford the
same growth opportunities as mid-cap and small-cap
companies.
Industry Focus. Stocks of issuers in a particular industry
might be affected by changes in economic conditions or
by changes in government regulations, availability of
basic resources or supplies, or other events that
affect that industry more than others. To the extent
that the Fund has a greater emphasis on investments in
a particular industry, its share values may fluctuate
in response to events affecting that industry.
Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund may
engage in short-term trading to try to achieve its
objective. It might have a turnover rate in excess of
100% annually. Portfolio turnover increases brokerage
costs the Fund pays. If the Fund realizes capital
gains when it sells its portfolio investments, it must
generally pay those gains out to the shareholders,
increasing their taxable distributions. The Financial
Highlights table at the end of this Prospectus shows
the Fund's portfolio turnover rate during past fiscal
years.
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE?
The Fund's Board of Trustees can change
non-fundamental investment policies without
shareholder approval, although significant changes
will be described in amendments to this Prospectus.
Fundamental policies cannot be changed without the
approval of a majority of the Fund's outstanding
voting shares. The Fund's objective is a fundamental
policy. Other investment restrictions that are
fundamental policies are listed in the Statement of
Additional Information. An investment policy is not
fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the
Fund can also use the investment techniques and strategies
described below. The Fund might not always use all of them.
These techniques have risks, although some are designed to
help reduce overall investment or market risks.
Other Equity Securities. While the Fund emphasizes
investments in common stocks, it can also buy
preferred stocks and securities convertible into
common stock. The Manager considers some convertible
securities to be "equity equivalents" because of the
conversion feature and in that case their credit
rating has less impact on the Manager's investment
decision than in the case of other debt securities.
Risks of Foreign Investing. The Fund can buy foreign equity
and debt securities. The Fund currently limits its
investments in foreign securities to not more than 10%
of its total assets, although it has the ability to
invest up to 25% of its total assets.
While foreign securities offer special investment
opportunities, they also have special risks. The
change in value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign
currency. Foreign issuers are not subject to the same
accounting and disclosure requirements to which U.S.
companies are subject. The value of foreign
investments may be affected by exchange control
regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement
of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad, or other
political and economic factors.
Illiquid and Restricted Securities. Investments may be
illiquid because they do not have an active trading
market, making it difficult to value them or dispose
of them promptly at an acceptable price. Restricted
securities may have terms that limit their resale to
other investors or may require registration under
federal securities laws before they can be sold
publicly. The Fund will not invest more than 10% of
its net assets in illiquid or restricted securities.
The Board can increase that limit to 15%. Certain
restricted securities that are eligible for resale to
qualified institutional purchasers may not be subject
to that limit. The Manager monitors holdings of
illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate
liquidity.
Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments. In
general terms, a derivative investment is an
investment contract whose value depends on (or is
derived from) the value of an underlying asset,
interest rate or index. In the broadest sense,
options, futures contracts, and other hedging
instruments the Fund might use may be considered
"derivative" investments. In addition to using
derivatives for hedging, the Fund might use other
derivative investments because they offer the
potential for increased value. The Fund currently does
not use derivatives to a significant degree and is not
required to use them in seeking its objective.
Derivatives have risks. If the issuer of the
derivative investment does not pay the amount due, the
Fund can lose money on the investment. The underlying
security or investment on which a derivative is based,
and the derivative itself, may not perform the way the
Manager expected it to. As a result of these risks
the Fund could realize less principal or income from
the investment than expected or its hedge might be
unsuccessful. As a result, the Fund's share prices
could fall. Certain derivative investments held by the
Fund might be illiquid.
o Hedging. The Fund can buy and sell futures contracts,
put and call options, and forward contracts. These are
all referred to as "hedging instruments." The Fund
does not currently use hedging extensively or for
speculative purposes. It has limits on its use of
hedging instruments and is not required to use them in
seeking its objective.
Some of these strategies would hedge the Fund's
portfolio against price fluctuations. Other hedging
strategies, such as buying futures and call options,
would tend to increase the Fund's exposure to the
securities market.
There are also special risks in particular hedging
strategies. Options trading involves the payment of
premiums and can increase portfolio turnover. If the
Manager used a hedging instrument at the wrong time or
judged market conditions incorrectly, the strategy
could reduce the Fund's return. The Fund may also
experience losses if the prices of its hedging
instruments were not correlated with its other
investments or if it could not close out a position
because of an illiquid market.
Temporary Defensive and Interim Investments. In times of
adverse or unstable market, economic or political
conditions, the Fund can invest up to 100% of its
assets in temporary defensive investments that are
inconsistent with the Fund's principal investment
strategies. Generally, they would be high-quality,
short-term money market instruments, such as U.S.
government securities, highly rated commercial paper,
short-term corporate debt obligations, bank deposits
or repurchase agreements. The Fund could also hold
these types of securities pending the investment of
proceeds from the sale of Fund shares or portfolio
securities or to meet anticipated redemptions of Fund
shares. To the extent the Fund invests defensively in
these securities, it might not achieve its investment
objective of capital appreciation.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and
handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the
Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The
agreement sets the fees the Fund pays to the Manager and
describes the expenses that the Fund is responsible to pay
to conduct its business.
The Manager has been an investment advisor since
January 1960. The Manager and its subsidiaries and
controlled affiliates managed more than $120 billion in
assets as of September 30, 2002 including other Oppenheimer
funds, with more than seven million shareholder accounts.
The Manager is located at 498 Seventh Avenue, New York, New
York 10018.
Portfolio Manager. The Fund's portfolio manager is Bruce
Bartlett, who is the person primarily responsible for
the day-to-day management of the Fund's portfolio. Mr.
Bartlett is a Vice President of the Fund and of the
Manager and is a portfolio manager of other
Oppenheimer funds. Mr. Bartlett became the Fund's
portfolio manager on December 22, 1998. Prior to
joining the Manager in April, 1995, Mr. Bartlett was a
Vice President and Senior Portfolio Manager with First
of America Investment Corporation.
Advisory Fees. Under the investment advisory agreement,
the Fund pays the Manager an advisory fee at an annual
rate that declines as the Fund's assets grow: 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 $1.0
billion, 0.56% of the next $2.0 billion, and 0.54% of
the average annual net assets in excess of $4.5
billion. The Fund's management fee for its fiscal
year ended August 31, 2002 was 0.64% of average annual
net assets for each class of shares.
ABOUT your account
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways, as
described below. The Fund's Distributor, OppenheimerFunds
Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its
sole discretion, may reject any purchase order for the
Fund's shares.
Buying Shares Through Your Dealer. You can buy shares
through any dealer, broker or financial institution
that has a sales agreement with the Distributor. Your
dealer will place your order with the Distributor on
your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds new account application and return
it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver,
Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent
in buying the shares. However, we recommend that you
discuss your investment with a financial advisor
before you make a purchase to be sure that the Fund
is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased
through the Distributor may be paid for by Federal
Funds wire. The minimum investment is $2,500. Before
sending a wire, call the Distributor's Wire
Department at 1.800.225.5677 to notify the
Distributor of the wire and to receive further
instructions.
o Buying Shares Through OppenheimerFunds AccountLink.
With AccountLink, you pay for shares by electronic
funds transfers from your bank account. Shares are
purchased for your account by a transfer of money
from your bank account through the Automated Clearing
House (ACH) system. You can provide those
instructions automatically, under an Asset Builder
Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described
below. Please refer to "AccountLink," below for more
details.
o Buying Shares Through Asset Builder Plans. You may
purchase shares of the Fund automatically each month
from your account at a bank or other financial
institution under an Asset Builder Plan with
AccountLink. Details are in the Asset Builder
application and the Statement of Additional
Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25 (effective
November 1, 2002, the additional purchase amount is $50).
There are reduced minimum investments under special
investment plans.
o With Asset Builder Plans, 403(b) plans, Automatic
Exchange Plans and military allotment plans, you can
make initial and subsequent investments for as little
as $25. The minimum initial investment in any such
plan accounts established on or after November 1,
2002 is $50. The minimum additional investment to
such plan accounts that were established prior to
November 1, 2002 will remain $25. To establish a new
Asset Builder Plan account on or after November 1,
2002, you must first invest at least $500.
o Under retirement plans, such as IRAs, pension and
profit-sharing plans and 401(k) plans, you can start
your account with as little as $250. If your IRA is
started as an Asset Builder Plan, the $25 minimum
applies. Additional purchases may be for as little as
$25. To establish any type of IRA account on or after
November 1, 2002, the minimum investment is $500. The
minimum additional investment to any type of IRA
account after November 1, 2002 is $50.
o The minimum investment requirement does not apply to
reinvesting dividends from the Fund or other
Oppenheimer funds (a list of them appears in the
Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or
reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their
offering price which is the net asset value per share plus
any initial sales charge that applies. The offering price
that applies to a purchase order is based on the next
calculation of the net asset value per share that is made
after the Distributor receives the purchase order at its
offices in Colorado, or after any agent appointed by the
Distributor receives the order.
Net Asset Value. The Fund calculates the net asset value of
each class of shares as of the close of The New York
Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00
P.M., Eastern time, but may close earlier on some
days. All references to time in this Prospectus mean
"Eastern time."
The net asset value per share is determined by
dividing the value of the Fund's net assets
attributable to a class by the number of shares of
that class that are outstanding. To determine net
asset value, the Fund's Board of Trustees has
established procedures to value the Fund's
securities, in general, based on market value. The
Board has adopted special procedures for valuing
illiquid and restricted securities and obligations
for which market values cannot be readily obtained.
Because some foreign securities trade in markets and
on exchanges that operate on weekends and U.S.
holidays, the values of some of the Fund's foreign
investments may change on days when investors cannot
buy or redeem Fund shares.
If, after the close of the principal market on which
a security held by the Fund is traded, and before the
time the Fund's securities are priced that day, an
event occurs that the Manager deems likely to cause a
material change in the value of such security, the
Fund's Board of Trustees has authorized the Manager,
subject to the Board's review, to ascertain a fair
value for such security. A security's valuation may
differ depending on the method used for determining
value.
The Offering Price. To receive the offering price for a
particular day, in most cases the Distributor or its
designated agent must receive your order by the time
of day The New York Stock Exchange closes that day.
If your order is received on a day when the Exchange
is closed or after it has closed, the order will
receive the next offering price that is determined
after your order is received.
Buying Through a Dealer. If you buy shares through a
dealer, your dealer must receive the order by the
close of The New York Stock Exchange and transmit it
to the Distributor so that it is received before the
Distributor's close of business on a regular business
day (normally 5:00 P.M.) to receive that day's
offering price unless your dealer has made alternate
arrangements with the Distributor. Otherwise, the
order will receive the next offering price that is
determined.
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WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers
investors five different classes of shares. The different
classes of shares represent investments in the same
portfolio of securities, but the classes are subject to
different expenses and will likely have different share
prices. When you buy shares, be sure to specify the class
of shares. If you do not choose a class, your investment
will be made in Class A shares.
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Class A Shares. If you buy Class A shares, you pay an
initial sales charge (on investments up to $1 million
for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge
will vary depending on the amount you invest. The
sales charge rates are listed in "How Can You Buy
Class A Shares?" below.
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Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 6 years of buying them, you will
normally pay a contingent deferred sales charge. That
contingent deferred sales charge varies depending on
how long you own your shares, as described in "How
Can You Buy Class B Shares?" below.
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Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 12 months of buying them, you will
normally pay a contingent deferred sales charge of
1.0%, as described in "How Can You Buy Class C
Shares?" below.
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Class N Shares. If you buy Class N shares (available only
through certain retirement plans), you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 18 months of the retirement plan's
first purchase of Class N shares, you may pay a
contingent deferred sales charge of 1.0%, as
described in "How Can You Buy Class N Shares?" below.
Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements
with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide
that the Fund is an appropriate investment for you, the
decision as to which class of shares is best suited to your
needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to
consider are how much you plan to invest and how long you
plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you
should consider another class of shares. The Fund's
operating costs that apply to a class of shares and the
effect of the different types of sales charges on your
investment will vary your investment results over time.
The discussion below is not intended to be investment
advice or a recommendation, because each investor's
financial considerations are different. The discussion
below assumes that you will purchase only one class of
shares and not a combination of shares of different
classes. Of course, these examples are based on
approximations of the effects of current sales charges and
expenses projected over time, and do not detail all of the
considerations in selecting a class of shares. You should
analyze your options carefully with your financial advisor
before making that choice.
How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with
certainty, knowing how long you expect to hold your
investment will assist you in selecting the
appropriate class of shares. Because of the effect of
class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced
sales charges available for larger purchases of Class
A shares may, over time, offset the effect of paying
an initial sales charge on your investment, compared
to the effect over time of higher class-based
expenses on shares of Class B, Class C or Class N.
For retirement plans that qualify to purchase Class N
shares, Class N shares will generally be more
advantageous than Class B and Class C shares.
o Investing for the Shorter Term. While the Fund is
meant to be a long-term investment, if you have a
relatively short-term investment horizon (that is,
you plan to hold your shares for not more than six
years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares. That
is because of the effect of the Class B contingent
deferred sales charge if you redeem within six years,
as well as the effect of the Class B asset-based
sales charge on the investment return for that class
in the short-term. Class C shares might be the
appropriate choice (especially for investments of
less than $100,000), because there is no initial
sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you
sell after holding them one year.
However, if you plan to invest more than $100,000 for
the shorter term, then as your investment horizon
increases toward six years, Class C shares might not
be as advantageous as Class A shares. That is because
the annual asset-based sales charge on Class C shares
will have a greater impact on your account over the
longer term than the reduced front-end sales charge
available for larger purchases of Class A shares.
And for non-retirement plan investors who invest $1
million or more, in most cases Class A shares will be
the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders
of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing
less than $100,000 for the longer-term, for example
for retirement, and do not expect to need access to
your money for seven years or more, Class B shares
may be appropriate.
Are There Differences in Account Features That Matter to
You? Some account features may not be available to
Class B, Class C and Class N shareholders. Other
features may not be advisable (because of the effect
of the contingent deferred sales charge) for Class B,
Class C and Class N shareholders. Therefore, you
should carefully review how you plan to use your
investment account before deciding which class of
shares to buy.
Additionally, the dividends payable to Class B, Class
C and Class N shareholders will be reduced by the
additional expenses borne by those classes that are
not borne by Class A or Class Y shares, such as the
Class B, Class C and Class N asset-based sales charge
described below and in the Statement of Additional
Information. Share certificates are only available
for Class A shares. If you are considering using your
shares as collateral for a loan, that may be a factor
to consider.
How Do Share Classes Affect Payments to Your Broker? A
financial advisor may receive different compensation
for selling one class of shares than for selling
another class. It is important to remember that Class
B, Class C and Class N contingent deferred sales
charges and asset-based sales charges have the same
purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for
concessions and expenses it pays to dealers and
financial institutions for selling shares. The
Distributor may pay additional compensation from its
own resources to securities dealers or financial
institutions based upon the value of shares of the
Fund owned by the dealer or financial institution for
its own account or for its customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix B
to the Statement of Additional Information details the
conditions for the waiver of sales charges that apply in
certain cases, and the special sales charge rates that
apply to purchases of shares of the Fund by certain groups,
or under specified retirement plan arrangements or in other
special types of transactions. To receive a waiver or
special sales charge rate, you must advise the Distributor
when purchasing shares or the Transfer Agent when redeeming
shares that the special conditions apply.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at
their offering price, which is normally net asset value
plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset
value. In other cases, reduced sales charges may be
available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the
Fund receives the net asset value to invest for your
account.
The sales charge varies depending on the amount of
your purchase. A portion of the sales charge may be
retained by the Distributor or allocated to your dealer as
a concession. The Distributor reserves the right to reallow
the entire concession to dealers. The current sales charge
rates and concessions paid to dealers and brokers are as
follows:
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Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Concession As
Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
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Less than $25,000 5.75% 6.10% 4.75%
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$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
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$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
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$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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Can You Reduce Class A Sales Charges? You may be eligible
to buy Class A shares at reduced sales charge rates
under the Fund's "Right of Accumulation" or a Letter
of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information.
Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds
aggregating $1 million or more, or for certain
purchases by particular types of retirement plans
that were permitted to purchase such shares prior to
March 1, 2001 ("grandfathered retirement accounts").
Retirement plans are not permitted to make initial
purchases of Class A shares subject to a contingent
deferred sales charge. The Distributor pays dealers
of record concessions in an amount equal to 1.0% of
purchases of $1 million or more other than by
grandfathered retirement accounts. For grandfathered
retirement accounts, the concession is 0.75% of the
first $2.5 million of purchases plus 0.25% of
purchases in excess of $2.5 million. In either case,
the concession will not be paid on purchases of
shares by exchange or that were previously subject to
a front-end sales charge and dealer concession.
If you redeem any of those shares within an 18-month
"holding period" measured from the beginning of the
calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent
deferred sales charge") may be deducted from the
redemption proceeds. That sales charge will be equal
to 1.0% of the lesser of:
othe aggregate net asset value of the redeemed shares
at the time of redemption (excluding shares
purchased by reinvestment of dividends or capital
gain distributions) or
othe original net asset value of the redeemed shares.
The Class A contingent deferred sales charge will not
exceed the aggregate amount of the concessions the
Distributor paid to your dealer on all purchases of
Class A shares of all Oppenheimer funds you made that
were subject to the Class A contingent deferred sales
charge.
Purchases by Certain Retirement Plans. There is no initial
sales charge on purchases of Class A shares of any
one or more Oppenheimer funds by retirement plans
that have $10 million or more in plan assets and that
have entered into a special agreement with the
Distributor and by retirement plans which are part of
a retirement plan product or platform offered by
certain banks, broker-dealers, financial advisors,
insurance companies or recordkeepers which have
entered into a special agreement with the
Distributor. The Distributor currently pays dealers
of record concessions in an amount equal to 0.25% of
the purchase price of Class A shares by those
retirement plans from its own resources at the time
of sale, subject to certain exceptions as described
in the Statement of Additional Information. There is
no contingent deferred sales charge upon the
redemption of such shares.
HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at
net asset value per share without an initial sales charge.
However, if Class B shares are redeemed within six years
from the beginning of the calendar month of their purchase,
a contingent deferred sales charge will be deducted from
the redemption proceeds. The Class B contingent deferred
sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
The amount of the contingent deferred sales charge
will depend on the number of years since you invested and
the dollar amount being redeemed, according to the
following schedule for the Class B contingent deferred
sales charge holding period:
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Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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More than 6 None
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In the table, a "year" is a 12-month period. In applying
the contingent deferred sales charge, all purchases are
considered to have been made on the first regular business
day of the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares
automatically convert to Class A shares 72 months
after you purchase them. This conversion feature
relieves Class B shareholders of the asset-based
sales charge that applies to Class B shares under the
Class B Distribution and Service Plan, described
below. The conversion is based on the relative net
asset value of the two classes, and no sales load or
other charge is imposed. When any Class B shares that
you hold convert, any other Class B shares that were
acquired by reinvesting dividends and distributions
on the converted shares will also convert to Class A
shares. For further information on the conversion
feature and its tax implications, see "Class B
Conversion" in the Statement of Additional
Information.
How Can you Buy Class C Shares? Class C shares are sold at
net asset value per share without an initial sales charge.
However, if Class C shares are redeemed within a holding
period of 12 months from the beginning of the calendar
month of their purchase, a contingent deferred sales charge
of 1.0% will be deducted from the redemption proceeds. The
Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection
with the sale of Class C shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered
for sale to retirement plans (including IRAs and 403(b)
plans) that purchase $500,000 or more of Class N shares of
one or more Oppenheimer funds or to group retirement plans
(which do not include IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible
participants. See "Availability of Class N shares" in the
Statement of Additional Information for other circumstances
where Class N shares are available for purchase.
A contingent deferred sales charge of 1.0% will be
imposed upon the redemption of Class N shares, if:
o The group retirement plan is terminated or Class N
shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first
purchase of Class N shares of any Oppenheimer fund, or
o With respect to an IRA or 403(b) plan, Class N shares
are redeemed within 18 months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
Retirement plans that offer Class N shares may impose
charges on plan participant accounts. The procedures for
buying, selling, exchanging and transferring the Fund's
other classes of shares (other than the time those orders
must be received by the Distributor or Transfer Agent in
Colorado) and the special account features applicable to
purchasers of those other classes of shares described
elsewhere in this prospectus do not apply to Class N shares
offered through a group retirement plan. Instructions for
buying, selling, exchanging or transferring Class N shares
offered through a group retirement plan must be submitted
by the plan, not by plan participants for whose benefit the
shares are held.
Who Can Buy Class Y Shares? Class Y shares are sold at net
asset value per share without a sales charge directly to
institutional investors that have special agreements with
the Distributor for this purpose. They may include
insurance companies, registered investment companies and
employee benefit plans. Individual investors cannot buy
Class Y shares directly.
An institutional investor that buys Class Y shares
for its customers' accounts may impose charges on those
accounts. The procedures for buying, selling, exchanging
and transferring the Fund's other classes of shares (other
than the time those orders must be received by the
Distributor or Transfer Agent at their Colorado office) and
the special account features available to investors buying
those other classes of shares do not apply to Class Y
shares. Instructions for buying, selling, exchanging or
transferring Class Y shares must be submitted by the
institutional investor, not by its customers for whose
benefit the shares are held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares. It reimburses the
Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A
shares. Reimbursement is made quarterly at an annual
rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor
currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions
quarterly for providing personal service and
maintenance of accounts of their customers that hold
Class A shares. With respect to Class A shares
subject to a Class A contingent deferred sales charge
purchased by grandfathered retirement accounts, the
Distributor pays the 0.25% service fee to dealers in
advance for the first year after the shares are sold
by the dealer. After the shares have been held for a
year, the Distributor pays the service fee to dealers
on a quarterly basis.
Distribution and Service Plans for Class B, Class C and
Class N Shares. The Fund has adopted Distribution and
Service Plans for Class B, Class C and Class N shares
to pay the Distributor for its services and costs in
distributing Class B, Class C and Class N shares and
servicing accounts. Under the plans, the Fund pays
the Distributor an annual asset-based sales charge of
0.75% on Class B and Class C shares and 0.25% on
Class N shares. The Distributor also receives a
service fee of 0.25% per year under the Class B,
Class C and Class N plans.
The asset-based sales charge and service fees
increase Class B and Class C expenses by 1.0% and
increase Class N expenses by 0.50% of the net assets
per year of the respective class. Because these fees
are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of
your investment and may cost you more than other
types of sales charges.
The Distributor uses the service fees to compensate
dealers for providing personal services for accounts
that hold Class B, Class C or Class N shares. The
Distributor pays the 0.25% service fees to dealers in
advance for the first year after the shares are sold
by the dealer. After the shares have been held for a
year, the Distributor pays the service fees to
dealers on a quarterly basis. The Distributor retains
the service fees for accounts for which it renders
the required personal services.
The Distributor currently pays a sales concession of
3.75% of the purchase price of Class B shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class B shares is therefore 4.00% of
the purchase price. The Distributor retains the Class
B asset-based sales charge. See the Statement of
Additional Information for exceptions.
The Distributor currently pays a sales concession of
0.75% of the purchase price of Class C shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class C shares is therefore 1.0% of
the purchase price. The Distributor pays the
asset-based sales charge as an ongoing concession to
the dealer on Class C shares that have been
outstanding for a year or more. See the Statement of
Additional Information for exceptions.
The Distributor currently pays a sales concession of
0.75% of the purchase price of Class N shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class N shares is therefore 1.0% of
the purchase price. The Distributor retains the
asset-based sales charge on Class N shares. See the
Statement of Additional Information for exceptions.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link
your Fund account with an account at a U.S. bank or other
financial institution. It must be an Automated Clearing
House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by
telephone (through a service representative or by
PhoneLink) or automatically under Asset Builder
Plans, or
o have the Transfer Agent send redemption proceeds or
transmit dividends and distributions directly to your
bank account. Please call the Transfer Agent for more
information.
You may purchase shares by telephone only after your
account has been established. To purchase shares in amounts
up to $250,000 through a telephone representative, call the
Distributor at 1.800.225.5677. The purchase payment will be
debited from your bank account.
AccountLink privileges should be requested on your
Application or your dealer's settlement instructions if you
buy your shares through a dealer. After your account is
established, you can request AccountLink privileges by
sending signature-guaranteed instructions and proper
documentation to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration
on your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written
instructions terminating or changing those privileges.
After you establish AccountLink for your account, any
change of bank account information must be made by
signature-guaranteed instructions to the Transfer Agent
signed by all shareholders who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a
number of account transactions automatically using a
touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a
Personal Identification Number (PIN), by calling the
PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1.800.225.5677. You
must have established AccountLink privileges to link
your bank account with the Fund to pay for these
purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares
automatically by phone from your Fund account to
another OppenheimerFunds account you have already
established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the
Fund will send the proceeds directly to your
AccountLink bank account. Please refer to "How to
Sell Shares," below for details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send
requests for certain types of account transactions to the
Transfer Agent by fax (telecopier). Please call
1.800.225.5677 for information about which transactions may
be handled this way. Transaction requests submitted by fax
are subject to the same rules and restrictions as written
and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain
information about the Fund, as well as your account
balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed
in the account registration (and the dealer of record) may
request certain account transactions through a special
section of that website. To perform account transactions or
obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want
to have Internet account transaction capability for your
account, please call the Transfer Agent at 1.800.225.5677.
At times, the website may be inaccessible or its
transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has
several plans that enable you to sell shares automatically
or exchange them to another OppenheimerFunds account on a
regular basis. Please call the Transfer Agent or consult
the Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If you redeem some or all of your
Class A or Class B shares of the Fund, you have up to six
months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only
to Class A shares that you purchased subject to an initial
sales charge and to Class A or Class B shares on which you
paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C, Class N or
Class Y shares. You must be sure to ask the Distributor for
this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your
retirement plan account. If you participate in a plan
sponsored by your employer, the plan trustee or
administrator must buy the shares for your plan account.
The Distributor also offers a number of different
retirement plans that individuals and employers can use:
Individual Retirement Accounts (IRAs). These include
regular IRAs, Roth IRAs, SIMPLE IRAs and rollover
IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs
for small business owners or self-employed
individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for
employees of eligible tax-exempt organizations, such
as schools, hospitals and charitable organizations.
401(k) Plans. These are special retirement plans for
businesses.
Pension and Profit-Sharing Plans. These plans are designed
for businesses and self-employed individuals.
Please call the Distributor for OppenheimerFunds
retirement plan documents, which include applications and
important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any
regular business day. Your shares will be sold at the next
net asset value calculated after your order is received in
proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer
Agent. The Fund lets you sell your shares by writing a
letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If
you have questions about any of these procedures, and
especially if you are redeeming shares in a special
situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent
first, at 1.800.225.5677, for assistance.
Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, the following redemption
requests must be in writing and must include a
signature guarantee (although there may be other
situations that also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a
check
o The redemption check is not payable to all
shareholders listed on the account statement
o The redemption check is not sent to the address of
record on your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are being redeemed by someone (such as an
Executor) other than the owners.
Where Can You Have Your Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a
number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings
association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities,
municipal securities or government securities, or
o a U.S. national securities exchange, a registered
securities association or a clearing agency.
If you are signing on behalf of a corporation,
partnership or other business or as a fiduciary, you
must also include your title in the signature.
Retirement Plan Accounts. There are special procedures to
sell shares in an OppenheimerFunds retirement plan
account. Call the Transfer Agent for a distribution
request form. Special income tax withholding
requirements apply to distributions from retirement
plans. You must submit a withholding form with your
redemption request to avoid delay in getting your
money and if you do not want tax withheld. If your
employer holds your retirement plan account for you
in the name of the plan, you must ask the plan
trustee or administrator to request the sale of the
Fund shares in your plan account.
HOW DO you SELL SHARES BY MAIL? Write a letter of
instruction that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as
the account is registered, and
o Any special documents requested by the Transfer Agent
to assure proper authorization of the person asking
to sell the shares.
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer
representative of record may also sell your shares by
telephone. To receive the redemption price calculated on a
particular regular business day, your call must be received
by the Transfer Agent by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan account or under a share
certificate by telephone.
o To redeem shares through a service representative or
automatically on PhoneLink, call 1.800.225.5677.
Whichever method you use, you may have a check sent
to the address on the account statement, or, if you have
linked your Fund account to your bank account on
AccountLink, you may have the proceeds sent to that bank
account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be
redeemed by telephone in any seven-day period. The
check must be payable to all owners of record of the
shares and must be sent to the address on the account
statement. This service is not available within 30
days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no
dollar limits on telephone redemption proceeds sent
to a bank account designated when you establish
AccountLink. Normally the ACH transfer to your bank
is initiated on the business day after the
redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are
waiting to be transferred.
CAN YOU SELL SHARES THROUGH your DEALER? The Distributor
has made arrangements to repurchase Fund shares from
dealers and brokers on behalf of their customers. Brokers
or dealers may charge for that service. If your shares are
held in the name of your dealer, you must redeem them
through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS.
If you purchase shares subject to a Class A, Class B, Class
C or Class N contingent deferred sales charge and redeem
any of those shares during the applicable holding period
for the class of shares, the contingent deferred sales
charge will be deducted from the redemption proceeds
(unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix B to the
Statement of Additional Information and you advise the
Transfer Agent of your eligibility for the waiver when you
place your redemption request.)
A contingent deferred sales charge will be based on
the lesser of the net asset value of the redeemed shares at
the time of redemption or the original net asset value. A
contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an
increase in net asset value over the initial purchase
price,
o shares purchased by the reinvestment of dividends or
capital gains distributions, or
o shares redeemed in the special circumstances
described in Appendix B to the Statement of
Additional Information.
To determine whether a contingent deferred sales
charge applies to a redemption, the Fund redeems shares in
the following order:
1. shares acquired by reinvestment of dividends and
capital gains distributions,
2. shares held for the holding period that applies to
the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged
when you exchange shares of the Fund for shares of other
Oppenheimer funds. However, if you exchange them within the
applicable contingent deferred sales charge holding period,
the holding period will carry over to the fund whose shares
you acquire. Similarly, if you acquire shares of this Fund
by exchanging shares of another Oppenheimer fund that are
still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time
of exchange, without sales charge. Shares of the Fund can
be purchased by exchange of shares of other Oppenheimer
funds on the same basis. To exchange shares, you must meet
several conditions:
o Shares of the fund selected for exchange must be
available for sale in your state of residence.
o The prospectuses of both funds must offer the
exchange privilege.
o You must hold the shares you buy when you establish
your account for at least seven days before you can
exchange them. After the account is open seven days,
you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for
the fund whose shares you purchase by exchange.
o Before exchanging into a fund, you must obtain and
read its prospectus.
Shares of a particular class of the Fund may be
exchanged only for shares of the same class in the other
Oppenheimer funds. For example, you can exchange Class A
shares of this Fund only for Class A shares of another
fund. In some cases, sales charges may be imposed on
exchange transactions. For tax purposes, exchanges of
shares involve a sale of the shares of the fund you own and
a purchase of the shares of the other fund, which may
result in a capital gain or loss. Please refer to "How to
Exchange Shares" in the Statement of Additional Information
for more details.
You can find a list of Oppenheimer funds currently
available for exchanges in the Statement of Additional
Information or obtain one by calling a service
representative at 1.800.225.5677. That list can change from
time to time.
HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be
requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the
account. Send it to the Transfer Agent at the address
on the back cover. Exchanges of shares held under
certificates cannot be processed unless the Transfer
Agent receives the certificates with the request.
Telephone Exchange Requests. Telephone exchange requests
may be made either by calling a service
representative or by using PhoneLink for automated
exchanges by calling 1.800.225.5677. Telephone
exchanges may be made only between accounts that are
registered with the same name(s) and address. Shares
held under certificates may not be exchanged by
telephone.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain
exchange policies you should be aware of:
o Shares are normally redeemed from one fund and
purchased from the other fund in the exchange
transaction on the same regular business day on which
the Transfer Agent receives an exchange request that
conforms to the policies described above. It must be
received by the close of The New York Stock Exchange
that day, which is normally 4:00 P.M. but may be
earlier on some days. However, either fund may delay
the purchase of shares of the fund you are exchanging
into up to seven days if it determines it would be
disadvantaged by the same day exchange.
o The interests of the Fund's long-term shareholders
and its ability to manage its investments may be
adversely affected when its shares are repeatedly
bought and sold in response to short-term market
fluctuations--also known as "market timing." When
large dollar amounts are involved, the Fund may have
difficulty implementing long-term investment
strategies, because it cannot predict how much cash
it will have to invest. Market timing also may force
the Fund to sell portfolio securities at
disadvantageous times to raise the cash needed to buy
a market timer's Fund shares. These factors may hurt
the Fund's performance and its shareholders. When the
Manager believes frequent trading would have a
disruptive effect on the Fund's ability to manage its
investments, the Manager and the Fund may reject
purchase orders and exchanges into the Fund by any
person, group or account that the Manager believes to
be a market timer.
o The Fund may amend, suspend or terminate the exchange
privilege at any time. The Fund will provide you
notice whenever it is required to do so by applicable
law, but it may impose changes at any time for
emergency purposes.
o If the Transfer Agent cannot exchange all the shares
you request because of a restriction cited above,
only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures
for buying, selling and exchanging shares is contained in
the Statement of Additional Information.
A $12 annual fee will be charged on any account valued
at less than $500. See the Statement of
Additional Information for circumstances when
this fee will not be charged.
The offering of shares may be suspended during any period
in which the determination of net asset value is
suspended, and the offering may be suspended by the
Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated
by the Fund at any time. The Fund will provide you
notice whenever it is required to do so by applicable
law. If an account has more than one owner, the Fund
and the Transfer Agent may rely on the instructions
of any one owner. Telephone privileges apply to each
owner of the account and the dealer representative of
record for the account unless the Transfer Agent
receives cancellation instructions from an owner of
the account.
The Transfer Agent will record any telephone calls to
verify data concerning transactions and has adopted
other procedures to confirm that telephone
instructions are genuine, by requiring callers to
provide tax identification numbers and other account
data or by using PINs, and by confirming such
transactions in writing. The Transfer Agent and the
Fund will not be liable for losses or expenses
arising out of telephone instructions reasonably
believed to be genuine.
Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in
proper form. From time to time, the Transfer Agent in
its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients
by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for
obtaining their clients' permission to perform those
transactions, and are responsible to their clients
who are shareholders of the Fund if the dealer
performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the value of the securities in the Fund's
portfolio fluctuates. The redemption price, which is
the net asset value per share, will normally differ
for each class of shares. The redemption value of
your shares may be more or less than their original
cost.
Payment for redeemed shares ordinarily is made in cash. It
is forwarded by check, or through AccountLink (as
elected by the shareholder) within seven days after
the Transfer Agent receives redemption instructions
in proper form. However, under unusual circumstances
determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment
will normally be forwarded within three business days
after redemption.
The Transfer Agent may delay processing any type of
redemption payment as described under "How to Sell
Shares" for recently purchased shares, but only until
the purchase payment has cleared. That delay may be
as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or
arrange with your bank to provide telephone or
written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by
the Fund if the account value has fallen below $500
for reasons other than the fact that the market value
of shares has dropped. In some cases, involuntary
redemptions may be made to repay the Distributor for
losses from the cancellation of share purchase
orders.
Shares may be "redeemed in kind" under unusual
circumstances (such as a lack of liquidity in the
Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with liquid
securities from the Fund's portfolio.
"Backup withholding" of federal income tax may be applied
against taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail
to furnish the Fund your correct, certified Social
Security or Employer Identification Number when you
sign your application, or if you under-report your
income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each
prospectus, annual and semi-annual report and annual
notice of the Fund's privacy policy to shareholders
having the same last name and address on the Fund's
records. The consolidation of these mailings, called
householding, benefits the Fund through reduced
mailing expense.
If you want to receive multiple copies of these
materials, you may call the Transfer Agent at
1.800.225.5677. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses,
reports and privacy notices will be sent to you
commencing within 30 days after the Transfer Agent
receives your request to stop householding.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately
for each class of shares from net investment income on an
annual basis and to pay them to shareholders in December on
a date selected by the Board of Trustees. Dividends and
distributions paid on Class A and Class Y shares will
generally be higher than dividends for Class B, Class C and
Class N shares, which normally have higher expenses than
Class A and Class Y. The Fund has no fixed dividend rate
and cannot guarantee that it will pay any dividends or
distributions.
Capital Gains. The Fund may realize capital gains on the
sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term
capital gains in December of each year. The Fund may make
supplemental distributions of dividends and capital gains
following the end of its fiscal year. There can be no
assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When
you open your account, specify on your application how you
want to receive your dividends and distributions. You have
four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and capital gains
distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to
reinvest some distributions (dividends, short-term
capital gains or long-term capital gains
distributions) in the Fund while receiving the other
types of distributions by check or having them sent
to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive
a check for all dividends and capital gains
distributions or have them sent to your bank through
AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds
Account. You can reinvest all distributions in the
same class of shares of another OppenheimerFunds
account you have established.
TAXES. If your shares are not held in a tax-deferred
retirement account, you should be aware of the following
tax implications of investing in the Fund. Distributions
are subject to federal income tax and may be subject to
state or local taxes. Dividends paid from short-term
capital gains and net investment income are taxable as
ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders.
It does not matter how long you have held your shares.
Whether you reinvest your distributions in additional
shares or take them in cash, the tax treatment is the same.
Every year the Fund will send you and the IRS a
statement showing the amount of any taxable distribution
you received in the previous year. Any long-term capital
gains will be separately identified in the tax information
the Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." If you buy shares on or just
before the Fund declares a capital gains
distribution, you will pay the full price for the
shares and then receive a portion of the price back
as a taxable capital gain.
Remember, There May be Taxes on Transactions. Because the
Fund's share prices fluctuate, you may have a capital
gain or loss when you sell or exchange your shares. A
capital gain or loss is the difference between the
price you paid for the shares and the price you
received when you sold them. Any capital gain is
subject to capital gains tax.
Returns of Capital Can Occur. In certain cases,
distributions made by the Fund may be considered a
non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal
income tax information about your investment. You should
consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you
understand the Fund's financial performance for the past
five fiscal years. Certain information reflects financial
results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, the Fund's
independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of
Additional Information, which is available on request.
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2002
2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.20 $
62.31 $ 39.77 $ 31.54 $ 40.42
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13)
..18 (.02) .10 .73
Net realized and unrealized gain (loss) (4.74)
(30.05) 25.42 11.69 (5.05)
- -------------------------------------------------------
Total from investment operations (4.87)
(29.87) 25.40 11.79 (4.32)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14)
- -- (.03) (.48) (.66)
Distributions from net realized gain --
(3.24) (2.83) (3.08) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders (.14)
(3.24) (2.86) (3.56) (4.56)
- --------------------------------------------------------------------------------
Net asset value, end of period $24.19
$29.20 $62.31 $39.77 $31.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (16.77)%
(49.87)% 67.10% 39.39% (11.62)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,173,027
$1,553,066 $3,176,435 $1,730,087 $1,356,905
- --------------------------------------------------------------------------------
Average net assets (in thousands) $1,430,735
$2,149,795 $2,390,125 $1,620,201 $1,640,181
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.54)%
0.45% (0.01)% 0.24% 1.90%
Expenses 1.31%
1.06% 1.01% 1.05% 1.00%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate 60%
92% 49% 106% 34%
1. Assumes an investment on the business day before the first
day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset value
calculated on the
last business day of the fiscal period. Sales charges are not
reflected in the
total returns. Total returns are not annualized for periods of
less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the
reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
OPPENHEIMER GROWTH FUND
CLASS B YEAR ENDED AUGUST 31, 2002
2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.60 $
59.55 $ 38.37 $ 30.54 $ 39.34
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.54)
(.10) (.21) (.20) .43
Net realized and unrealized gain (loss) (4.26)
(28.61) 24.22 11.32 (4.89)
- -------------------------------------------------------
Total from investment operations (4.80)
(28.71) 24.01 11.12 (4.46)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income --
- -- -- (.21) (.44)
Distributions from net realized gain --
(3.24) (2.83) (3.08) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders --
(3.24) (2.83) (3.29) (4.34)
- --------------------------------------------------------------------------------
Net asset value, end of period $22.80
$27.60 $59.55 $38.37 $30.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (17.39)%
(50.26)% 65.82% 38.27% (12.32)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $317,725
$483,298 $996,000 $445,629 $330,442
- --------------------------------------------------------------------------------
Average net assets (in thousands) $415,965
$692,159 $676,485 $410,058 $353,574
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (1.30)%
(0.31)% (0.78)% (0.58)% 1.08%
Expenses 2.08%
1.83% 1.78% 1.86% 1.81%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate 60%
92% 49% 106% 34%
1. Assumes an investment on the business day before the first
day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset value
calculated on the
last business day of the fiscal period. Sales charges are not
reflected in the
total returns. Total returns are not annualized for periods of
less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the
reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED AUGUST 31, 2002
2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.06 $
60.48 $ 38.92 $ 30.93 $ 39.87
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.43)
(.04) (.09) (.20) .46
Net realized and unrealized gain (loss) (4.45)
(29.14) 24.48 11.47 (4.99)
- --------------------------------------------------------
Total from investment operations (4.88)
(29.18) 24.39 11.27 (4.53)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income --
- -- -- (.21) (.51)
Distributions from net realized gain --
(3.24) (2.83) (3.07) (3.90)
- --------------------------------------------------------
Total dividends and/or distributions
to shareholders --
(3.24) (2.83) (3.28) (4.41)
- --------------------------------------------------------------------------------
Net asset value, end of period $23.18
$28.06 $60.48 $38.92 $30.93
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (17.39)%
(50.26)% 65.87% 38.28% (12.33)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $75,229
$102,144 $176,150 $57,970 $44,377
- --------------------------------------------------------------------------------
Average net assets (in thousands) $93,082
$133,823 $103,076 $53,501 $43,817
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (1.31)%
(0.32)% (0.77)% (0.58)% 1.06%
Expenses 2.08%
1.84% 1.78% 1.86% 1.81%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate 60%
92% 49% 106% 34%
1. Assumes an investment on the business day before the first
day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset value
calculated on the
last business day of the fiscal period. Sales charges are not
reflected in the
total returns. Total returns are not annualized for periods of
less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the
reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
OPPENHEIMER GROWTH FUND
CLASS N YEAR ENDED AUGUST 31,
2002 2001(1)
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $
29.13 $ 35.39
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.13)(2) (.01)
Net realized and unrealized loss
(4.78)(2) (6.25)
- ---------------------------------
Total from investment operations
(4.91) (6.26)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.23) --
Distributions from net realized gain
- -- --
- ---------------------------------
Total dividends and/or distributions to shareholders
(.23) --
- --------------------------------------------------------------------------------
Net asset value, end of period
$23.99 $29.13
=================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3)
(17.00)% (17.69)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands)
$2,243 $274
- --------------------------------------------------------------------------------
Average net assets (in thousands)
$1,623 $ 70
- --------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment loss
(0.90)% (0.33)%
Expenses
1.57% 1.40%
- --------------------------------------------------------------------------------
Portfolio turnover rate
60% 92%
1. For the period from March 1, 2001 (inception of offering) to
August 31, 2001.
2. Per share amounts calculated based on the average shares
outstanding during
the period.
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.
21
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED AUGUST 31, 2002
2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.27 $
62.33 $ 39.76 $ 31.54 $ 40.43
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.06)
..28 .16 .18 .87
Net realized and unrealized gain (loss) (4.73)
(30.10) 25.37 11.69 (5.09)
- -------------------------------------------------------
Total from investment operations (4.79)
(29.82) 25.53 11.87 (4.22)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24)
- -- (.13) (.58) (.77)
Distributions from net realized gain --
(3.24) (2.83) (3.07) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders (.24)
(3.24) (2.96) (3.65) (4.67)
- --------------------------------------------------------------------------------
Net asset value, end of period $24.24
$29.27 $62.33 $39.76 $31.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (16.50)%
(49.77)% 67.56% 39.74% (11.38)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $66,769 $
88,284 $191,267 $ 93,936 $132,146
- --------------------------------------------------------------------------------
Average net assets (in thousands) $81,127
$124,168 $134,650 $116,615 $135,098
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.25)%
0.67% 0.27% 0.65% 2.16%
Expenses 1.13%
0.86% 0.73% 0.80% 0.71%(3)
Expenses, net of voluntary waiver of
transfer agent fees and/or reduction
to custodian expenses 1.02%
0.86% 0.73% 0.80% 0.71%
- --------------------------------------------------------------------------------
Portfolio turnover rate 60%
92% 49% 106% 34%
1. Assumes an investment on the business day before the first
day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset value
calculated on the
last business day of the fiscal period. Sales charges are not
reflected in the
total returns. Total returns are not annualized for periods of
less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the
reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Growth 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).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the
Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign
currencies are
translated into U.S. dollars at the closing rates of exchange.
Amounts related
to the purchase and sale of foreign securities and investment
income are
translated at the rates of exchange prevailing on the
respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on
investments is
separately identified from the fluctuations arising from
changes in market
values of securities held and reported with all other foreign
currency gains
and losses in the Fund's Statement of Operations.
23
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 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.
As of August 31, 2002, the Fund had approximately
$229,706,000 of
post-October losses available to offset future capital gains,
if any. Such
losses, if unutilized, will expire in 2011.
As of August 31, 2002, the Fund had available for federal
income tax purposes
unused capital loss carryforwards as follows:
EXPIRING
------------------------
2009 $ 50,983,636
2010 391,696,099
------------
Total $442,679,735
============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded
retirement plan for
the Fund's independent trustees. Benefits are based on years of
service and
fees paid to each trustee during the years of service. During
the year ended
August 31, 2002, the Fund's projected benefit obligations were
increased by
$55,263 and payments of $12,454 were made to retired trustees,
resulting in an
accumulated liability of $402,757 as of August 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 periodically
adjusted as though an
equivalent amount had been 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.
24
OPPENHEIMER GROWTH FUND
- --------------------------------------------------------------------------------
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 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 August 31, 2002, amounts have been reclassified to
reflect a
decrease in paid-in capital of $14,454,009. Overdistributed net
investment
income was decreased by the same amount. Net assets of the Fund
were unaffected
by the reclassifications.
The tax character of distributions paid during the years ended
August 31, 2002
and August 31, 2001 was as follows:
YEAR
ENDED YEAR ENDED
AUGUST 31, 2002
AUGUST 31, 2001
- -----------------------------------------------------------
Distributions paid from:
Ordinary income $7,926,306
$ 96,345,987
Long-term capital gain
- -- 151,273,241
Return of capital
- -- --
- ---------------------------
Total $7,926,306
$247,619,228
===========================
As of August 31, 2002, the components of distributable earnings
on a tax basis
were as follows:
Overdistributed net
investment income $ (402,691)
Accumulated net realized loss (672,537,349)
Net unrealized depreciation (33,984,569)
-------------
Total $(706,924,609)
=============
- --------------------------------------------------------------------------------
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.
25
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value
shares of
beneficial interest. Transactions in shares of beneficial
interest were as
follows:
YEAR ENDED AUGUST 31, 2002 YEAR
ENDED AUGUST 31, 2001(1)
SHARES AMOUNT
SHARES AMOUNT
- --------------------------------------------------------------------------------
CLASS A
Sold 6,933,882 $ 195,310,273
10,569,340 $ 434,907,471
Dividends and/or
distributions reinvested 229,470 6,758,016
3,414,802 158,822,473
Redeemed (11,867,029) (326,404,857)
(11,769,825) (439,119,269)
- ------------------------------------------------------------
Net increase (decrease) (4,703,677) $(124,336,568)
2,214,317 $ 154,610,675
============================================================
- --------------------------------------------------------------------------------
CLASS B
Sold 2,659,840 $ 70,453,666
5,557,121 $ 229,365,850
Dividends and/or
distributions reinvested -- --
1,227,686 54,263,720
Redeemed (6,235,475) (162,752,916)
(5,997,793) (213,710,131)
- ------------------------------------------------------------
Net increase (decrease) (3,575,635) $ (92,299,250)
787,014 $ 69,919,439
============================================================
- --------------------------------------------------------------------------------
CLASS C
Sold 1,099,282 $ 29,093,790
1,717,522 $ 69,151,022
Dividends and/or
distributions reinvested -- --
217,183 9,762,405
Redeemed (1,493,796) (39,139,584)
(1,207,014) (42,248,434)
- ------------------------------------------------------------
Net increase (decrease) (394,514) $ (10,045,794)
727,691 $ 36,664,993
============================================================
- --------------------------------------------------------------------------------
CLASS N
Sold 140,675 $
3,970,419 9,401 $ 292,765
Dividends and/or
distributions reinvested 268
7,845 -- --
Redeemed (56,863)
(1,607,274) (5) (168)
- ------------------------------------------------------------
Net increase (decrease) 84,080 $
2,370,990 9,396 $ 292,597
============================================================
- --------------------------------------------------------------------------------
CLASS Y
Sold 877,421 $ 24,490,320
1,574,830 $$ 65,369,945
Dividends and/or
distributions reinvested 24,235 713,722
216,565 10,076,798
Redeemed (1,162,874) (31,902,458)
(1,844,136) (73,210,409)
- ------------------------------------------------------------
Net increase (decrease) (261,218) $ (6,698,416)
(52,741) $ 2,236,334
============================================================
1. For the year ended August 31, 2001, for Class A, B, C and Y
shares and for
the period from March 1, 2001 (inception of offering) to
August 31, 2001, for
Class N shares.
26
OPPENHEIMER GROWTH FUND
================================================================================
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 August 31,
2002, were
$999,741,770 and $1,084,966,491, respectively.
As of August 31, 2002, unrealized appreciation (depreciation)
based on cost of
securities for federal income tax purposes of $1,671,528,206
was composed of:
Gross unrealized appreciation $ 153,121,143
Gross unrealized depreciation (187,257,005)
-------------
Net unrealized depreciation $ (34,135,862)
=============
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 which provides
for a 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
$1.0 billion,
0.56% of the next $2.0 billion, and 0.54% of the average annual
net assets in
excess of $4.5 billion.
- --------------------------------------------------------------------------------
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. 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.
27
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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)
- --------------------------------------------------------------------------------
August 31, 2002 $2,350,474 $668,545
$204,213 $2,130,360 $174,319 $31,178
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
- -------------------------------------------------------------------------------
August 31, 2002 $21,386 $1,099,479
$22,633 $249
- --------------------------------------------------------------------------------
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 August 31, 2002
, payments under
the Class A Plan totaled $3,313,032, all of which were paid by
the Distributor
to recipients, and included $156,580 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
August 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 $4,141,613 $3,277,861
$11,192,681 3.52%
Class C Plan 931,561 193,657
1,590,674 2.11
Class N Plan 8,087 8,000
56,842 2.53
================================================================================
5. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put
and covered call
options on portfolio securities in order to produce incremental
earnings or
protect against changes in the value of portfolio securities.
28
OPPENHEIMER GROWTH FUND
The Fund generally purchases put options or writes covered
call options to
hedge against adverse movements in the value of portfolio
holdings. When an
option is written, the Fund receives a premium and becomes
obligated to sell or
purchase the underlying security at a fixed price, upon
exercise of the option.
Options are valued daily based upon the last sale price on
the principal
exchange on which the option is traded and unrealized
appreciation or
depreciation is recorded. The Fund will realize a gain or loss
upon the
expiration or closing of the option transaction. When an option
is exercised,
the proceeds on sales for a written call option, the purchase
cost for a
written put option, or the cost of the security for a purchased
put or call
option is adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are
noted in the
Statement of Investments where applicable. Shares subject to
call, expiration
date, exercise price, premium received and market value are
detailed in a note
to the Statement of Investments. Options written are reported
as a liability in
the Statement of Assets and Liabilities. Realized gains and
losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives up
the opportunity
for profit if the market price of the security increases and
the option is
exercised. The risk in writing a put option is that the Fund
may incur a loss
if the market price of the security decreases and the option is
exercised. The
risk in buying an option is that the Fund pays a premium
whether or not the
option is exercised. The Fund also has the additional risk of
not being able to
enter into a closing transaction if a liquid secondary market
does not exist.
Written option activity for the year ended August 31, 2002 was
as follows:
CALL
OPTIONS
- ----------------------------
NUMBER OF
AMOUNT OF
CONTRACTS
PREMIUMS
- ------------------------------------------------------
Options outstanding as of
August 31, 2001 --
$ --
Options written 1,750
207,652
Options closed or expired (1,750)
(207,652)
- ------------------------
Options outstanding as of
August 31, 2002 --
$ --
========================
================================================================================
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency
purposes including,
without limitation, funding of shareholder redemptions 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 August 31,
2002.
INFORMATION AND SERVICES
For More Information on Oppenheimer Growth Fund
The following additional information about the Fund is
available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION. This document includes
additional information about the Fund's investment
policies, risks, and operations. It is incorporated by
reference into this Prospectus (which means it is legally
part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS. Additional information
about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to
shareholders. The Annual Report includes a discussion of
market conditions and investment strategies that
significantly affected the Fund's performance during its
last fiscal year.
How to Get More Information
You can request the Statement of Additional Information,
the Annual and Semi-Annual Reports, the notice explaining
the Fund's privacy policy and other information about the
Fund or your account:
- --------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.CALL.OPP (225.5677)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On the Internet: You can send us a request by e-mail or
read or download documents on the
OppenheimerFunds website:
www.oppenheimerfunds.com
- --------------------------------------------------------------------------------
Information about the Fund including the Statement of
Additional Information can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference
Room may be obtained by calling the SEC at
1.202.942.8090. Reports and other information about
the Fund are available on the EDGAR database on the
SEC's Internet website at www.sec.gov. Copies may be
obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address:
publicinfo@sec.gov or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about
the Fund or to make any representations about the Fund
other than what is contained in this Prospectus. This
Prospectus is not an offer to sell shares of the Fund, nor
a solicitation of an offer to buy shares of the Fund, to
any person in any state or other jurisdiction where it is
unlawful to make such an offer.
The Fund's shares are distributed by:
[logo] OppenheimerFunds(R)
Distributor, Inc.
The Fund's SEC File No.: 811-2306.
PR0270.001.1002
Printed on recycled paper.
Appendix to Prospectus of
Oppenheimer Growth Fund
Graphic Material included in the Prospectus of
Oppenheimer Growth Fund: "Annual Total Returns (Class A) (%
as of 12/31 each year)":
A bar chart will be included in the Prospectus of
Oppenheimer Growth Fund (the "Fund") depicting the annual
total returns of a hypothetical investment in Class A
shares of the Fund for each of the ten most recent calendar
years, without deducting sales charges. Set forth below are
the relevant data points that will appear on the bar chart.
Calendar Oppenheimer
Year Growth Fund
Ended Class A Shares
- ----- --------------
12/31/01 -24.54%
12/31/00 -11.16%
12/31/99 46.73%
12/31/98 10.95%
12/31/97 18.12%
12/31/96 23.46%
12/31/95 34.95%
12/31/94 2.38%
12/31/93 2.72%
12/31/92 13.37%
SAI SUPPLEMENT
Oppenheimer Growth Fund
Supplement dated March 31, 2003 to the
Statement of Additional Information dated October 23, 2002
revised February 12, 2003
The Statement of Additional Information is changed as
follows:
1. The section captioned "Board of Trustees and
Oversight Committees" on page 23 is amended as follows:
a. The second sentence of the second paragraph under
that caption is revised to read:
"The members of the Audit Committee are
Kenneth A. Randall (Chairman) and Edward
Reagan."
b. The first sentence of the third paragraph under that
caption is revised to read:
"The members of the Study Committee are Robert G.
Galli (Chairman), Elizabeth Moynihan and Joel
Motley."
2. Effective March 31, 2003, Mr. Benjamin Lipstein
retired as a Trustee. Therefore, the Statement of
Additional Information is revised by deleting the
biography for Mr. Lipstein on page 25.
3. In the Trustee compensation table on pages 29 and 30,
the title of "Chairman" is added after Mr. Yeutter's
name. In addition, the following footnote is added
following Mr. Lipstein's name:
7. Effective January 1, 2003, Clayton Yeutter became
Chairman of the Board of
Trustees/Directors of the Board I
Funds upon the retirement of Leon
Levy. Effective March 31, 2003,
Mr. Lipstein retired as a Trustee.
March 31, 2003 PX0270.009
STATEMENT OF ADDITIONAL INFORMATION
Oppenheimer Growth Fund
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6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677
Statement of Additional Information dated October 23, 2002 revised February 12,
2003
This Statement of Additional Information is not a
Prospectus. This document contains additional information
about the Fund and supplements information in the
Prospectus dated October 23, 2002. It should be read
together with the Prospectus. You can obtain the
Prospectus by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above, or by downloading it from the
OppenheimerFunds Internet website at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies
and Risks.............................................................. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 4
Investment Restrictions............................................20
How the Fund is Managed ...............................................21
Organization and History...........................................21
Board of Trustees and Oversight Committees.........................23
Trustees and Officers of the Fund..................................23
The Manager........................................................31
Brokerage Policies of the Fund.........................................34
Distribution and Service Plans.........................................36
Performance of the Fund................................................40
About Your Account
How To Buy Shares......................................................46
How To Sell Shares.....................................................57
How To Exchange Shares.................................................61
Dividends, Capital Gains and Taxes.....................................65
Additional Information About the Fund..................................70
Financial Information About the Fund
Independent Auditors' Report...........................................71
Financial Statements...................................................72
Appendix A: Industry Classifications...................................A-1
Appendix B: Special Sales Charge Arrangements and Waivers..............B-1
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ABOUT THE FUND
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Additional Information About the Fund's Investment Policies
and Risks
The investment objective, the principal investment
policies and the main risks of the Fund are described in
the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and
risks and the types of securities that the Fund's
investment Manager, OppenheimerFunds, Inc. (the "Manager"),
can select for the Fund. Additional information is also
provided about the strategies that the Fund may use to try
to achieve its objective.
The Fund's Investment Policies. The composition of the
Fund's portfolio and the techniques and strategies that the
Fund's Manager may use in selecting portfolio securities
will vary over time. The Fund is not required to use all of
the investment techniques and strategies described below at
all times in seeking its goal. It may use some of the
special investment techniques and strategies at some times
or not at all.
|X| Cyclical Opportunities. The Fund might also seek
to take advantage of changes in the business cycle by
investing in companies that are sensitive to those changes
if the Manager believes they have growth potential. For
example, when the economy is expanding, companies in the
consumer durable and technology sectors might benefit and
offer long-term growth opportunities. Other cyclical
industries include insurance, for example. The fund focuses
on seeking growth over the long term, but could seek to
take tactical advantage of short-term market movements or
events affecting particular issuers or industries.
|X| Investments in Equity Securities. The Fund
focuses its investments in equity securities of mid-cap
issuers (having market capitalizations between $2 billion
and $11.5 billion) and large-cap issuers (having market
capitalizations greater than $11.5 billion). At times, the
market may favor or disfavor securities of issuers of a
particular capitalization range. Therefore the Fund may
focus its equity investments in securities of large cap or
mid cap issuers, or a combination of the two capitalization
ranges, based upon the Manager's judgment of where are the
best market opportunities to seek the Fund's objective.
Current income is not a criterion used to select portfolio
securities.
The Fund can also invest in securities of small cap
issuers (having market capitalizations of less than $1
billion). Securities of small capitalization issuers may be
subject to greater price volatility in general than
securities of large-cap and mid-cap companies. Therefore,
to the degree that the Fund has investments in smaller
capitalization companies at times of market volatility, the
Fund's share price may fluctuate more. As noted below, the
Fund limits such investments in unseasoned small cap
issuers.
o Convertible Securities. While convertible securities
are a form of debt security in many cases, their conversion
feature (allowing conversion into equity securities) causes
them to be regarded by the Manager more as "equity
equivalents." As a result, the rating assigned to the
security has less impact on the Manager's investment
decision with respect to convertible securities than in the
case of non-convertible fixed income securities.
The value of a convertible security is a function of
its "investment value" and its "conversion value." If the
investment value exceeds the conversion value, the security
will behave more like a debt security and the security's
price will likely increase when interest rates fall and
decrease when interest rates rise. If the conversion value
exceeds the investment value, the security will behave more
like an equity security. In that case it will likely sell
at a premium over its conversion value and its price will
tend to fluctuate directly with the price of the underlying
security.
To determine whether convertible securities
should be regarded as "equity equivalents," the Manager
examines the following factors:
(1) whether, at the option of the investor, the
convertible security can be exchanged for a
fixed number of shares of common stock of
the issuer,
(2) whether the issuer of the convertible securities has
restated its earnings per share of common
stock on a fully diluted basis (considering
the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a
defensive "equity substitute," providing the
ability to participate in any appreciation
in the price of the issuer's common stock.
|X| Foreign Securities. The Fund can purchase equity
securities issued or guaranteed by foreign companies or
debt securities issued by foreign governments. "Foreign
securities" include equity and debt securities of companies
organized under the laws of countries other than the United
States and debt securities issued by foreign governments
and their agencies. They may be traded on foreign
securities exchanges or in the foreign over-the-counter
markets.
Securities of foreign issuers that are represented by
American Depository Receipts or that are listed on a U.S.
securities exchange or traded in the U.S. over-the-counter
markets are not considered "foreign securities" for the
purpose of the Fund's investment allocations. That is
because they are not subject to many of the special
considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Investing in foreign securities offers potential
benefits not available from investing solely in securities
of domestic issuers. They include the opportunity to invest
in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel
to U.S. markets. The Fund will hold foreign currency only
in connection with the purchase or sale of foreign
securities.
o Risks of Foreign Investing. Investments in foreign
securities may offer special opportunities for investing
but also present special additional risks and
considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to
changes in currency rates or currency control
regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial
reporting standards in foreign countries
comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S.
exchanges;
o greater volatility and less liquidity on foreign
markets than in the U.S.;
o less governmental regulation of foreign issuers,
stock exchanges and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio
securities;
o possibilities in some countries of expropriation,
confiscatory taxation, political, financial or
social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and
foreign economies.
In the past, U.S. government policies have
discouraged certain investments abroad by U.S. investors,
through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
|X| Portfolio Turnover. "Portfolio turnover"
describes the rate at which the Fund traded its portfolio
securities during its last fiscal year. For example, if a
fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Fund's
portfolio turnover rate will fluctuate from year to year,
although the Fund might have a portfolio turnover rate of
more than 100% annually. Increased portfolio turnover
creates higher brokerage and transaction costs for the
Fund, which could reduce its overall performance.
Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable
long-term capital gains to shareholders, since the Fund
will normally distribute all of its capital gains realized
each year, to avoid excise taxes under the Internal Revenue
Code.
Other Investment Techniques and Strategies. In seeking its
objective, the Fund may from time to time employ the types
of investment strategies and investments described below.
It is not required to use all of these strategies at all
times, and at times may not use them.
|X| Investing in Small, Unseasoned Companies. The
Fund can invest in securities of small, unseasoned
companies. These are companies that have been in operation
for less than three years, including the operations of any
predecessors. Securities of these companies may be subject
to volatility in their prices. They may have a limited
trading market, which may adversely affect the Fund's
ability to dispose of them and can reduce the price the
Fund might be able to obtain for them. Other investors that
own a security issued by a small, unseasoned issuer for
which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of
that security. In that case the Fund might receive a lower
price for its holdings than might otherwise be obtained.
As a fundamental policy, the Fund cannot make an
investment that will result in more than 15% of the Fund's
total assets being invested in the securities of small,
unseasoned companies. The Fund currently intends to invest
no more than 5% of its net assets in those securities.
|X| Repurchase Agreements. The Fund can acquire
securities subject to repurchase agreements. It may do so
for liquidity purposes to meet anticipated redemptions of
Fund shares, or pending the investment of the proceeds from
sales of Fund shares, or pending the settlement of
portfolio securities transactions, or for temporary
defensive purposes, as described below.
In a repurchase transaction, the Fund buys a security
from, and simultaneously resells it to, an approved vendor
for delivery on an agreed-upon future date. The resale
price exceeds the purchase price by an amount that reflects
an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect.
Approved vendors include U.S. commercial banks, U.S.
branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities.
They must meet credit requirements set by the Manager from
time to time.
The majority of these transactions run from day to
day, and delivery pursuant to the resale typically occurs
within one to five days of the purchase. Repurchase
agreements having a maturity beyond seven days are subject
to the Fund's limits on holding illiquid investments. The
Fund will not enter into a repurchase agreement that causes
more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. There is no
limit on the amount of the Fund's net assets that may be
subject to repurchase agreements having maturities of seven
days or less.
Repurchase agreements, considered "loans" under the
Investment Company Act, are collateralized by the
underlying security. The Fund's repurchase agreements
require that at all times while the repurchase agreement is
in effect, the value of the collateral must equal or exceed
the repurchase price to fully collateralize the repayment
obligation. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Manager
will impose creditworthiness requirements to confirm that
the vendor is financially sound and will continuously
monitor the collateral's value.
Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with
other affiliated entities managed by the Manager, may
transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or
more repurchase agreements, secured by U.S. government
securities. Securities that are pledged as collateral for
repurchase agreements are held by a custodian bank until
the agreements mature. Each joint repurchase arrangement
requires that the market value of the collateral be
sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the
agreement, retention or sale of the collateral may be
subject to legal proceedings.
|X| Illiquid and Restricted Securities. Under the
policies and procedures established by the Fund's Board of
Trustees, the Manager determines the liquidity of certain
of the Fund's investments. To enable the Fund to sell its
holdings of a restricted security not registered under the
Securities Act of 1933, the Fund may have to cause those
securities to be registered. The expenses of registering
restricted securities may be negotiated by the Fund with
the issuer at the time the Fund buys the securities. When
the Fund must arrange registration because the Fund
wishes to sell the security, a considerable period may
elapse between the time the decision is made to sell the
security and the time the security is registered so that
the Fund could sell it. The Fund would bear the risks of any downward price
fluctuation during that period.
The Fund may also acquire restricted securities
through private placements. Those securities have
contractual restrictions on their public resale. Those
restrictions might limit the Fund's ability to dispose of
the securities and might lower the amount the Fund could
realize upon the sale.
The Fund has limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of
restricted securities that are eligible for sale to
qualified institutional purchasers under Rule 144A of the
Securities Act of 1933, if those securities have been
determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading
activity for such securities and the availability of
reliable pricing information, among other factors. If there
is a lack of trading interest in a particular Rule 144A
security, the Fund's holdings of that security may be
considered to be illiquid.
Illiquid securities include repurchase agreements
maturing in more than seven days and participation
interests that do not have puts exercisable within seven
days.
|X| Loans of Portfolio Securities. To raise cash for
liquidity purposes, the Fund can lend its portfolio
securities to brokers, dealers and other types of financial
institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 25% of the value
of the Fund's total assets. The Fund currently does not
intend to engage in loans of securities in the coming year,
but if it does so, such loans will not likely exceed 5% of
the Fund's total assets.
There are some risks in connection with securities
lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in
recovery of the loaned securities if the borrower defaults.
The Fund must receive collateral for a loan. Under current
applicable regulatory requirements (which are subject to
change), on each business day the loan collateral must be
at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of
the U.S. government or its agencies or instrumentalities,
or other cash equivalents in which the Fund is permitted to
invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if
the demand meets the terms of the letter. The terms of the
letter of credit and the issuing bank both must be
satisfactory to the Fund.
When it lends securities, the Fund receives amounts
equal to the dividends or interest on loaned securities. It
also receives one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, and (c) interest
on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the
borrower. The Fund may also pay reasonable finder's,
custodian and administrative fees in connection with these
loans. The terms of the Fund's loans must meet applicable
tests under the Internal Revenue Code and must permit the
Fund to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
|X| Borrowing for Leverage. As a fundamental
investment policy, the Fund may not borrow money, except to
the extent permitted under the Investment Company Act of
1940, (the "Investment Company Act") the rules or
regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or
regulations may be amended or interpreted
from time to time. Currently, under the Investment Company
Act, a mutual fund may borrow only from banks and the
maximum amount it may borrow is up to one-third of its
total assets (including the amount borrowed). The Fund may
borrow up to 5% of its total assets for temporary purposes
from any person. Under the Investment Company Act, there is
a rebuttable presumption that a loan is temporary if it is
repaid within 60 days and not extended or renewed. If the
value of the Fund's assets fails to meet this 300% asset
coverage requirement, the Fund will reduce its bank debt
within three days to meet the requirement. To do so the
Fund might have to sell a portion of its investments at a
disadvantageous time.
The Fund will pay interest on these loans, and that
interest expense will raise the overall expenses of the
Fund and reduce its returns. If it does borrow, its
expenses will be greater than comparable funds that do not
borrow for leverage. Additionally, the Fund's net asset
value per share might fluctuate more than that of funds
that do not borrow. Currently, the Fund does not
contemplate using this technique, but if it does so, it
will not likely do so to a substantial degree.
Interfund Borrowing and Lending Arrangements. Consistent
with its fundamental policies and pursuant to an exemptive
order issued by the Securities and Exchange Commission
("SEC"), the Fund may engage in borrowing and lending
activities with other funds in the OppenheimerFunds
complex. Borrowing money from affiliated funds may afford
the Fund the flexibility to use the most cost-effective
alternative to satisfy its borrowing requirements. Lending
money to an affiliated fund may allow the Fund to obtain a
higher rate of return than it could from interest rates on
alternative short-term investments. Implementation of
interfund lending will be accomplished consistent with
applicable regulatory requirements, including the
provisions of the SEC order.
o Interfund Borrowing. The Fund will not borrow from
affiliated funds unless the terms of the borrowing
arrangement are at least as favorable as the terms the Fund
could otherwise negotiate with a third party. To assure
that the Fund will not be disadvantaged by borrowing from
an affiliated fund, certain safeguards may be implemented.
Examples of these safeguards include the following:
o the Fund will not borrow money from affiliated funds
unless the interest rate is more favorable
than available bank loan rates;
o the Fund's borrowing from affiliated funds must be
consistent with its investment objective and
investment policies;
o the loan rates will be the average of the overnight
repurchase agreement rate available through
the OppenheimerFunds joint repurchase
agreement account and a pre-established
formula based on quotations from independent
banks to approximate the lowest interest
rate at which bank loans would be available
to the Fund;
o if the Fund has outstanding borrowings from all
sources greater than 10% of its total
assets, then the Fund must secure each
additional outstanding interfund loan by
segregating liquid assets of the Fund as
collateral;
o the Fund cannot borrow from an affiliated fund
in excess of 125% of its total redemptions
for the preceding seven days;
o each interfund loan may be repaid on any day by the
Fund; and
o the Trustees will be provided with a report of all
interfund loans and the Trustees will
monitor all such borrowings to ensure that
the Fund's participation is appropriate.
There is a risk that a borrowing fund could have a
loan called on one day's notice. In that circumstance, the
Fund might have to borrow from a bank at a higher interest
cost if money to lend were not available from another
Oppenheimer fund.
o Interfund Lending. To assure that the Fund will not
be disadvantaged by making loans to affiliated funds,
certain safeguards will be implemented. Examples of these
safeguards include the following:
o the Fund will not lend money to affiliated funds
unless the interest rate on such loan is
determined to be reasonable under the
circumstances;
o the Fund may not make interfund loans in excess of
15% of its net assets;
o an interfund loan to any one affiliated fund shall
not exceed 5% of the Fund's net assets;
o an interfund loan may not be outstanding for more
than seven days;
o each interfund loan may be called on one business
day's notice; and
o the Manager will provide the Trustees reports on all
interfund loans demonstrating that the
Fund's participation is appropriate and that
the loan is consistent with its investment
objectives and policies.
When the Fund lends assets to another affiliated
fund, the Fund is subject to the credit that the borrowing
fund fails to repay the loan.
|X| Derivatives. The Fund can invest in a variety of
derivative investments to seek income for liquidity needs
or for hedging purposes. Some derivative investments the
Fund can use are the hedging instruments described below in
this Statement of Additional Information. However, the Fund
does not use, and does not currently contemplate using,
derivatives or hedging instruments to a significant degree.
Some of the derivative investments the Fund can use
include debt exchangeable for common stock of an issuer or
"equity-linked debt securities" of an issuer. At maturity,
the debt security is exchanged for common stock of the
issuer or it is payable in an amount based on the price of
the issuer's common stock at the time of maturity. Both
alternatives present a risk that the amount payable at
maturity will be less than the principal amount of the debt
because the price of the issuer's common stock may not be
as high as the Manager expected.
|X| Hedging. Although the Fund does not anticipate
the extensive use of hedging instruments, the Fund can use
hedging instruments. To attempt to protect against declines
in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling
securities for investment reasons, the Fund could:
o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered
calls may also be used to increase the Fund's
income, but the Manager does not expect to engage
extensively in that practice.
The Fund can use hedging to establish a position in
the securities market as a temporary substitute for
purchasing particular securities. In that case the Fund
would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use
this type of hedge to attempt to protect against the
possibility that its portfolio securities would not be
fully included in a rise in value of the market. To do so
the Fund could:
o buy futures, or
o buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and
options on futures will be incidental to the Fund's
activities in the underlying cash market. The particular
hedging instruments the Fund can use are described below.
The Fund may employ new hedging instruments and strategies
when they are developed, if those investment methods are
consistent with the Fund's investment objective and are
permissible under applicable regulations governing the
Fund.
o Futures. The Fund may buy and sell futures contracts
that relate to (1) broadly-based stock indices (these are
referred to as "stock index futures"), (2) an individual
stock ("single stock futures"), (3) other broadly-based
securities indices (these are referred to as "financial
futures") and (4) foreign currencies (these are referred to
as "forward contracts").
A broadly-based stock index is used as the basis for
trading stock index futures. They may in some cases be
based on stocks of issuers in a particular industry or
group of industries. A stock index assigns relative values
to the common stocks included in the index and its value
fluctuates in response to the changes in value of the
underlying stocks. A stock index cannot be purchased or
sold directly. Financial futures are similar contracts
based on the future value of the basket of securities that
comprise the index. These contracts obligate the seller to
deliver, and the purchaser to take, cash to settle the
futures transaction. There is no delivery made of the
underlying securities to settle the futures obligation.
Either party may also settle the transaction by entering
into an offsetting contract.
A single stock future obligates the seller to deliver
(and the purchaser to take) cash or a specified equity
security to settle the futures transaction. Either party
could also enter into an offsetting contract to close out
the position. Single stock futures trade on a very limited
number of exchanges, with contracts typically not fungible
among the exchanges.
No payment is paid or received by the Fund on the
purchase or sale of a future. Upon entering into a futures
transaction, the Fund will be required to deposit an
initial margin payment with the futures commission merchant
(the "futures broker"). Initial margin payments will be
deposited with the Fund's custodian bank in an account
registered in the futures broker's name. However, the
futures broker can gain access to that account only under
specified conditions. As the future is marked to market
(that is, its value on the Fund's books is changed) to
reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by
the futures broker daily.
At any time prior to expiration of the future, the
Fund may elect to close out its position by taking an
opposite position, at which time a final determination of
variation margin is made and any additional cash must be
paid by or released to the Fund. Any loss or gain on the
future is then realized by the Fund for tax purposes. All
futures transactions (except forward contracts) are
effected through a clearinghouse associated with the
exchange on which the contracts are traded.
o Put and Call Options. The Fund can buy and sell
certain kinds of put options ("puts") and call options
("calls"). The Fund can buy and sell exchange-traded and
over-the-counter put and call options, including index
options, securities options, currency options, options on
commodity indices, and options on the other types of
futures described above.
o Writing Covered Call Options. The Fund can
write (that is, sell) covered calls. If the Fund sells a
call option, it must be covered. That means the Fund must
own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may
be
covered by segregating liquid assets to enable the Fund to
satisfy its obligations if the call is exercised. Up to 25%
of the Fund's total assets may be subject to calls the Fund
writes.
When the Fund writes a call on a security, it
receives cash (a premium). The Fund agrees to sell the
underlying security to a purchaser of a corresponding call
on the same security during the call period at a fixed
exercise price regardless of market price changes during
the call period. The call period is usually not more than
nine months. The exercise price may differ from the market
price of the underlying security. The Fund has the risk of
loss that the price of the underlying security may decline
during the call period. That risk may be offset to some
extent by the premium the Fund receives. If the value of
the investment does not rise above the call price, it is
likely that the call will lapse without being exercised. In
that case the Fund would keep the cash premium and the
investment.
When the Fund writes a call on an index, it receives
cash (a premium). If the buyer of the call exercises it,
the Fund will pay an amount of cash equal to the difference
between the closing price of the call and the exercise
price, multiplied by a specified multiple that determines
the total value of the call for each point of difference.
If the value of the underlying investment does not rise
above the call price, it is likely that the call will lapse
without being exercised. In that case, the Fund would keep
the cash premium.
The Fund's custodian, or a securities depository
acting for the custodian, will act as the Fund's escrow
agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written
calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such
transactions. OCC will release the securities on the
expiration of the option or when the Fund enters into a
closing transaction.
When the Fund writes an over-the-counter ("OTC")
option, it will enter into an arrangement with a primary
U.S. government securities dealer which will establish a
formula price at which the Fund will have the absolute
right to repurchase that OTC option. The formula price will
generally be based on a multiple of the premium received
for the option, plus the amount by which the option is
exercisable below the market price of the underlying
security (that is, the option is "in the money"). When the
Fund writes an OTC option, it will treat as illiquid (for
purposes of its restriction on holding illiquid securities)
the mark-to-market value of any OTC option it holds, unless
the option is subject to a buy-back agreement by the
executing broker.
To terminate its obligation on a call it has written,
the Fund may purchase a corresponding call in a "closing
purchase transaction." The Fund will then realize a profit
or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on
the call the Fund wrote is more or less than the price of
the call the Fund purchases to close out the transaction.
The Fund may realize a profit if the call expires
unexercised, because the Fund will retain the underlying
security and the premium it received when it wrote the
call. Any such profits are considered short-term capital
gains for federal income tax purposes, as are the premiums
on lapsed calls. When distributed by the Fund they are
taxable as ordinary income. If the Fund cannot effect a
closing purchase transaction due to the lack of a market,
it will have to hold the callable securities until the call
expires or is exercised.
The Fund may also write calls on a futures contract
without owning the futures contract or securities
deliverable under the contract. To do so, at the time the
call is written, the Fund must cover the call by
identifying on its books an equivalent dollar amount of
liquid assets. The Fund will identify additional liquid
assets if the value of the identified assets drops below
100%
of the current value of the future. Because of this
segregation requirement, in no circumstances would the
Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would
simply put the Fund in a short futures position, which is
permitted by the Fund's hedging policies.
o Writing Put Options. The Fund can sell put
options. A put option on securities gives the purchaser the
right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the
option period. The Fund will not write puts if, as a
result, more than 25% of the Fund's net assets would be
required to be identified to cover such put options.
If the Fund writes a put, the put must be covered by
identified liquid assets. The premium the Fund receives
from writing a put represents a profit, as long as the
price of the underlying investment remains equal to or
above the exercise price of the put. However, the Fund also
assumes the obligation during the option period to buy the
underlying investment from the buyer of the put at the
exercise price, even if the value of the investment falls
below the exercise price. If a put the Fund has written
expires unexercised, the Fund realizes a gain in the amount
of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the
exercise price. That price will usually exceed the market
value of the investment at that time. In that case, the
Fund may incur a loss if it sells the underlying
investment. That loss will be equal to the sum of the sale
price of the underlying investment and the premium received
minus the sum of the exercise price and any transaction
costs the Fund incurred.
When writing a put option on a security, to secure
its obligation to pay for the underlying security the Fund
will identify liquid assets with a value equal to or
greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of
investing the identified assets or writing calls against
those assets.
As long as the Fund's obligation as the put writer
continues, it may be assigned an exercise notice by the
broker-dealer through which the put was sold. That notice
will require the Fund to take delivery of the underlying
security and pay the exercise price. The Fund has no
control over when it may be required to purchase the
underlying security, since it may be assigned an exercise
notice at any time prior to the termination of its
obligation as the writer of the put. That obligation
terminates upon expiration of the put. It may also
terminate if, before it receives an exercise notice, the
Fund effects a closing purchase transaction by purchasing a
put of the same series as it sold. Once the Fund has been
assigned an exercise notice, it cannot effect a closing
purchase transaction.
The Fund may decide to effect a closing purchase
transaction to realize a profit on an outstanding put
option it has written or to prevent the underlying security
from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on
the security, or to sell the security and use the proceeds
from the sale for other investments. The Fund will realize
a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or
more than the premium received from writing the put option.
Any profits from writing puts are considered short-term
capital gains for federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
o Purchasing Calls and Puts. The Fund can
purchase calls to protect against the possibility that the
Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund buys a call
(other than in a closing purchase transaction), it pays a
premium. The Fund then has the right to buy the underlying
investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise
price. The Fund benefits only if it sells the call at a
profit or if, during the call period, the market price of
the underlying investment is above the sum of the call
price plus the transaction costs and the premium paid for
the call and the Fund exercises the call. If the Fund does
not exercise the call or sell it (whether or not at a
profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but
lost the right to purchase the underlying investment.
The Fund can buy puts whether or not it holds the
underlying investment in its portfolio. When the Fund
purchases a put, it pays a premium and, except as to puts
on indices, has the right to sell the underlying investment
to a seller of a put on a corresponding investment during
the put period at a fixed exercise price. Buying a put on
securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a
decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or
above the exercise price and, as a result, the put is not
exercised or resold, the put will become worthless at its
expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying
investment. However, the Fund may sell the put prior to its
expiration. That sale may or may not be at a profit.
Buying a put on an investment the Fund does not own
(such as an index or future) permits the Fund to resell the
put or to buy the underlying investment and sell it at the
exercise price. The resale price will vary inversely to the
price of the underlying investment. If the market price of
the underlying investment is above the exercise price and,
as a result, the put is not exercised, the put will become
worthless on its expiration date.
When the Fund purchases a call or put on an index or
future, it pays a premium, but settlement is in cash rather
than by delivery of the underlying investment to the Fund.
Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market
generally) rather than on price movements in individual
securities or futures contracts.
The Fund may buy a call or put only if, after the
purchase, the value of all call and put options held by the
Fund will not exceed 5% of the Fund's total assets.
o Buying and Selling Options on Foreign
Currencies. The Fund can buy and sell calls and puts on
foreign currencies. They include puts and calls that trade
on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized
dealers in such options. The Fund could use these calls and
puts to try to protect against declines in the dollar value
of foreign securities and increases in the dollar cost of
foreign securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value
of a foreign currency in which securities to be acquired
are denominated, the increased cost of those securities may
be partially offset by purchasing calls or writing puts on
that foreign currency. If the Manager anticipates a
decline in the dollar value of a foreign currency, the
decline in the dollar value of portfolio securities
denominated in that currency might be partially offset by
writing calls or purchasing puts on that foreign currency.
However, the currency rates could fluctuate in a direction
adverse to the Fund's position. The Fund will then have
incurred option premium payments and transaction costs
without a corresponding benefit.
A call the Fund writes on a foreign currency is
"covered" if the Fund owns the underlying foreign currency
covered by the call or has an absolute and immediate right
to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash
consideration identified on its books with the custodian
bank) upon conversion or exchange of other foreign currency
held in its portfolio.
The Fund could write a call on a foreign currency to
provide a hedge against a decline in the U.S. dollar value
of a security which the Fund owns or has the right to
acquire and which is denominated in the currency underlying
the option. That decline might be one that occurs due to
an expected adverse change in the exchange rate. This is
known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by maintaining
and identifying cash, U.S. government securities or other
liquid, high grade debt securities in an amount equal to
the exercise price of the option, with the Fund's custodian
bank.
o Risks of Hedging with Options and Futures. The use of
hedging instruments requires special skills and knowledge
of investment techniques that are different than what is
required for normal portfolio management. If the Manager
uses a hedging instrument at the wrong time or judges
market conditions incorrectly, hedging strategies may
reduce the Fund's return. The Fund could also experience
losses if the prices of its futures and options positions
were not correlated with its other investments.
The Fund's option activities might affect its
portfolio turnover rate and brokerage commissions. The
exercise of calls written by the Fund might cause the Fund
to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on
securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision
whether to exercise a put it holds is within the Fund's
control, holding a put might cause the Fund to sell the
related investments for reasons that would not exist in the
absence of the put.
The Fund could pay a brokerage commission each time
it buys a call or put, sells a call or put, or buys or
sells an underlying investment in connection with the
exercise of a call or put. Those commissions could be
higher on a relative basis than the commissions for direct
purchases or sales of the underlying investments. Premiums
paid for options are small in relation to the market value
of the underlying investments. Consequently, put and call
options offer large amounts of leverage. The leverage
offered by trading in options could result in the Fund's
net asset value being more sensitive to changes in the
value of the underlying investment.
If a covered call written by the Fund is exercised on
an investment that has increased in value, the Fund will be
required to sell the investment at the call price. It will
not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market
that provides secondary trading for options of the same
series, and there is no assurance that a liquid secondary
market will exist for any particular option. The Fund might
experience losses if it could not close out a position
because of an illiquid market for the future or option.
There is a risk in using short hedging by selling
futures or purchasing puts on broadly-based indices or
futures to attempt to protect against declines in the value
of the Fund's portfolio securities. The risk is that the
prices of the futures or the applicable index will
correlate imperfectly with the behavior of the cash prices
of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short
hedge, the market may advance and the value of the
securities held in the Fund's portfolio might decline. If
that occurred, the Fund would lose money on the hedging
instruments and also experience a decline in the value of
its portfolio securities. However, while this could occur
for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities
will tend to move in the same direction as the indices upon
which the hedging instruments are based.
The risk of imperfect correlation increases as the
composition of the Fund's portfolio diverges from the
securities included in the applicable index. To compensate
for the imperfect correlation of movements in the price of
the portfolio securities being hedged and movements in the
price of the hedging instruments, the Fund might use
hedging instruments in a greater dollar amount than the
dollar amount of portfolio securities being hedged. It
might do so if the historical volatility of the prices of
the portfolio securities being hedged is more than the
historical volatility of the applicable index.
The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to
differences in the nature of those markets. First, all
participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which
could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting
transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators
in the futures market may cause temporary price
distortions.
The Fund can use hedging instruments to establish a
position in the securities markets as a temporary
substitute for the purchase of individual securities (long
hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that
when the Fund does so the market might decline. If the Fund
then concludes not to invest in securities because of
concerns that the market might decline further or for other
reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price
of the securities purchased.
o Forward Contracts. Forward contracts are foreign
currency exchange contracts. They are used to buy or sell
foreign currency for future delivery at a fixed price. The
Fund uses them to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the
Fund has bought or sold, or to protect against possible
losses from changes in the relative values of the U.S.
dollar and a foreign currency. The Fund limits its exposure
in foreign currency exchange contracts in a particular
foreign currency to the amount of its assets denominated in
that currency or a closely-correlated currency. The Fund
may also use "cross-hedging" where the Fund hedges against
changes in currencies other than the currency in which a
security it holds is denominated.
Under a forward contract, one party agrees to
purchase, and another party agrees to sell, a specific
currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by
the parties. The transaction price is set at the time the
contract is entered into. These contracts are traded in the
inter-bank market conducted directly among currency traders
(usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against
uncertainty in the level of future exchange rates. The use
of forward contracts does not eliminate the risk of
fluctuations in the prices of the underlying securities the
Fund owns or intends to acquire, but it does fix a rate of
exchange in advance. Although forward contracts may reduce
the risk of loss from a decline in the value of the hedged currency,
at the same time they limit any potential gain if the value of the hedged
currency increases.
When the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or
when it anticipates receiving dividend payments in a
foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar
equivalent of the dividend payments. To do so, the Fund
could enter into a forward contract for the purchase or
sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars
per unit of the foreign currency. This is called a
"transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency
exchange rates during the period between the date on which
the security is purchased or sold or on which the payment
is declared, and the date on which the payments are made or
received.
The Fund could also use forward contracts to lock in
the U.S. dollar value of portfolio positions. This is
called a "position hedge." When the Fund believes that
foreign currency might suffer a substantial decline against
the U.S. dollar, it could enter into a forward contract to
sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities
denominated in that foreign currency. When the Fund
believes that the U.S. dollar might suffer a substantial
decline against a foreign currency, it could enter into a
forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a
forward contract to sell a different foreign currency for a
fixed U.S. dollar amount if the Fund believes that the U.S.
dollar value of the foreign currency to be sold pursuant to
its forward contract will fall whenever there is a decline
in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated. That is referred to
as a "cross hedge."
The Fund will cover its short positions in these
cases by identifying to its custodian bank assets having a
value equal to the aggregate amount of the Fund's
commitment under forward contracts. The Fund will not enter
into forward contracts or maintain a net exposure to such
contracts if the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities
or other assets denominated in that currency or another
currency that is the subject of the hedge.
However, to avoid excess transactions and transaction
costs, the Fund may maintain a net exposure to forward
contracts in excess of the value of the Fund's portfolio
securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid
securities denominated in any currency. The cover must be
at least equal at all times to the amount of that excess.
As one alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price
no higher than the forward contract price. As another
alternative, the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to
a forward purchase contract at a price as high or higher
than the forward contact price.
The precise matching of the amounts under forward
contracts and the value of the securities involved
generally will not be possible because the future value of
securities denominated in foreign currencies will change as
a consequence of market movements between the date the
forward contract is entered into and the date it is sold.
In some cases the Manager might decide to sell the security
and deliver foreign currency to settle the original
purchase obligation. If the market value of the security is
less than the amount of foreign currency the Fund is
obligated to deliver, the Fund might have to purchase
additional foreign currency on the "spot" (that is, cash)
market to settle the security trade. If the market value of
the security instead exceeds the amount of foreign currency the Fund is
obligated to deliver to settle the trade, the Fund might
have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will
be additional transaction costs on the spot market in those
cases.
The projection of short-term currency market
movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately
predicted, causing the Fund to sustain losses on these
contracts and to pay additional transactions costs. The use
of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency
prices to a greater degree than if the Fund had not entered
into such contracts.
At or before the maturity of a forward contract
requiring the Fund to sell a currency, the Fund might sell
a portfolio security and use the sale proceeds to make
delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation
to deliver the currency by purchasing a second contract.
Under that contract the Fund will obtain, on the same
maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might close out a
forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain
or loss as a result of entering into such an offsetting
forward contract under either circumstance. The gain or
loss will depend on the extent to which the exchange rate
or rates between the currencies involved moved between the
execution dates of the first contract and offsetting
contract.
The costs to the Fund of engaging in forward
contracts varies with factors such as the currencies
involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no brokerage
fees or commissions are involved. Because these contracts
are not traded on an exchange, the Fund must evaluate the
credit and performance risk of the counterparty under each
forward contract.
Although the Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. The
Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do
not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices
at which they buy and sell various currencies. Thus, a
dealer might offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange if
the Fund desires to resell that currency to the dealer.
o Regulatory Aspects of Hedging Instruments. When using
futures and options on futures, the Fund is required to
operate within certain guidelines and restrictions with
respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In
particular, the Fund is exempted from registration with the
CFTC as a "commodity pool operator" if the Fund complies
with the requirements of Rule 4.5 adopted by the CFTC. The
Rule does not limit the percentage of the Fund's assets
that may be used for futures margin and related options
premiums for a bona fide hedging position. However, under
the Rule, the Fund must limit its aggregate initial futures
margin and related options premiums to not more than 5% of
the Fund's net assets for hedging strategies that are not
considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short
futures and options on futures solely for bona fide hedging
purposes within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to
limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be
written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether
the options were written or purchased on the same or
different exchanges or are held in one or more accounts or
through one or more different exchanges or through one or
more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by
other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an
affiliate of the Fund's advisor). The exchanges also impose
position limits on Futures transactions. An exchange may
order the liquidation of positions found to be in violation
of those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund
purchases a future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal
to the market value of the securities underlying the
future, less the margin deposit applicable to it.
o Tax Aspects of Certain Hedging Instruments. Certain
foreign currency exchange contracts in which the Fund may
invest are treated as "Section 1256 contracts" under the
Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60%
long-term and 40% short-term capital gains or losses under
the Code. However, foreign currency gains or losses arising
from Section 1256 contracts that are forward contracts
generally are treated as ordinary income or loss. In
addition, Section 1256 contracts held by the Fund at the
end of each taxable year are "marked-to-market," and
unrealized gains or losses are treated as though they were
realized. These contracts also may be marked-to-market for
purposes of determining the excise tax applicable to
investment company distributions and for other purposes
under rules prescribed pursuant to the Internal Revenue
Code. An election can be made by the Fund to exempt those
transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may
result in "straddles" for federal income tax purposes. The
straddle rules may affect the character and timing of gains
(or losses) recognized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent
that the loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, the following gains
or losses are treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in
exchange rates that occur between the time the
Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated
in a foreign currency and the time the Fund
actually collects such receivables or pays such
liabilities, and
(2) gains or losses attributable to fluctuations in
the value of a foreign currency between the date
of acquisition of a debt security denominated in
a foreign currency or foreign currency forward
contracts and the date of disposition.
Currency gains and losses are offset against market
gains and losses on each trade before determining a net
"Section 988" gain or loss under the Internal Revenue Code
for that trade, which may increase or decrease the amount
of the Fund's investment company income available for
distribution to its shareholders.
|X| Investment in Other Investment Companies. As a
non-fundamental policy, the Fund generally cannot invest in
securities of other investment companies, except to the
extent permitted under the Investment Company Act, the
rules or regulations thereunder or any exemption therefrom,
as such statute, rules or regulations may be amended or
interpreted from time to time. To the extent that the Fund
can invest in shares of other investment companies, those
investments can include open-end funds, closed-end funds
and unit investment trusts, subject to the limits set forth
in the Investment Company Act that apply to those types of
investments. For example, the Fund can invest in
exchange-traded funds, which are typically open-end funds
or unit investment trusts, listed on a stock exchange. The
Fund might do so as a way of gaining exposure to the
segments of the equity or fixed-income markets represented
by the exchange-traded fund's portfolio at times when the
Fund may not be able to buy those portfolio securities
directly. An investment in another investment company may
involve the payment of substantial premiums above the value
of such investment company's portfolio securities and is
subject to limitations under the Investment Company Act.
The Fund does not intend to invest in other investment
companies unless the Manager believes that the potential
benefits of the investment justify the payment of any
premiums or sales charges. As a shareholder is an
investment company, the Fund would be subject to its
ratable share of that investment company's expenses,
including its advisory and administration fees. At the
same time, the Fund would bear its own management fees and
other expenses. The Fund does not anticipate investing a
substantial amount of its net assets in shares of other
investment companies.
|X| Temporary Defensive Investments. When market,
economic or political conditions are unstable, or the
Manager believes it is otherwise appropriate to reduce
holdings in stocks, the Fund can invest in a variety of
debt securities for defensive purposes. The Fund can also
purchase these securities for liquidity purposes to meet
cash needs due to the redemption of Fund shares, or to hold
while waiting to reinvest cash received from the sale of
other portfolio securities. The Fund can buy:
o high-quality (rated in the top two rating categories
of nationally-recognized rating organizations or
deemed by the Manager to be of comparable
quality), short-term money market instruments,
including those issued by the U. S. Treasury or
other government agencies,
o commercial paper (short-term, unsecured, promissory
notes of domestic or foreign companies),
o short-term debt obligations of corporate issuers,
o certificates of deposit and bankers' acceptances of
domestic and foreign banks and savings and loan
associations, and
o repurchase agreements.
These short-term debt securities would be selected
for defensive or cash management purposes because they can
normally be disposed of quickly, are not generally subject
to significant fluctuations in principal value and their
value will be less subject to interest rate risk than
longer-term debt securities. If securities of foreign
companies are selected, the issuer must have assets of at
least (U.S.) $1 billion.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental
policies are those policies that the Fund has adopted to
govern its investments that can be changed only by the vote
of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, a "majority"
vote is defined as the vote of the holders of the lesser of:
o 67% or more of the shares present or represented by
proxy at a shareholder meeting, if the holders of
more than 50% of the outstanding shares are
present or represented by proxy, or
o more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental
policy. Other policies described in the Prospectus or this
Statement of Additional Information are "fundamental" only
if they are identified as such. The Fund's Board of
Trustees can change non-fundamental policies without
shareholder approval. However, significant changes to
investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's most significant
investment policies are described in the Prospectus.
|X| Does the Fund Have Additional Fundamental
Policies? The following investment restrictions are
fundamental policies of the Fund.
o The Fund cannot buy securities issued or guaranteed
by any one issuer if more than 5% of its total
assets would be invested in securities of that
issuer or if it would then
own more than 10% of that issuer's voting
securities. That restriction applies to 75% of the
Fund's total assets. The limit does not apply to
securities issued by the U.S. government or any of
its agencies or instrumentalities.
o The Fund cannot deviate from the percentage
restrictions that apply to its investments in
small, unseasoned companies, borrowing for
leverage and loans of portfolio securities.
o The Fund cannot make loans, except to the extent
permitted under the Investment Company Act, the
rules or regulations thereunder or any exemption
therefrom that is applicable to the Fund, as such
statute, rules or regulations may be amended or
interpreted from time to time.
o The Fund may not borrow money, except as permitted by
the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom
that is applicable to the Fund, as such statute,
rules or regulations may be amended or interpreted
from time to time.
o The Fund cannot invest 25% or more of its total
assets in any one industry. That limit does not
apply to securities issued or guaranteed by the
U.S. government or its agencies and
instrumentalities or securities issued by
investment companies.
o The Fund cannot invest in real estate. However, the
Fund can purchase readily-marketable securities of
companies holding real estate or interests in real
estate.
o The Fund cannot invest in commodities or commodity
contracts other than the hedging instruments
permitted by any of its other fundamental
policies, whether or not such hedging instrument
is considered to be a commodity or commodity
contract.
o The Fund cannot underwrite securities of other
companies. A permitted exception is in case it is
deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in
its own portfolio.
The Fund currently has an operating policy (which is
not a fundamental policy but will not be changed without
the approval of a shareholder vote) that prohibits the Fund
from issuing senior securities. However, that policy does
not prohibit certain investment activities that are
permitted by the Fund's other policies, including, for
example, borrowing money, and entering into contracts to
buy or sell derivatives, hedging instruments, options,
futures and the related margin, collateral or escrow
arrangements.
Unless the Prospectus or this Statement of Additional
Information states that a percentage restriction applies on
an ongoing basis, it applies only at the time the Fund
makes an investment. The Fund need not sell securities to
meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.
For purposes of the Fund's policy not to concentrate
its investments as described above, the Fund has adopted
the industry classifications set forth in Appendix A to
this Statement of Additional Information. This is not a
fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end,
diversified management investment company with an unlimited
number of authorized shares of beneficial interest. The
Fund was organized as a Maryland corporation in 1972 and
reorganized as a Massachusetts business trust in July 1988.
The Fund is governed by a Board of Trustees, which is
responsible for protecting the interests of shareholders
under Massachusetts law. The Trustees meet periodically
throughout the year to oversee the Fund's activities,
review its performance, and review the actions of the
Manager. Although the Fund will not normally hold annual
meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Fund's
Declaration of Trust.
|X| Classes of Shares. The Trustees are authorized,
without shareholder approval, to create new series and
classes of shares. The Trustees may reclassify unissued
shares of the Fund into additional series or classes of
shares. The Trustees also may divide or combine the shares
of a class into a greater or lesser number of shares
without changing the proportionate beneficial interest of a
shareholder in the Fund. Shares do not have cumulative
voting rights or preemptive or subscription rights. Shares
may be voted in person or by proxy at shareholder meetings.
The Fund currently has five classes of shares: Class
A, Class B, Class C, Class N and Class Y. All classes
invest in the same investment portfolio. Only retirement
plans may purchase Class N shares. Only certain
institutional investors may elect to purchase Class Y
shares. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the
different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which
interests of one class are different from interests
of another class, and
o votes as a class on matters that affect that class
alone.
Shares are freely transferable, and each share of
each class has one vote at shareholder meetings, with
fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the
Fund represents an interest in the Fund proportionately
equal to the interest of each other share of the same
class.
|X| Meetings of Shareholders. As a Massachusetts
business trust, the Fund is not required to hold, and does
not plan to hold, regular annual meetings of shareholders.
The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will
also do so when a shareholder meeting is called by the
Trustees or upon proper request of the shareholders.
Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of
the Fund, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of
its outstanding shares. If the Trustees receive a request
from at least 10 shareholders stating that they wish to
communicate with other shareholders to request a meeting to
remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail
their communication to all other shareholders at the
applicants' expense. The shareholders making the request
must have been shareholders for at least six months and
must hold shares of the Fund valued at $25,000 or more or
constituting at least 1% of the Fund's outstanding shares,
whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's
Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's
obligations. It also provides for indemnification and
reimbursement of expenses out of the Fund's property for
any shareholder held personally liable for its
obligations. The Declaration of Trust also states that
upon request, the Fund shall assume the defense of any
claim made against a shareholder for any act or obligation
of the Fund and shall satisfy any judgment on that claim.
Massachusetts law
permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund
shareholder will incur financial loss from being held
liable as a "partner" of the Fund is limited to the
relatively remote circumstances in which the Fund would be
unable to meet its obligations.
The Fund's contractual arrangements state that any
person doing business with the Fund (and each shareholder
of the Fund) agrees under its Declaration of Trust to look
solely to the assets of the Fund for satisfaction of any
claim or demand that may arise out of any dealings with the
Fund. Additionally, the Trustees shall have no personal
liability to any such person, to the extent permitted by
law.
Board of Trustees and Oversight Committees. The Fund is
governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under
Massachusetts law. The Trustees meet periodically
throughout the year to oversee the Fund's activities,
review its performance, and review the actions of the
Manager. Although the Fund will not normally hold annual
meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has an Audit Committee, a Study
Committee and a Proxy Committee. The members of the Audit
Committee are Kenneth Randall (Chairman), Benjamin Lipstein
and Edward Regan. The Audit Committee held five meetings
during the Fund's fiscal year ended August 31, 2002. The
Audit Committee provides the Board with recommendations
regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of
audits and the audit fees charged, reviews reports from the
Fund's independent auditor concerning the Fund's internal
accounting procedures, and controls and reviews reports of
the Manager's internal auditor, among other duties as set
forth in the Committee's charter.
The members of the Study Committee are Benjamin
Lipstein (Chairman), Robert Galli and Elizabeth Moynihan.
The Study Committee held eight meetings during the Fund's
fiscal year ended August 31, 2002. The Study Committee
evaluates and reports to the Board on the Fund's
contractual arrangements, including the Investment Advisory
and Distribution Agreements, transfer and shareholder
service agreements and custodian agreements as well as the
policies and procedures adopted by the Fund to comply with
the Investment Company Act and other applicable law, among
other duties as set forth in the Committee's charter.
The members of the Proxy Committee are Edward Regan
(Chairman), Russell Reynolds and Clayton Yeutter. The
Proxy Committee held one meeting during the Fund's fiscal
year ended August 31, 2002. The Proxy Committee provides
the Board with recommendations for proxy voting and
monitors proxy voting by the Fund.
Trustees and Officers of the Fund. Except for Mr. Murphy,
each of the Trustees is an independent trustee of the Fund
("Independent Trustee"). Mr. Murphy is an "Interested
Trustee," because he is affiliated with the Manager by
virtue of his positions as an officer and director of the
Manager, and as a shareholder of its parent company.
The Fund's Trustees and officers and their positions
held with the Fund and length of service in such
position(s) and their principal occupations and business
affiliations during the past five years are listed in the
chart below. The information for the Trustees also includes
the dollar range of shares of the Fund as well as the
aggregate dollar range of shares beneficially owned in any
of the Oppenheimer funds overseen by the Trustees. All of
the Trustees are also trustees or directors of the
following publicly-offered Oppenheimer funds (referred to
as "Board I Funds"):
Oppenheimer California Municipal Fund Oppenheimer International Growth Fund
Oppenheimer International Small Company
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Preservation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Discovery Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Emerging Growth Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Technologies Fund Oppenheimer Municipal Bond Fund
Oppenheimer Enterprise Fund Oppenheimer New York Municipal Fund
Oppenheimer Europe Fund Oppenheimer Series Fund, Inc.
Oppenheimer Global Fund Oppenheimer Trinity Core Fund
Oppenheimer Global Growth amp;amp; Income Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Gold amp;amp; Special Minerals
Fund Oppenheimer Trinity Value Fund
Oppenheimer Growth Fund Oppenheimer U.S. Government Trust
In addition to being a trustee or director of the
Board I Funds, Mr. Galli is also a director or trustee of
10 other portfolios in the OppenheimerFunds complex.
Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund,
the Manager and its affiliates, and retirement plans
established by them for their employees are permitted to
purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge.
The sales charges on Class A shares is waived for that
group because of the economics of sales efforts realized by
the Distributor.
Messrs. Bartlett, Murphy, Molleur, Masterson,
Vottiero, Wixted and Zack, and Mses. Bechtolt, Feld and
Ives respectively hold the same offices with one or more of
the other Board I Funds as with the Fund. As of September
26, 2002, the Trustees and officers of the Fund, as a group
owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not
reflect ownership of shares of the Fund held of record by
an employee benefit plan for employees of the Manager,
other than the shares beneficially owned under the plan by
the officers of the Fund listed above. In addition, each
Independent Trustee, and his or her family members, do not
own securities of either the Manager or Distributor of the
Board I Funds or any person directly or indirectly
controlling, controlled by or under common control with the
Manager or Distributor.
|X| Affiliated Transactions and Material Business
Relationships. Mr. Reynolds has reported he has a
controlling interest in The Directorship Group, Inc. ("The
Directorship Search Group"), a director recruiting firm
that provided consulting services to Massachusetts Mutual
Life Insurance Company (which controls the Manager) for
fees aggregating $247,500 from January 1, 2001 through
December 31, 2002. Mr. Reynolds estimates that The
Directorship Search Group will not provide consulting services to
Massachusetts Mutual Life Insurance Company during the
calendar year 2003.
The Independent Trustees have unanimously (except for
Mr. Reynolds, who abstained) determined that the consulting
arrangements between The Directorship Search Group and
Massachusetts Mutual Life Insurance Company were not
material business or professional relationships that would
compromise Mr. Reynolds' status as an Independent Trustee.
Nonetheless, to assure certainty as to determinations of
the Board and the Independent Trustees as to matters upon
which the Investment Company Act or the rules thereunder
require approval by a majority of Independent Trustees, Mr.
Reynolds will not be counted for purposes of determining
whether a quorum of Independent Trustees was present or
whether a majority of Independent Trustees approved the
matter.
The address of each Trustee in the chart below is
6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee
serves for an indefinite term, until his or her
resignation, retirement, death or removal.
- --------------------------------------------------------------------------------
Independent Trustees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name; Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range of
Shares
Beneficially
Owned in
Years; Range of any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund; Trustee; BeneficiallFunds
Length of Service; Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As of December 31,
2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli, A trustee or director of other $0 Over
Trustee since 1993 Oppenheimer funds. Formerly Vice $100,000
Age: 69 Chairman (October 1995-December 1997) of
the Manager. Oversees 41 portfolios in
the OppenheimerFunds complex.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Phillip A. The Director (since 1991) of the $0 Over
Griffiths, Trustee Institute for Advanced Study, Princeton, $100,000
since 1999 N.J., director (since 2001) of GSI
Age: 64 Lumonics and a member of the National
Academy of Sciences (since 1979);
formerly (in descending chronological
order) a director of Bankers Trust
Corporation, Provost and Professor of
Mathematics at Duke University, a
director of Research Triangle Institute,
Raleigh, N.C., and a Professor of
Mathematics at Harvard University.
Oversees 31 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benjamin Lipstein, Professor Emeritus of Marketing, Stern $10,001-$50Over
Trustee since 1974 Graduate School of Business $100,000
Age: 79 Administration, New York University.
Oversees 31 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Joel W. Motley, Director (January 2002-present), $01 None1
Trustee since 2002 Columbia Equity Financial Corp.
Age: 50 (privately-held financial adviser);
Managing Director (January
2002-present), Carmona Motley, Inc.
(privately-held financial adviser);
Formerly he held the following
positions: Managing Director (January
1998-December 2001), Carmona Motley
Hoffman Inc. (privately-held financial
adviser); Managing Director (January
1992-December 1997), Carmona Motley amp;amp;
Co. (privately-held financial adviser).
Oversees 31 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Elizabeth B. Author and architectural historian; a $10,001-50,
Moynihan, trustee of the Freer Gallery of Art and $50,001-$100,000
Trustee since 1992 Arthur M. Sackler Gallery (Smithsonian
Age: 73 Institute), Trustees Council of the
National Building Museum; a member of
the Trustees Council, Preservation
League of New York State. Oversees 31
portfolios in the OppenheimerFunds
complex.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Kenneth A. A director of Dominion Resources, Inc. $1 - Over
Randall, Trustee (electric utility holding company) and $10,000 $100,000
since 1980 Prime Retail, Inc. (real estate
Age: 75 investment trust); formerly a director
of Dominion Energy, Inc. (electric power
and oil amp;amp; gas producer), President and
Chief Executive Officer of The
Conference Board, Inc. (international
economic and business research) and a
director of Lumbermens Mutual Casualty
Company, American Motorists Insurance
Company and American Manufacturers
Mutual Insurance Company. Oversees 31
portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Edward V. Regan, President, Baruch College, CUNY; a $1 - $50,001-$100,000
Trustee since 1993 director of RBAsset (real estate $10,000
Age: 72 manager); a director of OffitBank;
formerly Trustee, Financial Accounting
Foundation (FASB and GASB), Senior
Fellow of Jerome Levy Economics
Institute, Bard College, Chairman of
Municipal Assistance Corporation for the
City of New York, New York State
Comptroller and Trustee of New York
State and Local Retirement Fund.
Oversees 31 investment companies in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Russell S. Chairman (since 1993) of The $1 - $10,001-$50,000
Reynolds, Jr., Directorship Search Group, Inc. $10,000
Trustee since 1989 (corporate governance consulting and
Age: 70 executive recruiting); a life trustee of
International House (non-profit
educational organization), and a trustee
(since 1996) of the Greenwich Historical
Society. Oversees 31 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Donald W. Spiro, Chairman Emeritus (since January 1991) $0 Over
Vice Chairman of of the Manager. Formerly a director $100,000
the Board of (January 1969-August 1999) of the
Trustees, Manager. Oversees 31 portfolios in the
Trustee since 1985 OppenheimerFunds complex.
Age: 76
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Clayton K. Of Counsel (since 1993), Hogan & Hartson $50,001-$10$50,001-$100,000
Yeutter, Chairman (a law firm). Other directorships:
of the Board of Caterpillar, Inc. (since 1993) and
Trustees, Weyerhaeuser Co. (since 1999). Oversees
Trustee since 1991 31 portfolios in the OppenheimerFunds
Age: 71 complex.
- --------------------------------------------------------------------------------
The address of Mr. Murphy in the chart below is 498
Seventh Avenue, New York, NY 10018. Mr. Murphy serves for
an indefinite term, until his resignation, retirement,
death or removal.
- --------------------------------------------------------------------------------
Interested Trustee and Officer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name; Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range of
Shares
Years; Range of Beneficially
Position(s) Held Other Trusteeships/Directorships Held by Shares Owned in
with Fund; Trustee; Beneficiallany of the
Length of Service; Number of Portfolios in Fund Complex Owned in Oppenheimer
Age Currently Overseen by Trustee the Fund Funds
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
As of December 31,
2001
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and $0 Over
President and director (since June 2001) and President $100,000
Trustee, (since September 2000) of the Manager;
Trustee since 2001 President and a director or trustee of
Age: 53 other Oppenheimer funds; President and a
director (since July 2001) of
Oppenheimer Acquisition Corp. (the
Manager's parent holding company) and of
Oppenheimer Partnership Holdings, Inc.
(a holding company subsidiary of the
Manager); a director (since November
2001) of OppenheimerFunds Distributor,
Inc. (a subsidiary of the Manager);
Chairman and a director (since July
2001) of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc.
(transfer agent subsidiaries of the
Manager); President and a director
(since July 2001) of OppenheimerFunds
Legacy Program (a charitable trust
program established by the Manager); a
director of the investment advisory
subsidiaries of the Manager: OFI
Institutional Asset Management, Inc. and
Centennial Asset Management Corporation
(since November 2001), HarbourView Asset
Management Corporation and OFI Private
Investments, Inc. (since July 2001);
President (since November 1, 2001) and a
director (since July 2001) of
Oppenheimer Real Asset Management, Inc.;
a director (since November 2001) of
Trinity Investment Management Corp. and
Tremont Advisers, Inc. (Investment
advisory affiliates of the Manager);
Executive Vice President (since February
1997) of Massachusetts Mutual Life
Insurance Company (the Manager's parent
company); a director (since June 1995)
of DBL Acquisition Corporation;
formerly, Chief Operating Officer
(September 2000-June 2001) of the
Manager; President and trustee (November
1999-November 2001) of MML Series
Investment Fund and MassMutual
Institutional Funds (open-end investment
companies); a director (September
1999-August 2000) of C.M. Life Insurance
Company; President, Chief Executive
Officer and director (September
1999-August 2000) of MML Bay State Life
Insurance Company; a director (June
1989-June 1998) of Emerald Isle Bancorp
and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle
Bancorp). Oversees 69 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------
The address of the Officers in the chart below is as
follows: for Messrs. Bartlett, Molleur and Zack and Ms.
Feld, 498 Seventh Avenue, New York, NY 10018, for Messrs.
Masterson, Vottiero and Wixted and Mses. Bechtolt and Ives,
6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer
serves for an annual term or until his or her earlier
resignation, death or removal.
- --------------------------------------------------------------------------------
Officers of the Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name; Principal Occupation(s) During Past 5 Years
Position(s) Held with Fund;
Length of Service;
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Bruce Bartlett, Senior Vice President (since January 1999) of the
Vice President and Manager. Formerly, Vice President of the Manager
Portfolio Manager (April 1995-December 1998). An officer of 6 portfolios
since 1998 in the OppenheimerFunds complex.
Age: 52
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999)
Treasurer, Principal of the Manager; Treasurer (since March 1999) of
Financial and Accounting HarbourView Asset Management Corporation, Shareholder
Officer Services, Inc., Oppenheimer Real Asset Management
since 1999 Corporation, Shareholder Financial Services, Inc.,
Age: 43 Oppenheimer Partnership Holdings, Inc., OFI Private
Investments, Inc. (since March 2000), OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds
plc (since May 2000) and OFI Institutional Asset
Management, Inc. (since November 2000) (offshore fund
management subsidiaries of the Manager); Treasurer and
Chief Financial Officer (since May 2000) of
Oppenheimer Trust Company (a trust company subsidiary
of the Manager); Assistant Treasurer (since March
1999) of Oppenheimer Acquisition Corp. and
OppenheimerFunds Legacy Program (since April 2000);
formerly Principal and Chief Operating Officer (March
1995-March 1999), Bankers Trust Company-Mutual Fund
Services Division. An officer of 85 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since
Assistant Treasurer March 2002; formerly Vice President/Corporate
since 2002 Accounting of the Manager (July 1999-March 2002) prior
Age: 39 to which he was Chief Financial Officer at Sovlink
Corporation (April 1996-June 1999). An officer of 82
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Connie Bechtolt, Assistant Vice President of the Manager (since
Assistant Treasurer September 1998); formerly Manager/Fund Accounting
since 2002 (September 1994-September 1998) of the Manager. An
Age: 39 officer of 82 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Zack, Senior Vice President (since May 1985) and General
Secretary Counsel (since February 2002) of the Manager; General
since 2001 Counsel and a director (since November 2001) of
Age: 54 OppenheimerFunds Distributor, Inc.; Senior Vice
President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Vice
President and a director (since November 2000) of
Oppenheimer Partnership Holdings, Inc.; Senior Vice
President, General Counsel and a director (since
November 2001) of Shareholder Services, Inc.,
Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.; General Counsel
(since November 2001) of Centennial Asset Management
Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant
Secretary and a director (since November 2001) of
OppenheimerFunds International Ltd.; Vice President
(since November 2001) of OppenheimerFunds Legacy
Program; Secretary (since November 2001) of
Oppenheimer Acquisition Corp.; formerly Acting General
Counsel (November 2001-February 2002) and Associate
General Counsel (May 1981-October 2001) of the
Manager; Assistant Secretary of Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001);
OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (October 1997-November 2001). An
officer of 85 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip T. Masterson, Vice President and Assistant Counsel of the Manager
Assistant Secretary (since July 1998); formerly, an associate with Davis,
since 2002 Graham, amp;amp; Stubbs LLP (January 1997-June 1998). An
Age: 38 officer of 82 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Denis R. Molleur, Vice President and Senior Counsel of the Manager
Assistant Secretary (since July 1999); formerly a Vice President and
since 2001 Associate Counsel of the Manager (September 1995-July
Age: 45 1999). An officer of 82 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of
Assistant Secretary the Manager; Vice President (since June 1990) of
since 2001 OppenheimerFunds Distributor, Inc.; Director, Vice
Age: 44 President and Assistant Secretary (since June 1999) of
Centennial Asset Management Corporation; Vice
President (since 1997) of Oppenheimer Real Asset
Management, Inc.; formerly Vice President and
Associate Counsel of the Manager (June 1990-July
1999). An officer of 85 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998)
Assistant Secretary of the Manager; Vice President (since 1999) of
since 2001 OppenheimerFunds Distributor, Inc.; Vice President and
Age: 36 Assistant Secretary (since 1999) of Shareholder
Services, Inc.; Assistant Secretary (since December
2001) of OppenheimerFunds Legacy Program and
Shareholder Financial Services, Inc.; formerly
Assistant Vice President and Assistant Counsel of the
Manager (August 1997-June 1998); Assistant Counsel of
the Manager (August 1994-August 1997). An officer of
85 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
|X| Remuneration of Trustees. The officers of the
Fund and one of the Trustees of the Fund (Mr. Murphy) who
are affiliated with the Manager receive no salary or fee
from the Fund. The remaining Trustees of the Fund received
the compensation shown below from the Fund with respect to
the Fund's fiscal year ended August 31, 2002. The
compensation from all of the Board I Funds (including the
Fund) represents compensation received as a director,
trustee or member of a committee of the Board during the
calendar year 2001.
- ----------------------------------------------------------------------------------
Trustee Name and For Fiscal Year Ended For Calendar Year Ended 12/31/01
Other Fund
Position(s)
(as applicable) 08/31/02
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Aggregate Retirement Estimated Total
Compensation
Annual From All
Retirement Oppenheimer
Benefits Benefits Paid Funds For Which
Accrued as at Retirement Individual
Part of from all Board Serves As
Compensation Fund I Funds Trustee/Director
From Fund1 Expenses (33 Funds) 2 (33 Funds)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Leon Levy $11,426 $2,721 $137,560 $173,700
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Robert G. Galli $6,957 $8,059 $32,766 2 $202,8863
Study Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Phillip Griffiths $3,9144 $2,128 $6,803 $54,889
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Benjamin Lipstein $9,877 None $118,911 $150,152
Study Committee
Chairman, Audit
Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Joel W. Motley6 $0 $0 $0 $0
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Elizabeth B. Moynihan $6,957 $10,406 $52,348 $105,760
Study Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Kenneth A. Randall $6,381 $6,332 $76,827 $97,012
Audit Committee
Chairman
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Edward V. Regan $6,312 $11,027 $42,748 $95,960
Proxy Committee
Chairman, Audit
Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Russell S. Reynolds, $4,722 $6,823 $46,197 $71,792
Jr.
Proxy Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Donald Spiro $4,757 $2,560 $3,625 $64,080
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Clayton K. Yeutter7 $4,7225 $5,207 $31,982 $71,792
Proxy Committee
Member
- ----------------------------------------------------------------------------------
1. Aggregate compensation from the Fund includes fees
and deferred compensation, if any.
2. Estimated annual retirement benefits paid at
retirement is based on a straight life payment plan
election. The amount for Mr. Galli includes $14,818 for
serving as a trustee or director of 10 Oppenheimer funds
that are not Board I Funds.
3. Includes $97,126 for Mr. Galli for serving as trustee
or director of 10 Oppenheimer funds that are not Board I
Funds.
4. Aggregate total compensation from the Fund includes
$3,914 deferred under Deferred Compensation Plan described
below.
5. Aggregate compensation from the Fund includes $1,181
deferred under Deferred Compensation Plan described below.
6. Elected to the Board on October 10, 2002 and
therefore did not receive any compensation.
7. Effective January 1, 2003, Clayton Yeutter became
Chairman of the Board of Trustees/Directors of the Board
I Funds upon the retirement of Leon Levy.
|X| Retirement Plan for Trustees. The Fund has
adopted a retirement plan that provides for payments to
retired Trustees. Payments are up to 80% of the average
compensation paid during a Trustee's five years of service
in which the highest compensation was received. A Trustee
must serve as trustee for any of the Board I Oppenheimer
funds for at least 15 years to be eligible for the maximum
payment. Each Trustee's retirement benefits will depend on
the amount of the Trustee's future compensation and length
of service. Therefore the amount of those benefits cannot
be determined at this time, nor can we estimate the number
of years of credited service that will be used to determine
those benefits.
|X| Deferred Compensation Plan for Trustees. The
Board of Trustees has adopted a Deferred Compensation Plan
for disinterested trustees that enables them to elect to
defer receipt of all or a portion of the annual fees they
are entitled to receive from the Fund. Under the plan, the
compensation deferred by a Trustee is periodically adjusted
as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee.
The amount paid to the Trustee under the plan will be
determined based upon the performance of the selected
funds.
Deferral of Trustees' fees under the plan will not
materially affect the Fund's assets, liabilities or net
income per share. The plan will not obligate the Fund to
retain the services of any Trustee or to pay any particular
level of compensation to any Trustee. Pursuant to an Order
issued by the Securities and Exchange Commission, the Fund
may invest in the funds selected by the Trustee under the
plan without shareholder approval for the limited purpose
of determining the value of the Trustee's deferred fee
account.
|X| Major Shareholders. As of September 26, 2002,
there were no persons who owned of record or were known by
the Fund to own beneficially 5% or more of any class of the
Fund's outstanding Class A, Class B and Class C shares and
the only persons who owned of record or were known by the
Fund to own beneficially 5% or more of the Fund's
outstanding Class N shares and Class Y shares were:
Smith Barney, 7th Floor, 333 West 34th Street, New York, NY
10001-2483, which owned 256,791.895 Class C shares (7.99%
of the outstanding Class C shares).
RPSS TR, Empress International Ltd., 401(k) Plan, 10 Harbor
Park Dr., Port Washington, NY 11050-4648, which owned
6,458.793 Class N shares (6.58% of the outstanding Class N
shares).
RPSS TR IRA, FBO Dennis B. Baskin, P.O. Box 1935, San
Andreas, CA 95249-1935, who owned 5,065.127 Class N shares
(5.16% of the outstanding Class N shares).
Wayne Casteen TR, Murphy Brown Deferred Comp Plan, 2822 W.
NC Highway 24, Warsaw, NC 28398-7952, who owned 8,876.823
Class N shares (9.05% of the outstanding Class N shares).
The Manager. The Manager is wholly-owned by Oppenheimer
Acquisition Corp., a holding company controlled by
Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the
Distributor have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete
with or take advantage of the Fund's portfolio
transactions. Covered persons include persons with
knowledge of the investments and investment intentions of
the Fund and other funds advised by the Manager. The Code
of Ethics does permit personnel subject to the Code to
invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of
restrictions and controls. Compliance with the Code of
Ethics is carefully monitored and enforced by the Manager.
The Code of Ethics is an exhibit to the Fund's
registration statement filed with the Securities and
Exchange Commission and can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. You can
obtain information about the hours of operation of the
Public Reference Room by calling the SEC at
1.202.942.8090. The Code of Ethics can also be viewed as
part of the Fund's registration statement on the SEC's
EDGAR database at the SEC's Internet website at
www.sec.gov. Copies may be obtained, after paying a
duplicating fee, by electronic request at the following
E-mail address: publicinfo@sec.gov, or by writing to the
SEC's Public Reference Section, Washington, D.C.
20549-0102.
|X| The Investment Advisory Agreement. The Manager
provides investment advisory and management services to the
Fund under an investment advisory agreement between the
Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business.
The portfolio manager of the Fund is employed by the
Manager and is the person who is principally responsible
for the day-to-day management of the Fund's portfolio.
Other members of the Manager's Equity Portfolio Team
provide the portfolio manager with counsel and support in
managing the Fund's portfolio.
The agreement requires the Manager, at its expense,
to provide the Fund with adequate office space, facilities
and equipment. It also requires the Manager to provide and
supervise the activities of all administrative and clerical
personnel required to provide effective administration for
the Fund. Those responsibilities include the compilation
and maintenance of records with respect to its operations,
the preparation and filing of specified reports, and
composition of proxy materials and registration statements
for continuous public sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the
Manager under the advisory agreement. The advisory
agreement lists examples of expenses paid by the Fund. The
major categories relate to interest, taxes, brokerage
commissions, fees to Independent Trustees, legal and audit
expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The
management fees paid by the Fund to the Manager are
calculated at the rates described in the Prospectus, which
are applied to the assets of the Fund as a whole. The fees
are allocated to each class of shares based upon the
relative proportion of the Fund's net assets represented by
that class. The management fees paid by the Fund to the
Manager during its last three fiscal years were:
------------------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2000 $20,119,482
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2001 $19,009,822
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2002 $12,880,111
------------------------------------------------------------------------------
The investment advisory agreement states that in the
absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties or reckless disregard of
its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund
sustains for any investment adoption of any investment
policy, or the purchase, sale or retention of any security.
The agreement permits the Manager to act as
investment advisor for any other person, firm or
corporation and to use the name "Oppenheimer" in connection
with other investment companies for which it may act as
investment advisor or general distributor. If the Manager
shall no longer act as investment advisor to the Fund, the
Manager may withdraw the right of the Fund to use the name
"Oppenheimer" as part of its name.
|X| Annual Approval of Investment Advisory
Agreement. Each year, the Board of Trustees, including a
majority of the Independent Trustees, is required to
approve the renewal of the investment advisory agreement.
The Investment Company Act requires that the Board request
and evaluate and the Manager provide such information as
may be reasonably necessary to evaluate the terms of the
investment advisory agreement. The Board employs an
independent consultant to prepare a report that provides
such information as the Board requests for this purpose.
The Board also receives information about the 12b-1
distribution fees the Fund pays. These distribution fees
are reviewed and approved at a different time of the year.
The Board reviewed the foregoing information in arriving at
its decision to renew the investment advisory agreement.
Among other factors, the Board considered:
o The nature, cost, and quality of the services
provided to the Fund and its shareholders;
o The profitability of the Fund to the Manager;
o The investment performance of the Fund in comparison
to regular market indices
o Economies of scale that may be available to the Fund
from the Manager;
o Fees paid by other mutual funds for similar services;
o The value and quality of any other benefits or
services received by the Fund from its
relationship with the Manager, and
o The direct and indirect benefits the Manager received
from its relationship with the Fund. These
included services provided by the Distributor and
the Transfer Agent, and brokerage and soft dollar
arrangements permissible under Section 28(e) of
the Securities Exchange Act.
The Board considered that the Manager must be able to
pay and retain high quality personnel at competitive rates
to provide services to the Fund. The Board also considered
that maintaining the financial viability of the Manager is
important so that the Manager will be able to continue to
provide quality services to the Fund and its shareholders
in adverse times. The Board also considered the investment
performance of other mutual funds advised by the Manager.
The Board is aware that there are alternatives to the use
of the Manager.
These matters were also considered by the Independent
Trustees, meeting separately from the full Board with
experienced Counsel to the Fund who assisted the Board in
its deliberations. The Fund's Counsel is independent of
the Manager within the meaning and intent of the SEC Rules
regarding the independence of counsel.
After careful deliberation the Board of Trustees
concluded that it was in the best interests of shareholders
to continue the investment advisory agreement for another
year. In arriving at a decision, the Board did not single
out any one factor or group of factors as being more
important than other factors, but considered all factors
together. The Board judged the terms and conditions of the
investment advisory agreement, including the investment
advisory fee, in light of all of the surrounding
circumstances.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement.
One of the duties of the Manager under the investment
advisory agreement is to arrange the portfolio transactions
for the Fund. The advisory agreement contains provisions
relating to the employment of broker-dealers to effect the
Fund's portfolio transactions. The Manager is authorized by
the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the
Investment Company Act. The Manager may employ
broker-dealers that the Manager thinks, in its best
judgment based on all relevant factors, will implement the
policy of the Fund to obtain, at reasonable expense, the
"best execution" of the Fund's portfolio transactions.
"Best execution" means prompt and reliable execution at the
most favorable price obtainable. The Manager need not seek
competitive commission bidding. However, it is expected to
be aware of the current rates of eligible brokers and to
minimize the commissions paid to the extent consistent with
the interests and policies of the Fund as established by
its Board of Trustees.
Under the investment advisory agreement, the Manager
may select brokers (other than affiliates) that provide
brokerage and/or research services for the Fund and/or the
other accounts over which the Manager or its affiliates
have investment discretion. The commissions paid to such
brokers may be higher than another qualified broker would
charge, if the Manager makes a good faith determination
that the commission is fair and reasonable in relation to
the services provided. Subject to those considerations, as
a factor in selecting brokers for the Fund's portfolio
transactions, the Manager may also consider sales of shares
of the Fund and other investment companies for which the
Manager or an affiliate serves as investment advisor.
Brokerage Practices Followed by the Manager. The Manager
allocates brokerage for the Fund subject to the provisions
of the investment advisory agreement and the procedures and
rules described above. Generally, the Manager's portfolio
traders allocate brokerage based upon recommendations from
the Manager's portfolio managers. In certain instances,
portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive
officers supervise the allocation of brokerage.
Transactions in securities other than those for which
an exchange is the primary market are generally done with
principals or market makers. In transactions on foreign
exchanges, the Fund may be required to pay fixed brokerage
commissions and therefore would not have the benefit of
negotiated commissions available in U.S. markets.
Brokerage commissions are paid primarily for transactions
in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage
commissions are paid only if it appears likely that a
better price or execution can be obtained by doing so. In
an option transaction, the Fund ordinarily uses the same
broker for the purchase or sale of the option and any
transaction in the securities to which the option relates.
Other funds advised by the Manager have investment
policies similar to those of the Fund. Those other funds
may purchase or sell the same securities as the Fund at the
same time as the Fund, which could affect the supply and
price of the securities. If two or more funds advised by
the Manager purchase the same security on the same day from
the same dealer, the transactions under those combined
orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each
account.
Most purchases of debt obligations are principal
transactions at net prices. Instead of using a broker for
those transactions, the Fund normally deals directly with
the selling or purchasing principal or market maker unless
the Manager determines that a better price or execution can
be obtained by using the services of a broker. Purchases
of portfolio securities from underwriters include a
commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain
prompt execution of these orders at the most favorable net
price.
The investment advisory agreement permits the Manager
to allocate brokerage for research services. The research
services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and
its affiliates. The investment research received for the
commissions of those other accounts may be useful both to
the Fund and one or more of the Manager's other accounts.
Investment research may be supplied to the Manager by a
third party at the instance of a broker through which
trades are placed.
Investment research services include information and
analysis on particular companies and industries as well as
market or economic trends and portfolio strategy, market
quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a
research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative
functions), then only the percentage or component that
provides assistance to the Manager in the investment
decision-making process may be paid in commission dollars.
The Board of Trustees permits the Manager to use
stated commissions on secondary fixed-income agency trades
to obtain research if the broker represents to the Manager
that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an
agency basis at the stated commission, and (iii) the trade
is not a riskless principal transaction.
The Board of Trustees permits the Manager to use
commissions on fixed-price offerings to obtain research, in
the same manner as is permitted for agency transactions.
The research services provided by brokers broadens
the scope and supplements the research activities of the
Manager. That research provides additional views and
comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities
that are either held in the Fund's portfolio or are being
considered for purchase. The Manager provides information
to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's
representation that the amount of such commissions was
reasonably related to the value or benefit of such
services.
- -------------------------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2000 $1,551,0402
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2001 $3,838,7033
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2002 $2,307,9974
- -------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on
principal transactions on a net trade basis.
2. In the fiscal year ended 8/31/00, the amount of
transactions directed to brokers for research services was
$691,230,606 and the amount of the commissions paid to
broker-dealers for those services was $624,828.
3. In the fiscal year ended 8/31/01, the amount of
transactions directed to brokers for research services was
$1,460,471,538 and the amount of the commissions paid to
broker-dealers for those services was $1,651,878.
4. In the fiscal year ended 8/31/02, the amount of
transactions directed to brokers for research services was
$1,064,536,313 and the amount of the commissions paid to
broker-dealers for those services was $1,430,277.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's
classes of shares. The Distributor bears the expenses
normally attributable to sales, including advertising and
the cost of printing and mailing prospectuses, other than
those furnished to existing shareholders. The Distributor
is not obligated to sell a specific number of shares.
Expenses normally attributable to sales are borne by the
Distributor.
The sales charges and concessions paid to, or
retained by, the Distributor from the sale of shares during
the Fund's three most recent fiscal years, and the
contingent deferred sales charges retained by the
Distributor on the redemption of shares for the most recent
fiscal year are shown in the tables below.
- -------------------------------------------
Fiscal Aggregate Class A
Front-End
Year Front-End Sales Sales Charges
Ended Charges on Retained by
8/31: Class A Shares Distributor1
- -------------------------------------------
- -------------------------------------------
2000 $4,977,997 $1,530,627
- -------------------------------------------
- -------------------------------------------
2001 $5,039,994 $1,431,582
- -------------------------------------------
- -------------------------------------------
2002 $2,350,474 $668,545
- -------------------------------------------
1. Includes amounts retained by a broker-dealer that is an
affiliate or a parent of the Distributor.
- -----------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
8/31: Distributor1 Distributor1 Distributor1 Distributor1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2000 $457,833 $6,360,803 $457,702 N/A
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2001 $993,657 $6,136,274 $470,959 $2,2272
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2002 $204,213 $2,130,360 $174,319 $31,178
- -----------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers
for certain sales of Class A shares and for sales of Class
B and Class C shares from its own resources at the time of
sale.
2. The inception date of Class N shares was March 1, 2001.
- -----------------------------------------------------------------------------
Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent Contingent
Year Deferred Sales Deferred Sales Deferred Sales Deferred Sales
Ended Charges Charges Charges Charges
8/31 Retained by Retained by Retained by Retained by
Distributor Distributor Distributor Distributor
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2002 $21,386 $1,099,479 $22,633 $249
- -----------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a
Service Plan for Class A shares and Distribution and
Service Plans for Class B, Class C and Class N shares under
Rule 12b-1 of the Investment Company Act. Under those
plans the Fund pays the Distributor for all or a portion of
its costs incurred in connection with the distribution
and/or servicing of the shares of the particular class.
Under the plans, the Manager and the Distributor may
make payments to affiliates and in their sole discretion,
from time to time, may use their own resources (at no
direct cost to the Fund) to make payments to brokers,
dealers or other financial institutions for distribution
and administrative services they perform. The Manager may
use its profits from the advisory fee it receives from the
Fund. In their sole discretion, the Distributor and the
Manager may increase or decrease the amount of payments
they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the
plan continues in effect from year to year but only if the
Fund's Board of Trustees and its Independent Trustees
specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting
called for the purpose of voting on continuing the plan. A
plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the Investment
Company Act) of the outstanding shares of that class.
The Board of Trustees and the Independent Trustees
must approve all material amendments to a plan. An
amendment to increase materially the amount of payments to
be made under a plan must be approved by shareholders of
the class affected by the amendment. Because Class B
shares of the Fund automatically convert into Class A
shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed
material amendment to the Class A Plan that would
materially increase payments under the Plan. That approval
must be by a "majority" (as defined in the Investment
Company Act) of the shares of each Class, voting separately
by class.
While the Plans are in effect, the Treasurer of the
Fund shall provide separate written reports on the plans to
the Board of Trustees at least quarterly for its review.
The reports shall detail the amount of all payments made
under a plan, the purpose for which the payments were made
and the identity of each recipient of a payment. The
reports on the Class B Plan and Class C Plan shall also
include the Distributor's distribution costs for that
quarter and in the case of the Class B plan the amount of
those costs for previous fiscal periods that have been
carried forward. Those reports are subject to the review
and approval of the Independent Trustees.
Each Plan states that while it is in effect, the
selection and nomination of those Trustees of the Fund who
are not "interested persons" of the Fund is committed to
the discretion of the Independent Trustees. This does not
prevent the involvement of others in the selection and
nomination process as long as the final decision as to
selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made
to any recipient in any quarter in which the aggregate net
asset value of all Fund shares of that class held by the
recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time
by a majority of the Independent Trustees. The Board of
Trustees has set no minimum amount of assets to qualify for
payments under the plans.
o Class A Service Plan Fees. Under the Class A service
plan, the Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for
personal services and account maintenance services they
provide for their customers who hold Class A shares. The
services include, among others, answering customer
inquiries about the Fund, assisting in establishing and
maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at
the request of the Fund or the Distributor. While the plan
permits the Board to authorize payments to the Distributor
to reimburse itself for services under the plan, the Board
has not yet done so, except in the case of the special
arrangement described below. The Distributor makes
payments to plan recipients quarterly at an annual rate not
to exceed 0.25% of the average annual net assets consisting
of Class A shares, held in the accounts of the recipients
or their customers.
For the fiscal year ended August 31, 2002 payments
under the Class A Plan totaled $3,313,032, of which
$668,545 was retained by the Distributor under the
arrangement described above, and included $156,580 paid to
an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect
to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments
received the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or
allocation of overhead.
o Class B, Class C and Class N Service and Distribution
Plan Fees. Under each plan, service fees and distribution
fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close
of each regular business day during the period. The Class
B, Class C and Class N plans provide for the Distributor to
be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts
paid by the Fund under the plan during the period for which
the fee is paid. The types of services that recipients
provide are similar to the services provided under the
Class A service plan, described above.
The Class B, Class C and Class N plans permit the
Distributor to retain both the asset-based sales charges
and the service fees or to pay recipients the service fee
on a quarterly basis, without payment in advance. However,
the Distributor currently intends to pay the service fee to
recipients in advance for the first year after the shares
are purchased. After the first year shares are
outstanding, the Distributor makes service fee payments
quarterly on those shares. The advance payment is based on
the net asset value of shares sold. Shares purchased by
exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are
redeemed during the first year after their purchase, the
recipient of the service fees on those shares will be
obligated to repay the Distributor a pro rata portion of
the advance payment of the service fee made on those shares.
The Distributor retains the asset-based sales charge
on Class B and Class N shares. The Distributor retains the
asset-based sales charge on Class C shares during the first
year the shares are outstanding. It pays the asset-based sales charge as
an ongoing concession to the recipient on Class C shares
outstanding for a year or more. If a dealer has a special
agreement with the Distributor, the Distributor will pay
the Class B, Class C and/or Class N service fee and the
asset-based sales charge to the dealer quarterly in lieu of
paying the sales concessions and service fee in advance at
the time of purchase.
The asset-based sales charges on Class B, Class C and
Class N shares allow investors to buy shares without a
front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays
the asset-based sales charges to the Distributor for its
services rendered in distributing Class B, Class C and
Class N shares. The payments are made to the Distributor
in recognition that the Distributor:
o pays sales concessions to authorized brokers and
dealers at the time of sale and pays service
fees as described above,
o may finance payment of sales concessions and/or the
advance of the service fee payment to
recipients under the plans, or may provide such
financing from its own resources or from the
resources of an affiliate,
o employs personnel to support distribution of Class B,
Class C and Class N shares,
o bears the costs of sales literature, advertising and
prospectuses (other than those furnished to
current shareholders) and state "blue sky"
registration fees and certain other
distribution expenses, may not be able to
adequately compensate dealers that sell Class
B, Class C and Class N shares without receiving
payment under the plans and therefore may not
be able to offer such Classes for sale absent
the plans,
o receives payments under the plans consistent with the
service fees and asset-based sales charges paid
by other non-proprietary funds that charge
12b-1 fees,
o may use the payments under the plan to include the
Fund in various third-party distribution
programs that may increase sales of Fund shares,
o may experience increased difficulty selling the
Fund's shares if payments under the plan are
discontinued because most competitor funds have
plans that pay dealers for rendering
distribution services as much or more than the
amounts currently being paid by the Fund, and
o may not be able to continue providing, at the same or
at a lesser cost, the same quality distribution
sales efforts and services, or to obtain such
services from brokers and dealers, if the plan
payments were to be discontinued.
When Class B, Class C or Class N shares are sold
without the designation of a broker-dealer, the Distributor
is automatically designated as the broker-dealer of record.
In those cases, the Distributor retains the service fee and
asset-based sales charge paid on Class B, Class C and Class
N shares.
The Distributor's actual expenses in selling Class B,
Class C and Class N shares may be more than the payments it
receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the
plans. If the Class B, Class C or Class N plan is
terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan
was terminated.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 8/31/02
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses Under of Net Assets
Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $4,141,613 $3,277,8611 $11,192,681 3.52%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $931,561 $193,6572 $1,590,674 2.11%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Plan $8,087 $8,000 $56,842 2.53%
- --------------------------------------------------------------------------------
1. Includes $73,823 paid to an affiliate of the
Distributor's parent company.
2. Includes $30,375 paid to an affiliate of the
Distributor's parent company.
All payments under the Class B, Class C and Class N
plans are subject to the limitations imposed by the Conduct
Rules of the National Association of Securities Dealers,
Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a
variety of terms to illustrate its investment performance.
Those terms include "cumulative total return," "average
annual total return," "average annual total return at net
asset value" and "total return at net asset value." An
explanation of how total returns are calculated is set
forth below. The charts below show the Fund's performance
as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the
Fund's Transfer Agent at 1.800.225.5677 or by visiting the
OppenheimerFunds Internet website at
www.oppenheimerfunds.com.
- ------------------------
The Fund's illustrations of its performance data in
advertisements must comply with rules of the Securities and
Exchange Commission. Those rules describe the types of
performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of
its performance data must include the average annual total
returns for the advertised class of shares of the Fund.
Those returns must be shown for the 1-, 5- and 10-year
periods (or the life of the class, if less) ending as of
the most recently ended calendar quarter prior to the
publication of the advertisement (or its submission for
publication).
Use of standardized performance calculations enables
an investor to compare the Fund's performance to the
performance of other funds for the same periods. However, a
number of factors should be considered before using the
Fund's performance information as a basis for comparison
with other investments:
Total returns measure the performance of a
hypothetical account in the Fund over various periods and
do not show the performance of each shareholder's account.
Your account's performance will vary from the model
performance data if your dividends are received in cash, or
you buy or sell shares during the period, or you bought
your shares at a different time and price than the shares
used in the model.
o The Fund's performance returns may not reflect the
effect of taxes on dividends and capital gains
distributions.
o An investment in the Fund is not insured by the FDIC
or any other government agency.
o The principal value of the Fund's shares and total
returns are not guaranteed and normally will
fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be
worth more or less than their original cost.
o Total returns for any given past period represent
historical performance information and are not,
and should not be considered, a prediction of
future returns.
The performance of each class of shares is shown
separately, because the performance of each class of shares
will usually be different. That is because of the different
kinds of expenses each class bears. The total returns of
each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the
maturity of debt investments, the types of investments the
Fund holds, and its operating expenses that are allocated
to the particular class.
|X| Total Return Information. There are different
types of "total returns" to measure the Fund's performance.
Total return is the change in value of a hypothetical
investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are
reinvested in
additional shares and that the investment is redeemed at
the end of the period. Because of differences in expenses
for each class of shares, the total returns for each class
are separately measured. The cumulative total return
measures the change in value over the entire period (for
example, ten years). An average annual total return shows
the average rate of return for each year in a period that
would produce the cumulative total return over the entire
period. However, average annual total returns do not show
actual year-by-year performance. The Fund uses standardized
calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the
current maximum sales charge of 5.75% (as a percentage of
the offering price) is deducted from the initial investment
("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied,
depending on the period for which the return is shown: 5.0%
in the first year, 4.0% in the second year, 3.0% in the
third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter. For Class C shares, the 1%
contingent deferred sales charge is deducted for returns
for the one-year period. For Class N shares, the 1%
contingent deferred sales charge is deducted for returns
for the one year period, and, if applicable, the total
returns for the periods prior to March 1, 2001 (the
inception date for
Class N shares) is based on the Fund's Class A returns,
adjusted to reflect the higher Class N 12b-1 fees. There is
no sales charge for Class Y shares.
o Average Annual Total Return. The "average annual
total return" of each class is an average annual compounded
rate of return for each year in a specified number of
years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P"
in the formula below) held for a number of years ("n" in
the formula) to achieve an Ending Redeemable Value ("ERV"
in the formula) of that investment, according to the
following formula:
ERV l/n - 1 Average Annual Total
Return
P
o Average Annual Total Return (After Taxes on
Distributions). The "average annual total return (after
taxes on distributions)" of Class A shares is an average
annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of
federal taxes (calculated using the highest individual
marginal federal income tax rates in effect on any
reinvestment date) on any distributions made by the Fund
during the specified period. It is the rate of return based
on the change in value of a hypothetical initial investment
of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking
into account the effect of taxes on Fund distributions, but
not on the redemption of Fund shares, according to the
following formula:
ATVD - 1= Average Annual Total Return (After Taxes on
- ----
1/n Distributions)
P
o Average Annual Total Return (After Taxes on
Distributions and Redemptions). The "average annual total
return (after taxes on distributions and redemptions)" of
Class A shares is an average annual compounded rate of
return for each year in a specified number of years,
adjusted to show the effect of federal taxes (calculated
using the highest individual marginal federal income tax
rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period
and the effect of capital gains taxes or capital loss tax
benefits (each calculated using the highest federal
individual capital gains tax rate in effect on the
redemption date) resulting from the redemption of the
shares at the end of the period. It is the rate of return
based on the change in value of a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a
number of years ("n" in the formula) to achieve an ending
value ("ATVDR" in the formula) of that investment, after
taking into account the effect of taxes on fund
distributions and on the redemption of Fund shares,
according to the following formula:
ATVDR - 1= Average Annual Total Return (After Taxes on
- -----
1/n Distributions and Redemption)
P
o Cumulative Total Return. The "cumulative total
return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of
years. Its calculation uses some of the same factors as
average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return
is determined as follows:
ERV - P = Total Return
- -----------
P
o Total Returns at Net Asset Value. From time to time
the Fund may also quote a cumulative or an average annual
total return "at net asset value" (without deducting sales
charges) for Class A, Class B, Class C or Class N shares.
There is no sales charge on Class Y shares. Each is based
on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that class
of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions.
- -------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 8/31/02
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Class Returns (10
of years or Life of
Shares Class)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A 96.20% 108.18% -21.55% -16.77% -4.14% -3.00% 6.97% 7.61%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B 74.08%1 74.08%1 -21.52% -17.39% -4.02% -3.75% 6.32%1 6.32%1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C 22.52%2 22.52%2 -18.22% -17.39% -3.75% -3.75% 3.02%2 3.02%2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class N -32.35%3 -31.68%3 -17.82% -17.00% -22.94%3 -22.43%3 N/A N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class Y 76.82%4 N/A -16.50% N/A -2.74% -2.74% 7.15%4 7.15%4
- -------------------------------------------------------------------------------
1. Inception of Class B: 8/17/93
2. Inception of Class C: 11/1/95
3. Inception of Class N: 3/01/01
4. Inception of Class Y: 6/1/94
- ------------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 8/31/02
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
1-Year 5-Year 10-Year
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
After Taxes on -21.70% -5.81% 4.73%
Distributions
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
After Taxes on
Distributions and -13.11% -3.22% 5.26%
Redemption of Fund Shares
- ------------------------------------------------------------------------------
Other Performance Comparisons. The Fund compares its
performance annually to that of an appropriate
broadly-based market index in its Annual Report to
shareholders. You can obtain
that information by contacting the Transfer Agent at the
addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also
compare its performance to that of other investments,
including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of
these performance comparisons are set forth below.
o Lipper Rankings. From time to time the Fund may
publish the ranking of the performance of its classes of
shares by Lipper Inc. ("Lipper"). Lipper is a
widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their
performance for various periods in categories based on
investment styles. The performance of the Fund is ranked
by Lipper against all other growth funds. The Lipper
performance rankings are based on total returns that
include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group"
indices of the performance of all mutual funds in a
category that it monitors and averages of the performance
of the funds in particular categories.
o Morningstar Ratings. From time to time the Fund may
publish the star rating of the performance of its classes
of shares by Morningstar, Inc., an independent mutual fund
monitoring service. Morningstar ranks mutual funds in
their specialized market sector. The Fund is ranked among
domestic stock funds.
Morningstar proprietary star ratings reflect
historical risk-adjusted total investment return. For each
fund with at least a three-year history, Morningstar
calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in
a fund's monthly performance (including the effects of
sales charges, loads, and redemption fees), placing more
emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category
receive 5 stars, the next 22.5% receive 4 stars, the next
35% receive 3 stars, the next 22.5% receive 2 stars, and
the bottom 10% receive 1 star. (Each share class is
counted as a fraction of one fund within this scale and
rated separately, which may cause slight variations in the
distribution percentages.) The Overall Morningstar Rating
for a fund is derived from a weighted average of the
performance figures associated with its three-, five-and
ten-year (if applicable) Morningstar Rating metrics.
The Fund may also compare its performance to that of
other funds in its Morningstar category. In addition to its
star ratings, Morningstar also categorizes and compares a
fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment
style, rather than how a fund defines its investment
objective. Morningstar's four broad categories (domestic
equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on
types of investments and investment styles. Those
comparisons by Morningstar are based on the same risk and
return measurements as its star rankings but do not
consider the effect of sales charges.
o Performance Rankings and Comparisons by Other
Entities and Publications. From time to time the Fund may
include in its advertisements and sales literature
performance information about the Fund cited in newspapers
and other periodicals such as The New York Times, The Wall
Street Journal, Barron's, or similar publications. That
information may include performance quotations from other
sources, including Lipper and Morningstar. The performance
of the Fund's classes of shares may be compared in
publications to the performance of various market indices
or other investments, and averages, performance rankings or
other benchmarks prepared by recognized mutual fund
statistical services.
Investors may also wish to compare the returns on the
Fund's share classes to the return on fixed-income
investments available from banks and thrift institutions.
Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other
forms of fixed or variable time deposits, and various other
instruments such as Treasury bills. However, the Fund's
returns and share price are not guaranteed or insured by
the FDIC or any other agency and will fluctuate daily,
while bank depository obligations may be insured by the
FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is
backed by the full faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or
ratings of the Manager or Transfer Agent, and of the
investor services provided by them to shareholders of the
Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of
shareholder and investor services by third parties may
include comparisons of their services to those provided by
other mutual fund families selected by the rating or
ranking services. They may be based upon the opinions of
the rating or ranking service itself, using its research or
judgment, or based upon surveys of investors, brokers,
shareholders or others.
From time to time the Fund may include in its
advertisements and sales literature the total return
performance of a hypothetical investment account that
includes shares of the fund and other Oppenheimer funds.
The combined account may be part of an illustration of an
asset allocation model or similar presentation. The account
performance may combine total return performance of the
fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to
time, the Fund's advertisements and sales literature may
include, for illustrative or comparative purposes,
statistical data or other information about general or
specific market and economic conditions. That may include,
for example,
o information about the performance of certain
securities or commodities markets or segments of
those markets,
o information about the performance of the economies of
particular countries or regions,
o the earnings of companies included in segments of
particular industries, sectors, securities markets,
countries or regions,
o the availability of different types of securities or
offerings of securities,
o information relating to the gross national or gross
domestic product of the United States or other
countries or regions,
o comparisons of various market sectors or indices to
demonstrate performance, risk, or other
characteristics of the Fund.
ABOUT your account
How to Buy Shares
Additional information is presented below about the methods
that can be used to buy shares of the Fund. Appendix B
contains more information about the special sales charge
arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain
classes of investors.
AccountLink. When shares are purchased through
AccountLink, each purchase must be at least $25. Effective
November 1, 2002, for any new Asset Builder Plan, each
purchase through AccountLink must be at least $50 and
---
shareholders must invest at least $500 before an Asset
Builder Plan can be established on a new account. Accounts
established prior to November 1, 2001, will remain at $25
for additional purchases. Shares will be purchased on the
regular business day the Distributor is instructed to
initiate the Automated Clearing House ("ACH") transfer to
buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the
business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00
P.M., but may close earlier on certain days. If Federal
Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will
begin to accrue on the next regular business day. The
proceeds of ACH transfers are normally received by the Fund
three days after the transfers are initiated. If the
proceeds of the ACH transfer are not received on a timely
basis, the Distributor reserves the right to cancel the
purchase order. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a
reduced sales charge rate may be obtained for Class A
shares under Right of Accumulation and Letters of Intent
because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain
other circumstances described in Appendix B to this
Statement of Additional Information because the Distributor
or dealer or broker incurs little or no selling expenses.
|X| Right of Accumulation. To qualify for the lower
sales charge rates that apply to larger purchases of Class
A shares, you and your spouse can add together:
o Class A and Class B shares you purchase for your
individual accounts (including IRAs and 403(b)
plans), or for your joint accounts, or for
trust or custodial accounts on behalf of your
children who are minors, and
o Current purchases of Class A and Class B shares of
the Fund and other Oppenheimer funds to reduce
the sales charge rate that applies to current
purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or
contingent deferred sales charge to reduce the
sales charge rate for current purchases of
Class A shares, provided that you still hold
your investment in one of the Oppenheimer funds.
A fiduciary can count all shares purchased for a
trust, estate or other fiduciary account (including one or
more employee benefit plans of the same employer) that has
multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously
purchased and currently own to the value of current
purchases to determine the sales charge rate that applies.
The reduced sales charge will apply only to current
purchases. You must request it when you buy shares.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the
distributor and currently include the following:
Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New York Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Champion Income Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Convertible Securities Fund Inc.
Oppenheimer Developing Markets Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Discovery Fund Oppenheimer Real Asset Fund
Oppenheimer Rochester National
Oppenheimer Emerging Growth Fund Municipals
Oppenheimer Emerging Technologies Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund Oppenheimer Strategic Income Fund
Oppenheimer Global Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth amp;amp; Income Fund Oppenheimer Trinity Core Fund
Oppenheimer Trinity Large Cap Growth
Oppenheimer Gold amp;amp; Special Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Trinity Value Fund
Oppenheimer High Yield Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer Value Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Company
Fund Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund OSM1- Gartmore Millennium Growth Fund II
Oppenheimer Limited Term Municipal Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street Growth amp;amp; Income OSM1 - Mercury Advisors Samp;amp;P 500 Index
Fund Fund
OSM1 - Mercury Advisors Focus Growth
Oppenheimer Main Street Opportunity Fund Fund
Oppenheimer Main Street Small Cap Fund OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund OSM1 - Salomon Brothers All Cap Fund
Oppenheimer Multiple Strategies Fund
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
1 - "OSM" stands for Oppenheimer Select Managers
There is an initial sales charge on the purchase of
Class A shares of each of the Oppenheimer funds described
above except the money market funds. Under certain
circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market
fund shares may be subject to a contingent deferred sales
charge.
Letters of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of
the Fund and other Oppenheimer funds during a 13-month
period, you can reduce the sales charge rate that applies
to your purchases of Class A shares. The total amount of
your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class
A shares purchased during that period. You can include
purchases made up to 90 days before the date of the
Letter. Letters of Intent do not consider Class C or Class
N shares you purchase or may have purchased.
A Letter of Intent is an investor's statement in
writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of the Fund
(and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this
may include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which,
when added to the investor's holdings of shares of those
funds, will equal or exceed the amount specified in the
Letter. Purchases made by reinvestment of dividends or
distributions of capital gains and purchases made at net
asset value without sales charge do not count toward
satisfying the amount of the Letter.
A Letter enables an investor to count the Class A and
Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of
the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter
will be made at the offering price (including the sales
charge) that applies to a single lump-sum purchase of
shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no
commitment to purchase shares. However, if the investor's
purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the
investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is
described in "Terms of Escrow," below (those terms may be
amended by the Distributor from time to time). The
investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the
investor agrees to be bound by the terms of the Prospectus,
this Statement of Additional Information and the
application used for a Letter of Intent. If those terms are
amended, as they may be from time to time by the Fund, the
investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing
Letters of Intent.
If the total eligible purchases made during the
Letter of Intent period do not equal or exceed the intended
purchase amount, the concessions previously paid to the
dealer of record for the account and the amount of sales
charge retained by the Distributor will be adjusted to the
rates applicable to actual total purchases. If total
eligible purchases during the Letter of Intent
period exceed the intended purchase amount and exceed the
amount needed to qualify for the next sales charge rate
reduction set forth in the Prospectus, the sales charges
paid will be adjusted to the lower rate. That adjustment
will be made only if and when the dealer returns to the
Distributor the excess of the amount of concessions allowed
or paid to the dealer over the amount of concessions that
apply to the actual amount of purchases. The excess
concessions returned to the Distributor will be used to
purchase additional shares for the investor's account at
the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
The Transfer Agent will not hold shares in escrow for
purchases of shares of the Fund and other Oppenheimer funds
by OppenheimerFunds prototype 401(k) plans under a Letter
of Intent. If the intended purchase amount under a Letter
of Intent entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the
Letter of Intent period, there will be no adjustment of
concessions paid to the broker-dealer or financial
institution of record for accounts held in the name of that
plan.
In determining the total amount of purchases made
under a Letter, shares redeemed by the investor prior to
the termination of the Letter of Intent period will be
deducted. It is the responsibility of the dealer of record
and/or the investor to advise the Distributor about the
Letter in placing any purchase orders for the investor
during the Letter of Intent period. All of such purchases
must be made through the Distributor.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent
purchases if necessary) made pursuant to a Letter, shares
of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares
valued in the amount of $2,500 (computed at the offering
price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be
credited to the investor's account.
2. If the total minimum investment specified under
the Letter is completed within the thirteen-month Letter of
Intent period, the escrowed shares will be promptly
released to the investor.
3. If, at the end of the 13-month Letter of Intent
period the total purchases pursuant to the Letter are less
than the intended purchase amount specified in the Letter,
the investor must remit to the Distributor an amount equal
to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which
would have been paid if the total amount purchased had been
made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid
within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed
shares necessary to realize such difference in sales
charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is
received to redeem escrowed shares prior to the payment of
such additional sales charge, the sales charge will be
withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as
attorney-in-fact to surrender for redemption any or all
escrowed shares.
5. The shares eligible for purchase under the Letter (or
the holding of which may be counted toward completion of a
Letter) include:
(a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales
charge,
(b) Class B shares of other Oppenheimer funds acquired
subject to a contingent deferred sales charge,
and
(c) Class A or Class B shares acquired by exchange of
either (1) Class A shares of one of the other
Oppenheimer funds that were acquired subject to
a Class A initial or contingent deferred sales
charge or (2) Class B shares of one of the
other Oppenheimer funds that were acquired
subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically
be exchanged for shares of another fund to which an
exchange is requested, as described in the section of the
Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to
buy shares directly from a bank account, you must enclose a
check (the minimum is $25) for the initial purchase with
your application. Currently, the minimum investment is $25
to establish an Asset Builder Plan, and will remain at $25
for those accounts established prior to November 1, 2002.
However, as described above under "AccountLink," for Asset
Builder Plans established on or after November 1, 2002, the
minimum investment for new Asset Builder Plans will
increase to $50, each purchase must be at least $50 and
---
shareholders must invest at least $500 before an Asset
Builder Plan can be established. Shares purchased by Asset
Builder Plan payments from bank accounts are subject to the
redemption restrictions for recent purchases described in
the Prospectus. Asset Builder Plans are available only if
your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored
qualified retirement accounts. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of
shares of up to four other Oppenheimer funds.
If you make payments from your bank account to
purchase shares of the Fund, your bank account will be
debited automatically. Normally the debit will be made two
business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer
Agent nor the Fund shall be responsible for any delays in
purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you
should obtain a prospectus of the selected fund(s) from
your financial advisor (or the Distributor) and request an
application from the Distributor. Complete the application
and return it. You may change the amount of your Asset
Builder payment or you can terminate these automatic
investments at any time by writing to the Transfer Agent.
The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions
to implement them. The Fund reserves the right to amend,
suspend or discontinue offering Asset Builder plans at any
time without prior notice.
Retirement Plans. Certain types of retirement plans are
entitled to purchase shares of the Fund without sales
charge or at reduced sales charge rates, as described in
Appendix B to this Statement of Additional Information.
Certain special sales charge arrangements described in that
Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner amp;amp; Smith, Inc. ("Merrill Lynch") or an
independent record keeper that has a contract or special
arrangement with Merrill Lynch. If on the date the plan
sponsor signed the Merrill Lynch record keeping service
agreement the plan has less than $3 million in assets
(other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may
purchase only Class B shares of the Oppenheimer funds. Any
retirement plans in that category that currently invest in
Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's
applicable investments reach $5 million. OppenheimerFunds
has entered into arrangements with certain record keepers
whereby the Transfer Agent compensates the record keeper
for its record keeping and account servicing functions that
it performs on behalf of the participant level accounts of
a retirement plan. While such compensation may act to
reduce the record keeping fees charged by the retirement
plan's record keeper, that compensation arrangement may be
terminated at any time, potentially affecting the record
keeping fees charged by the retirement plan's record keeper.
Cancellation of Purchase Orders. Cancellation of purchase
orders for the Fund's shares (for example, when a purchase
check is returned to the Fund unpaid) causes a loss to be
incurred when the net asset values of the Fund's shares on
the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net
asset value per share multiplied by the number of shares in
the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the
loss, the Distributor will do so. The Fund may reimburse
the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund
or the Distributor may seek other redress.
Classes of Shares. Each class of shares of the Fund
represents an interest in the same portfolio of investments
of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends
payable on Class B, Class C or Class N shares will be
reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.
The availability of different classes of shares
permits an investor to choose the method of purchasing
shares that is more appropriate for the investor. That may
depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant
circumstances. Class A shares normally are sold subject to
an initial sales charge. While Class B, Class C and Class N
shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class
B, Class C and Class N shares is the same as that of the
initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions
that sell shares of the Fund. A salesperson who is
entitled to receive compensation from his or her firm for
selling Fund shares may receive different levels of
compensation for selling one class of shares rather than
another.
The Distributor will not accept any order in the
amount of $500,000 or more for Class B shares or $1 million
or more for Class C shares on behalf of a single investor
(not including dealer "street name" or omnibus accounts).
That is because generally it will be more advantageous for
that investor to purchase Class A shares of the Fund.
|X| Class A Shares Subject to a Contingent Deferred Sales
Charge. For purchases of Class A shares at net asset value
whether or not subject to a contingent deferred sales
charge as described in the Prospectus, no sales concessions
will be paid to the broker-dealer of record, as described
in the Prospectus, on sales of Class A shares purchased
with the redemption proceeds of shares of another mutual
fund offered as an investment option in a retirement plan
in which Oppenheimer funds are also offered as investment
options under a special arrangement with the Distributor,
if the purchase occurs more than 30 days after the
Oppenheimer funds are added as an investment option under
that plan. Additionally, that concession will not be paid
on purchases of Class A shares by a retirement plan made
with the redemption proceeds of Class N shares of one or
more Oppenheimer funds held by the plan for more than 18
months.
|X| Class B Conversion. Under current
interpretations of applicable federal income tax law by the
Internal Revenue Service, the conversion of Class B shares
to Class A shares after six years is not treated as a
taxable event for the shareholder. If those laws or the IRS
interpretation of those laws should change, the automatic
conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the
basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such
exchange could constitute a taxable event for the
shareholder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for
longer than six years.
|X| Availability of Class N Shares. In addition to
the description of the types of retirement plans which may
purchase Class N shares contained in the prospectus, Class
N shares also are offered to the following:
o to all rollover IRAs, (including SEP IRAs and SIMPLE
IRAs),
o to all rollover contributions made to Individual
401(k) plans, Profit-Sharing Plans and Money
Purchase Pension Plans,
o to all direct rollovers from
OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix B
to this Statement of Additional Information)
which have entered into a special agreement
with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a)
or 401(k) of the Internal Revenue Code, the
recordkeeper or the plan sponsor for which has
entered into a special agreement with the
Distributor,
o to Retirement Plans of a plan sponsor where the
aggregate assets of all such plans invested in
the Oppenheimer funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k)
plans that pay for the purchase with the
redemption proceeds of Class A shares of one or
more Oppenheimer funds.
o to certain customers of broker-dealers and financial
advisors that are identified in a special
agreement between the broker-dealer or
financial advisor and the Distributor for that
purpose.
The sales concession and the advance of the service
fee, as described in the Prospectus, will not be paid to
dealers of record on sales of Class N shares on:
o purchases of Class N shares in amounts of $500,000 or
more by a retirement plan that pays for the
purchase with the redemption proceeds of Class
A shares of one or more Oppenheimer funds
(other than rollovers from an
OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan to any IRA invested in the
Oppenheimer funds),
o purchases of Class N shares in amounts of $500,000 or
more by a retirement plan that pays for the
purchase with the redemption proceeds of Class
C shares of one or more Oppenheimer funds held
by the plan for more than one year (other than
rollovers from an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan to any IRA
invested in the Oppenheimer funds), and
o on purchases of Class N shares by an
OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan made with the redemption proceeds
of Class A shares of one or more Oppenheimer
funds.
No sales concessions will be paid to the
broker-dealer of record, as described in the Prospectus, on
sales of Class N shares purchased with the redemption
proceeds of shares of another mutual fund offered as an
investment option in a retirement plan in which Oppenheimer
funds are also offered as investment options under a
special arrangement with the Distributor, if the purchase
occurs more than 30 days after the Oppenheimer funds are
added as an investment option under that plan.
|X| Allocation of Expenses. The Fund pays expenses
related to its daily operations, such as custodian fees,
Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However,
those expenses reduce the net asset values of shares, and
therefore are indirectly borne by shareholders through
their investment.
The methodology for calculating the net asset value,
dividends and distributions of the Fund's share classes
recognizes two types of expenses. General expenses that do
not pertain specifically to any one class are allocated pro
rata to the shares of all classes. The allocation is based
on the percentage of the Fund's total assets that is
represented by the assets of each class, and then equally
to each outstanding share within a given class. Such
general expenses include management fees, legal,
bookkeeping and audit fees, printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders,
fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest,
taxes and brokerage commissions, and non-recurring
expenses, such as litigation costs.
Other expenses that are directly attributable to a
particular class are allocated equally to each outstanding
share within that class. Examples of such expenses include
distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and
shareholder meeting expenses (to the extent that such
expenses pertain only to a specific class).
Account Fees. As stated in the Prospectus, a $12 annual fee
will be charge on any account valued at less than $500.
This fee will not be charged for:
o Accounts that have balances below $500 due to the
automatic conversion of shares from Class B to
Class A shares;
o Accounts with an active Asset Builder Plan, payroll
deduction plan or a military allotment plan;
o OppenheimerFunds-sponsored group retirement accounts
that are making continuing purchases;
o Certain accounts held by broker-dealers through the
National Securities Clearing Corporation; and
o Accounts that fall below the $500 threshold due
solely to market fluctuations within the
12-month period preceding the date the fee is
deducted.
The annual fee will be charged on or about the second
to last business day of September. This annual fee will be
waived for any shareholders who elect to access their
account documents through electronic document delivery
rather than in paper copy and who elect to utilize the
Internet or PhoneLink as their primary source for their
general servicing needs. To sign up to access account
documents electronically via eDocs Direct, please visit the
Service Center on our website at www.oppenheimerfunds.com
------------------------
or call 1.888.470.0862 for instructions.
Determination of Net Asset Values Per Share. The net asset
values per share of each class of shares of the Fund are
determined as of the close of business of The New York
Stock Exchange ("the Exchange") on each day that the
Exchange is open. The calculation is done by dividing the
value of the Fund's net assets attributable to a class by
the number of shares of that class that are outstanding.
The Exchange normally closes at 4:00 P.M., Eastern time,
but may close earlier on
some other days (for example, in case of weather
emergencies or on days falling before a U.S. holiday). All
references to time in this Statement of Additional
Information mean "Eastern time." The Exchange's most recent
annual announcement (which is subject to change) states
that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days.
Dealers other than Exchange members may conduct
trading in certain securities on days on which the Exchange
is closed (including weekends and holidays) or after 4:00
P.M. on a regular business day. Because the Fund's net
asset values will not be calculated on those days, the
Fund's net asset values per share may be significantly
affected on such days when shareholders may not purchase or
redeem shares. Additionally, trading on European and Asian
stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign
exchanges or markets as a result of events that occur after
the prices of those securities are determined, but before
the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values
that day unless the Manager determines that the event is
likely to effect a material change in the value of the
security. The Manager, or an internal valuation committee
established by the Manager, as applicable, may establish a
valuation, under procedures established by the Board and
subject to the approval, ratification and confirmation by
the Board at its next ensuing meeting.
|X| Securities Valuation. The Fund's Board of
Trustees has established procedures for the valuation of
the Fund's securities. In general those procedures are as
follows:
o Equity securities traded on a U.S. securities
exchange or on Nasdaq(R)are valued as follows:
(1) if last sale information is regularly reported, they
are valued at the last reported sale price
on the principal exchange on which they are
traded or on Nasdaq, as applicable, on that
day, or
(2) if last sale information is not available on a
valuation date, they are valued at the last
reported sale price preceding the valuation
date if it is within the
spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at
the closing "bid" price on the valuation
date.
o Equity securities traded on a foreign securities
exchange generally are valued in one of the following ways:
(1) at the last sale price available to the pricing
service approved by the Board of Trustees,
or
(2) at the last sale price obtained by the Manager from
the report of the principal exchange on
which the security is traded at its last
trading session on or immediately before the
valuation date, or
(3) at the mean between the "bid" and "asked" prices
obtained from the principal exchange on
which the security is traded or, on the
basis of reasonable inquiry, from two market
makers in the security.
o Long-term debt securities having a remaining maturity
in excess of 60 days are valued based on the mean between
the "bid" and "asked" prices determined by a portfolio
pricing service approved by the Fund's Board of Trustees or
obtained by the Manager from two active market makers in
the security on the basis of reasonable inquiry.
o The following securities are valued at the mean
between the "bid" and "asked" prices determined by a
pricing service approved by the Fund's Board of Trustees or
obtained by the Manager from two active market makers in
the security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than
397 days when issued,
(2) debt instruments that had a maturity of 397 days or
less when issued and have a remaining
maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity
of 397 days or less when issued and which
have a remaining maturity of 60 days or less.
o The following securities are valued at cost, adjusted
for amortization of premiums and accretion of discounts:
(1) money market debt securities held by a non-money
market fund that had a maturity of less than
397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that
have a remaining maturity of 397 days or
less.
o Securities (including restricted securities) not
having readily-available market quotations are valued at
fair value determined under the Board's procedures. If the
Manager is unable to locate two market makers willing to
give quotes, a security may be priced at the mean between
the "bid" and "asked" prices provided by a single active
market maker (which in certain cases may be the "bid" price
if no "asked" price is available).
In the case of U.S. government securities,
mortgage-backed securities, corporate bonds and foreign
government securities, when last sale information is not
generally available, the Manager may use pricing services
approved by the Board of Trustees. The pricing service may
use "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the
tax-exempt status of the interest paid by municipal
securities). The Manager will monitor the accuracy of the
pricing services. That monitoring may include comparing
prices used for portfolio valuation to actual sales prices
of selected securities.
The closing prices in the London foreign exchange
market on a particular business day that are provided to
the Manager by a bank, dealer or pricing service that the
Manager has determined to be reliable are used to value
foreign currency, including forward contracts, and to
convert to U.S. dollars securities that are denominated in
foreign currency.
Puts, calls, and futures are valued at the last sale
price on the principal exchange on which they are traded or
on Nasdaq, as applicable, as determined by a pricing
service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be
valued at the last sale price on the preceding trading day
if it is within the spread of the closing "bid" and "asked"
prices on the principal exchange or on Nasdaq on the
valuation date. If not, the value shall be the closing bid
price on the principal exchange or on Nasdaq on the
valuation date. If the put, call or future is not traded
on an exchange or on Nasdaq, it shall be valued by the mean
between "bid" and "asked" prices obtained by the Manager
from two active market makers. In certain cases that may be
at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to
the premium received is included in the Fund's Statement of
Assets and Liabilities as an asset. An equivalent credit is
included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments,
if a call or put written by the Fund is exercised, the
proceeds are increased by the premium received. If a call
or put written by the Fund expires, the Fund has a gain in
the amount of the premium. If the Fund enters into a
closing purchase transaction, it will have a gain or loss,
depending on whether the premium received was more or less
than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on
its sale of the underlying investment is reduced by the
amount of premium paid by the Fund.
How to Sell Shares
The information below supplements the terms and conditions
for redeeming shares set forth in the Prospectus.
Reinvestment Privilege. Within six months of a redemption,
a shareholder may reinvest all or part of the redemption
proceeds of:
o Class A shares purchased subject to an initial sales
charge or Class A shares on which a contingent deferred
sales charge was paid, or
o Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed.
The reinvestment may be made without sales charge
only in Class A shares of the Fund or any of the other
Oppenheimer funds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares"
below. Reinvestment will be at the net asset value next
computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Transfer Agent for
that privilege at the time of reinvestment. This privilege
does not apply to Class C, and Class N or Class Y shares.
The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.
Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has
been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and
amount of the reinvestment. Under the Internal Revenue
Code, if the redemption proceeds of Fund shares on which a
sales charge was paid are reinvested in shares of the Fund
or another of the Oppenheimer funds within 90 days of
payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the
amount of the sales charge paid. That would reduce the
loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to
the basis of the shares acquired by the reinvestment of the
redemption proceeds.
Payments "In Kind." The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash.
However, under certain circumstances, the Board of Trustees
of the Fund may determine that it would be detrimental to
the best interests of the remaining shareholders of the
Fund to make payment of a redemption order wholly or partly
in cash. In that case, the Fund may pay the redemption
proceeds in whole or in part by a distribution "in kind" of
liquid securities from the portfolio of the Fund, in lieu
of cash. If payment in made by a distribution "in kind" of
portfolio securities, then the recipient will bear the risk
that the value of those securities may increase or decrease
before the securities can be sold.
The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act. Under that rule, the Fund
is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur
brokerage or other costs in selling the securities for
cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to
value its portfolio securities described above under
"Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price
is determined.
Involuntary Redemptions. The Fund's Board of Trustees has
the right to cause the involuntary redemption of the shares
held in any account if the aggregate net asset value of
those shares is less than $500 or such lesser amount as the
Board may fix. The Board will not cause the involuntary
redemption of shares in an account if the aggregate net
asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. If the
Board exercises this right, it may also fix the
requirements for any notice to be given to the shareholders
in question (not less than 30 days). The Board may
alternatively set requirements for the shareholder to
increase the investment, or set other terms and conditions
so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different
registration is not an event that triggers the payment of
sales charges. Therefore, shares are not subject to the
payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or
entity. It does not matter whether the transfer occurs by
absolute assignment, gift or bequest, as long as it does
not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales
charge are transferred, the transferred shares will remain
subject to the contingent deferred sales charge. It will be
calculated as if the transferee shareholder had acquired
the transferred shares in the same manner and at the same
time as the transferring shareholder.
If less than all shares held in an account are
transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described
in the Prospectus under "How to Buy Shares" for the
imposition of the Class B, Class C and Class N contingent
deferred sales charge will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for
distributions from OppenheimerFunds-sponsored IRAs,
SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial plans, 401(k)
plans or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans,"
c/o the Transfer Agent at its address listed in "How To
Sell Shares" in the Prospectus or on the back cover of this
Statement of Additional Information. The request must:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the
distribution is premature; and
(3) conform to the requirements of the plan and the
Fund's other redemption requirements.
Participants (other than self-employed plan sponsors)
in OppenheimerFunds-sponsored pension or profit-sharing
plans with shares of the Fund held in the name of the plan
or its fiduciary may not directly request redemption of
their accounts. The plan administrator or fiduciary must
sign the request.
Distributions from pension and profit sharing plans
are subject to special requirements under the Internal
Revenue Code and certain documents (available from the
Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made.
Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code,
and IRS Form W-4P (available from the Transfer Agent) must
be submitted to the Transfer Agent with the distribution
request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a
certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer
Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax
laws and will not be responsible for any tax penalties
assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers
and Brokers. The Distributor is the Fund's agent to
repurchase its shares from authorized dealers or brokers on
behalf of their customers. Shareholders should contact
their broker or dealer to arrange this type of redemption.
The repurchase price per share will be the net asset value
next computed after the Distributor receives an order
placed by the dealer or broker. However, if the Distributor
receives a repurchase order from a dealer or broker after
the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes.
Normally, the Exchange closes at 4:00 P.M., but may do so
earlier on some days. Additionally, the order must have
been transmitted to and received by the Distributor prior
to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer
under this procedure, payment will be made within three
business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents
in proper form. The signature(s) of the registered owners
on the redemption documents must be guaranteed as described
in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning
shares of the Fund valued at $5,000 or more can authorize
the Transfer Agent to redeem shares (having a value of at
least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal
Plan. Shares will be redeemed three business days prior to
the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month
may be requested by telephone if payments are to be made by
check payable to all shareholders of record. Payments must
also be sent to the address of record for the account and
the address must not have been changed within the prior 30
days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be
arranged on this basis.
Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may
arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the account
application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant
to an Automatic Withdrawal Plan three business days before
the payment transmittal date you select in the account
application. If a contingent deferred sales charge applies
to the redemption, the amount of the check or payment will
be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the
date requested. The Fund reserves the right to amend,
suspend or discontinue offering these plans at any time
without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make
regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B,
Class C and Class N shareholders should not establish
automatic withdrawal plans, because of the potential
imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B, Class C or Class N
contingent deferred sales charge is waived as described in
Appendix B to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange
Plan, the shareholder agrees to the terms and conditions
that apply to such plans, as stated below. These
provisions may be amended from time to time by the Fund
and/or the Distributor. When adopted, any amendments will
automatically apply to existing Plans.
|X| Automatic Exchange Plans. Shareholders can
authorize the Transfer Agent to exchange a pre-determined
amount of shares of the Fund for shares (of the same class)
of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Effective November 1, 2002,
the minimum amount that may be exchanged to each other fund
account is $50. Instructions should be provided on the
OppenheimerFunds Application or signature-guaranteed
instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in
"How to Exchange Shares" in the Prospectus and below in
this Statement of Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be
redeemed as necessary to meet withdrawal payments. Shares
acquired without a sales charge will be redeemed first.
Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares
acquired with a sales charge, to the extent necessary to
make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted.
Payments made under these plans should not be considered as
a yield or income on your investment.
The Transfer Agent will administer the investor's
Automatic Withdrawal Plan as agent for the shareholder(s)
(the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to
the Planholder for any action taken or not taken by the
Transfer Agent in good faith to administer the Plan. Share
certificates will not be issued for shares of the Fund
purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the
Planholder on the records of the Fund. Any share
certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application
so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares
of the Fund, which will be done at net asset value without
a sales charge. Dividends on shares held in the account may
be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments
at the net asset value per share determined on the
redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally
be transmitted three business days prior to the date
selected for receipt of the payment, according to the
choice specified in writing by the Planholder. Receipt of
payment on the date selected cannot be guaranteed.
The amount and the interval of disbursement payments
and the address to which checks are to be mailed or
AccountLink payments are to be sent may be changed at any
time by the Planholder by writing to the Transfer Agent.
The Planholder should allow at least two weeks' time after
mailing such notification for the requested change to be
put in effect. The Planholder may, at any time, instruct
the Transfer Agent by written notice to redeem all, or any
part of, the shares held under the Plan. That notice must
be in proper form in accordance with the requirements of
the then-current Prospectus of the Fund. In that case, the
Transfer Agent will redeem the number of shares requested
at the net asset value per share in effect and will mail a
check for the proceeds to the Planholder.
The Planholder may terminate a Plan at any time by
writing to the Transfer Agent. The Fund may also give
directions to the Transfer Agent to terminate a Plan. The
Transfer Agent will also terminate a Plan upon its receipt
of evidence satisfactory to it that the Planholder has died
or is legally incapacitated. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been
redeemed will be held in uncertificated form in the name of
the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized
person.
To use shares held under the Plan as collateral for a
debt, the Planholder may request issuance of a portion of
the shares in certificated form. Upon written request from
the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued
without causing the withdrawal checks to stop. However,
should such uncertificated shares become exhausted, Plan
withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent
for the Fund, the Planholder will be deemed to have
appointed any successor transfer agent to act as agent in
administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class
of Oppenheimer funds having more than one class of shares
may be exchanged only for shares of the same class of other
Oppenheimer funds. Shares of Oppenheimer funds that have a
single class without a class designation are deemed "Class
A" shares for this purpose. You can obtain a current list
showing which funds offer which classes of shares by
calling the Distributor.
o All of the Oppenheimer funds currently offer Class A,
B, C, N and Y shares with the following exceptions:
The following funds only offer Class A shares:
Centennial America Fund, L.P. Centennial New York Tax Exempt
Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust
The following funds do not offer Class N shares:
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer Municipal Bond Fund Rochester Fund Municipals
Oppenheimer New Jersey Municipal Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer New York Municipal Fund Limited Term New York Municipal
Fund
The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal
Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal
Fund
Oppenheimer Cash Reserves Oppenheimer New York Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester National
Municipals
Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer Gold amp;amp; Special Minerals Oppenheimer Small Cap Value Fund
Fund
Oppenheimer International Small Limited Term New York Municipal
Company Fund Fund
o Class Y shares of Oppenheimer Real Asset Fund may not
be exchanged for shares of any other fund.
o Class B, Class C and Class N shares of Oppenheimer
Cash Reserves are generally available only by
exchange from the same class of shares of other
Oppenheimer funds or through
OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities
Fund may be exchanged only for Class A shares of
other Oppenheimer funds. They may not be acquired by
exchange of shares of any class of any other
Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal
Fund may be exchanged only for Class B shares of
other Oppenheimer funds and no exchanges may be made
to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may
not be exchanged for shares of Oppenheimer Money
Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only
participants in certain retirement plans may purchase
shares of Oppenheimer Capital Preservation Fund, and
only those participants may exchange shares of other
Oppenheimer funds for shares of Oppenheimer Capital
Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate
Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury
Advisors Samp;amp;P Index Fund and Oppenheimer Select
Managers QM Active Balanced Fund are only available
to retirement plans and are available only by
exchange from the same class of shares of other
Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged
at net asset value for shares of any money market
fund offered by the Distributor. Shares of any money
market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge.
They may also be used to purchase shares of
Oppenheimer funds subject to an early withdrawal
charge or contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc.
purchased with the redemption proceeds of shares of
other mutual funds (other than funds managed by the
Manager or its subsidiaries) redeemed within the 30
days prior to that purchase may subsequently be
exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or
contingent deferred sales charge. To qualify for that
privilege, the investor or the investor's dealer must
notify the Distributor of eligibility for this
privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of
dividends or distributions from any of the other
Oppenheimer funds or from any unit investment trust
for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset
value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund may impose these
changes at any time, it will provide you with notice of
those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days'
notice prior to materially amending or terminating the
exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales
Charges. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a
contingent deferred sales charge, with the following
exceptions:
o When Class A shares of any Oppenheimer fund (other
than Rochester National Municipals and Rochester Fund
Municipals) acquired by exchange of Class A shares of any
Oppenheimer fund purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months
measured from the beginning of the calendar month of the
initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the
redeemed shares.
o When Class A shares of Rochester National Municipals
and Rochester Fund Municipals acquired by exchange of Class
A shares of any Oppenheimer fund purchased subject to
a Class A contingent deferred sales charge are redeemed
within 24 months of the beginning of the calendar month of
the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the
redeemed shares.
o If any Class A shares of another Oppenheimer fund
that are exchanged for Class A shares of Oppenheimer Senior
Floating Rate Fund are subject to the Class A contingent
deferred sales charge of the other Oppenheimer fund at the
time of exchange, the holding period for that Class A
contingent deferred sales charge will carry over to the
Class A shares of Oppenheimer Senior Floating Rate Fund
acquired in the exchange. The Class A shares of Oppenheimer
Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of
Oppenheimer Senior Floating Rate Fund if they are
repurchased before the expiration of the holding period.
o When Class A shares of Oppenheimer Cash Reserves and
Oppenheimer Money Market Fund, Inc. acquired by exchange of
Class A shares of any Oppenheimer fund purchased subject to
a Class A contingent deferred sales charge are redeemed
within the Class A holding period of the fund from which
the shares were exchanged, the Class A contingent deferred
sales charge of the fund from which the shares were
exchanged is imposed on the redeemed shares.
o With respect to Class B shares, the Class B
contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six
years of the initial purchase of the exchanged Class B
shares.
o With respect to Class C shares, the Class C
contingent deferred sales charge is imposed on Class C
shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C
shares.
o With respect to Class N shares, a 1% contingent
deferred sales charge will be imposed if the retirement
plan (not including IRAs and 403(b) plans) is terminated or
Class N
shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first purchase
of Class N shares of any Oppenheimer fund or with respect
to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
o When Class B or Class C shares are redeemed to effect
an exchange, the priorities described in "How To Buy
Shares" in the Prospectus for the imposition of the Class B
or the Class C contingent deferred sales charge will be
followed in determining the order in which the shares are
exchanged. Before exchanging shares, shareholders should
take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in
the subsequent redemption of remaining shares.
Shareholders owning shares of more than one class
must specify which class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. The Fund
reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than
one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of
authorized dealers that qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging
shares by telephone, a shareholder must have an existing
account in the fund to which the exchange is to be made.
Otherwise, the investors must obtain a prospectus of that
fund before the exchange request may be submitted. If all
telephone lines are busy (which might occur, for example,
during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by
telephone and would have to submit written exchange
requests.
|X| Processing Exchange Requests. Shares to be exchanged
are redeemed on the regular business day the Transfer Agent
receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business
days if it determines that it
would be disadvantaged by an immediate transfer of the
redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may
disadvantage it. For example, if the receipt of multiple
exchange requests from a dealer might require the
disposition of portfolio securities at a time or at a price
that might be disadvantageous to the Fund, the Fund may
refuse the request.
When you exchange some or all of your shares from one
fund to another, any special account feature such as an
Asset Builder Plan or Automatic Withdrawal Plan, will be
switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption
and exchange features such as Automatic Exchange Plans and
Automatic Withdrawal Plans cannot be switched to an account
in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number
of shares exchanged may be less than the number requested
if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information, or would include
shares covered by a share certificate that is not tendered
with the request. In those cases, only the shares
available for exchange without restriction will be
exchanged.
The different Oppenheimer funds available for
exchange have different investment objectives, policies and
risks. A shareholder should assure that the fund selected
is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal
income tax purposes, an exchange transaction is treated as
a redemption of shares of one fund and a purchase of shares
of another. "Reinvestment Privilege," above, discusses
some of the tax consequences of reinvestment of redemption
proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or
legal advice to a shareholder in connection with an
exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend
rate and there can be no assurance as to the payment of any
dividends or the realization of any capital gains. The
dividends and distributions paid by a class of shares will
vary from time to time depending on market conditions, the
composition of the Fund's portfolio, and expenses borne by
the Fund or borne separately by a class. Dividends are
calculated in the same manner, at the same time, and on the
same day for each class of shares. However, dividends on
Class B, Class C and Class N shares are expected to be
lower than dividends on Class A and Class Y shares. That is
because of the effect of the asset-based sales charge on
Class B, Class C and Class N shares. Those dividends will
also differ in amount as a consequence of any difference in
the net asset values of the different classes of shares.
Dividends, distributions and proceeds of the
redemption of Fund shares represented by
checks returned to the Transfer Agent by the Postal Service
as undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc. Reinvestment will be made as
promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to
state escheatment laws, and the Fund and the Transfer Agent
will not be liable to shareholders or their representatives
for compliance with those laws in good faith.
Tax Status of the Fund's Dividends, Distributions and
Redemptions of Shares. The federal tax treatment of the
Fund's dividends and capital gains distributions is briefly
highlighted in the Prospectus. The following is only a
summary of certain additional tax considerations generally
affecting the Fund and its shareholders.
The tax discussion in the Prospectus and this
Statement of Additional Information is based on tax law in
effect on the date of the Prospectus and this Statement of
Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action,
sometimes with retroactive effect. State and local tax
treatment of ordinary income dividends and capital gain
dividends from regulated investment companies may differ
from the treatment under the Internal Revenue Code
described below. Potential purchasers of shares of the Fund
are urged to consult their tax advisers with specific
reference to their own tax circumstances as well as the
consequences of federal, state and local tax rules
affecting an investment in the Fund.
Qualification as a Regulated Investment Company. The Fund
has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a regulated investment company, the Fund is
not subject to federal income tax on the portion of its net
investment income (that is, taxable interest, dividends,
and other taxable ordinary income, net of expenses) and
capital gain net income (that is, the excess of net
long-term capital gains over net short-term capital losses)
that it distributes to shareholders. That qualification
enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on
them. This avoids a "double tax" on that income and capital
gains, since shareholders normally will be taxed on the
dividends and capital gains they receive from the Fund
(unless their Fund shares are held in a retirement account
or the shareholder is otherwise exempt from tax).
The Internal Revenue Code contains a number of
complex tests relating to qualification that the Fund might
not meet in a particular year. If it did not qualify as a
regulated investment company, the Fund would be treated for
tax purposes as an ordinary corporation and would receive
no tax deduction for payments made to shareholders.
To qualify as a regulated investment company, the
Fund must distribute at least 90% of its investment company
taxable income (in brief, net investment income and the
excess of net short-term capital gain over net long-term
capital loss) for the taxable year. The Fund must also
satisfy certain other requirements of the Internal Revenue
Code, some of which are described below. Distributions by
the Fund made during the taxable year or, under specified
circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income
and gains for the taxable year and will therefore count
toward satisfaction of the above-mentioned requirement.
To qualify as a regulated investment company, the
Fund must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition
of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated
investment company's principal business of investing in
stock or securities) and certain other income.
In addition to satisfying the requirements described
above, the Fund must satisfy an asset diversification test
in order to qualify as a regulated investment company.
Under that test, at the
close of each quarter of the Fund's taxable year, at least
50% of the value of the Fund's assets must
consist of cash and cash items (including receivables),
U.S. government securities, securities of other regulated
investment companies, and securities of other issuers. As
to each of those issuers, the Fund must not have invested
more than 5% of the value of the Fund's total assets in
securities of each such issuer and the Fund must not hold
more than 10% of the outstanding voting securities of each
such issuer. No more than 25% of the value of its total
assets may be invested in the securities of any one issuer
(other than U.S. government securities and securities of
other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in
the same or similar trades or businesses. For purposes of
this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are
treated as U.S. government securities.
Excise Tax on Regulated Investment Companies. Under the
Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of
its capital gains realized in the period from November 1 of
the prior year through October 31 of the current year. If
it does not, the Fund must pay an excise tax on the amounts
not distributed. It is presently anticipated that the Fund
will meet those requirements. To meet this requirement, in
certain circumstances the Fund might be required to
liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability. However, the
Board of Trustees and the Manager might determine in a
particular year that it would be in the best interests of
shareholders for the Fund not to make such distributions at
the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to
shareholders.
Taxation of Fund Distributions. The Fund anticipates
distributing substantially all of its investment company
taxable income for each taxable year. Those distributions
will be taxable to shareholders as ordinary income and
treated as dividends for federal income tax purposes.
Special provisions of the Internal Revenue Code
govern the eligibility of the Fund's dividends for the
dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for
the deduction. The amount of dividends paid by the Fund
that may qualify for the deduction is limited to the
aggregate amount of qualifying dividends that the Fund
derives from portfolio investments that the Fund has held
for a minimum period, usually 46 days. A corporate
shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To
the extent the Fund's dividends are derived from gross
income from option premiums, interest income or short-term
gains from the sale of securities or dividends from foreign
corporations, those dividends will not qualify for the
deduction.
The Fund may either retain or distribute to
shareholders its net capital gain for each taxable year.
The Fund currently intends to distribute any such amounts.
If net long term capital gains are distributed and
designated as a capital gain distribution, it will be
taxable to shareholders as a long-term capital gain and
will be properly identified in reports sent to shareholders
in January of each year. Such treatment will apply no
matter how long the shareholder has held his or her shares
or whether that gain was recognized by the Fund before the
shareholder acquired his or her shares.
If the Fund elects to retain its net capital gain,
the Fund will be subject to tax on it at the 35% corporate
tax rate. If the Fund elects to retain its net capital
gain, the Fund will provide to
shareholders of record on the last day of its taxable year
information regarding their pro rata share
of the gain and tax paid. As a result, each shareholder
will be required to report his or her pro rata share of
such gain on their tax return as long-term capital gain,
will receive a refundable tax credit for his/her pro rata
share of tax paid by the Fund on the gain, and will
increase the tax basis for his/her shares by an amount
equal to the deemed distribution less the tax credit.
Investment income that may be received by the Fund
from sources within foreign countries may be subject to
foreign taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption
from, taxes on such income.
Distributions by the Fund that do not constitute
ordinary income dividends or capital gain distributions
will be treated as a return of capital to the extent of the
shareholder's tax basis in their shares. Any excess will be
treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or
deemed made) during the year. If prior distributions made
by the Fund must be re-characterized as a non-taxable
return of capital at the end of the fiscal year as a result
of the effect of the Fund's investment policies, they will
be identified as such in notices sent to shareholders.
Distributions by the Fund will be treated in the
manner described above regardless of whether the
distributions are paid in cash or reinvested in additional
shares of the Fund (or of another fund). Shareholders
receiving a distribution in the form of additional shares
will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received,
determined as of the reinvestment date.
The Fund will be required in certain cases to
withhold 30% (29% for payments after December 31, 2003) of
ordinary income dividends, capital gains distributions and
the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct
-------
taxpayer identification number or to properly certify that
number when required, (2) who is subject to backup
withholding for failure to report the receipt of interest
or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to
backup withholding or is an "exempt recipient" (such as a
corporation). All income and any tax withheld by the Fund
is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of
each year.
Tax Effects of Redemptions of Shares. If a
shareholder redeems all or a portion of his/her shares, the
-
shareholder will recognize a gain or loss on the redeemed
shares in an amount equal to the difference between the
proceeds of the redeemed shares and the shareholder's
adjusted tax basis in the shares. All or a portion of any
loss recognized in that manner may be disallowed if the
shareholder purchases other shares of the Fund within 30
days before or after the redemption.
In general, any gain or loss arising from the
redemption of shares of the Fund will be considered capital
gain or loss, if the shares were held as a capital asset.
It will be long-term capital gain or loss if the shares
were held for more than one year. However, any capital
loss arising from the redemption of shares held for six months or less will
be treated as a long-term capital loss to the extent of the
amount of capital gain dividends received on those shares.
Special holding period rules under the Internal Revenue
Code apply in this case to determine the holding period of
shares and there are limits on the deductibility of capital
losses in any year.
Foreign Shareholders. Under U.S. tax law, taxation of a
shareholder who is a foreign person (to include, but not
limited to, a nonresident alien individual, a foreign
trust, a foreign estate, a foreign corporation, or a
foreign partnership) primarily depends on whether the
foreign person's income from the Fund is effectively
connected with the conduct of a U.S. trade or business.
Typically, ordinary income dividends paid from a mutual
fund are not considered "effectively connected" income.
Ordinary income dividends that are paid by the Fund
(and are deemed not "effectively connected income") to
foreign persons will be subject to a U.S. tax withheld by
the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign
Status. The tax rate may be reduced if the foreign person's
country of residence has a tax treaty with the U.S.
allowing for a reduced tax rate on ordinary income
dividends paid by the Fund. All income and any tax withheld
by the Fund is remitted by the Fund to the U.S. Treasury
and is identified in reports mailed to shareholders in
March of each year.
If the ordinary income dividends from the Fund are
---
effectively connected with the conduct of a U.S. trade or
business, then the foreign person may claim an exemption
from the U.S. tax described above provided the Fund obtains
a properly completed and signed Certificate of Foreign
Status.
If the foreign person fails to provide a
certification of his/her foreign status, the Fund will be
required to withhold U.S. tax at a rate of 30% (29% for
payments after December 31, 2003) on ordinary income
dividends, capital gains distributions and the proceeds of
the redemption of shares, paid to any foreign person. All
income and any tax withheld (in this situation) by the Fund
is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of
each year.
The tax consequences to foreign persons entitled to
claim the benefits of an applicable tax treaty may be
different from those described herein. Foreign
shareholders are urged to consult their own tax advisors or
the U.S. Internal Revenue Service with respect to the
particular tax consequences to them of an investment in the
Fund, including the applicability of the U.S. withholding
taxes described above.
Dividend Reinvestment in Another Fund. Shareholders of the
Fund may elect to reinvest all dividends and/or capital
gains distributions in shares of the same class of any of
the other Oppenheimer funds listed above. Reinvestment will
be made without sales charge at the net asset value per
share in effect at the close of business on the payable
date of the dividend or distribution. To elect this option,
the shareholder must notify the Transfer Agent in writing
and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a
prospectus for that fund and an application from the
Distributor to establish an account. Dividends and/or
distributions from shares of certain other Oppenheimer
funds (other than Oppenheimer Cash Reserves) may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through
dealers, brokers and other financial institutions that have
a sales agreement with OppenheimerFunds Distributor, Inc.,
a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of
the other Oppenheimer funds and is sub-distributor for
funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's
Transfer Agent, is a division of the Manager. It is
responsible for maintaining the Fund's shareholder registry
and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also
handles shareholder servicing and administrative functions.
It serves as the Transfer Agent for an annual per account
fee. It also acts as shareholder servicing agent for the
other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the
address and toll-free numbers shown on the back cover.
The Custodian. Citibank, N.A. is the custodian of the
Fund's assets. The custodian's responsibilities include
safeguarding and controlling the Fund's portfolio
securities and handling the delivery of such securities to
and from the Fund. It is the practice of the Fund to deal
with the custodian in a manner uninfluenced by any banking
relationship the custodian may have with the Manager and
its affiliates. The Fund's cash balances with the
custodian in excess of $100,000 are not protected by
federal deposit insurance. Those uninsured balances at
times may be substantial.
Independent Auditors. KPMG LLP are the independent auditors
of the Fund. They audit the Fund's financial statements and
perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and
its affiliates.
INDEPENDENT AUDITORS' REPORT
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THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER GROWTH FUND:
We have audited the accompanying statement of assets and
liabilities of
Oppenheimer Growth Fund, including the statement of
investments, as of August
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 five
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.
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 August 31,
2002, by
correspondence with the custodian and brokers. 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 Growth Fund as of August 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
five years in the period then ended, in conformity with
accounting principles
generally accepted in the United States of America.
KPMG LLP
Denver, Colorado
September 23, 2002
OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS August 31, 2002
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
============================================================
COMMON STOCKS--81.4%
- ------------------------------------------------------------
CONSUMER DISCRETIONARY--22.9%
- ------------------------------------------------------------
AUTOMOBILES--3.9%
Harley-Davidson, Inc. 1,300,000 $ 63,999,000
- ------------------------------------------------------------
MEDIA--0.8%
Comcast Corp.,
Cl. A Special(1) 517,000 12,320,110
- ------------------------------------------------------------
MULTILINE RETAIL--13.4%
BJ's Wholesale
Club, Inc.(1) 680,000 16,694,000
- ------------------------------------------------------------
Costco Wholesale
Corp.(1) 1,750,000 58,467,500
- ------------------------------------------------------------
Kohl's Corp(1) 1,604,500 111,865,740
- ------------------------------------------------------------
Target Corp. 950,000 32,490,000
--------------
219,517,240
- ------------------------------------------------------------
SPECIALTY RETAIL--4.8%
Bed Bath amp;amp; Beyond, Inc.(1) 2,445,000 78,386,700
- ------------------------------------------------------------
CONSUMER STAPLES--3.8%
- ------------------------------------------------------------
FOOD amp;amp; DRUG RETAILING--3.8%
Walgreen Co. 1,800,000 62,550,000
- ------------------------------------------------------------
FINANCIALS--14.0%
- ------------------------------------------------------------
DIVERSIFIED FINANCIALS--10.9%
AMBAC Financial
Group, Inc. 795,600 45,754,956
- ------------------------------------------------------------
Freddie Mac 490,500 31,441,050
- ------------------------------------------------------------
SLM Corp. 1,100,000 100,815,000
--------------
178,011,006
- ------------------------------------------------------------
INSURANCE--3.1%
MBIA, Inc. 1,112,600 51,135,096
- ------------------------------------------------------------
HEALTH CARE--30.5%
- ------------------------------------------------------------
BIOTECHNOLOGY--4.3%
Gilead Sciences, Inc.(1) 1,250,000 40,100,000
- ------------------------------------------------------------
IDEC Pharmaceuticals
Corp.(1) 755,000 30,335,900
--------------
70,435,900
MARKET VALUE
SHARES SEE NOTE 1
============================================================
HEALTH CARE EQUIPMENT amp;amp; SUPPLIES--6.2%
Biomet, Inc. 937,100 $ 25,170,506
- ------------------------------------------------------------
Stryker Corp. 1,327,500 74,831,175
--------------
100,001,681
- ------------------------------------------------------------
HEALTH CARE PROVIDERS amp;amp; SERVICES--14.2%
AmerisourceBergen Corp. 625,000 45,318,750
- ------------------------------------------------------------
Cardinal Health, Inc. 732,000 47,462,880
- ------------------------------------------------------------
Lincare Holdings, Inc.(1) 1,399,200 44,844,360
- ------------------------------------------------------------
McKesson Corp. 980,000 32,869,200
- ------------------------------------------------------------
Tenet Healthcare Corp.(1) 1,312,500 61,910,625
--------------
232,405,815
- ------------------------------------------------------------
PHARMACEUTICALS--5.8%
Johnson amp;amp; Johnson 1,750,000 95,042,500
- ------------------------------------------------------------
INDUSTRIALS--5.2%
- ------------------------------------------------------------
COMMERCIAL SERVICES amp;amp; SUPPLIES--5.2%
Concord EFS, Inc.(1) 2,300,000 46,943,000
- ------------------------------------------------------------
First Data Corp. 1,074,800 37,349,300
--------------
84,292,300
- ------------------------------------------------------------
INFORMATION TECHNOLOGY--5.0%
- ------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.5%
Cisco Systems, Inc.(1) 650,000 8,983,000
- ------------------------------------------------------------
COMPUTERS amp;amp;amp; PERIPHERALS--0.4%
EMC Corp.(1) 1,000,000 6,760,000
- ------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT amp;amp;; PRODUCTS--0.6%
Broadcom Corp., Cl. A(1) 550,000 9,069,500
- ------------------------------------------------------------
SOFTWARE--3.5%
Microsoft Corp.(1) 1,175,000 57,669,000
--------------
Total Common
Stocks (Cost $1,350,683,668) 1,330,578,848
============================================================
OTHER SECURITIES--1.4%
- ------------------------------------------------------------
Nasdaq-100 Unit
Investment Trust(1)
(Cost $37,369,749) 1,000,000 23,490,000
12
OPPENHEIMER GROWTH FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
============================================================
SHORT-TERM NOTES--8.4%
- ------------------------------------------------------------
Barton Capital Corp.,
1.75%, 9/20/02 $ 13,093,000 $ 13,080,907
- ------------------------------------------------------------
Fairway Finance Corp.,
1.74%, 9/9/02 26,551,000 26,540,734
- ------------------------------------------------------------
Neptune Funding Corp.,
1.78%, 10/1/02 38,370,000 38,313,084
- ------------------------------------------------------------
Wyeth:
2%, 9/17/02 25,000,000 24,979,222
2%, 9/26/02 35,000,000 34,954,549
-------------
Total Short-Term Notes
(Cost $137,868,496) 137,868,496
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
============================================================
JOINT REPURCHASE AGREEMENTS--8.9%
- ------------------------------------------------------------
Undivided interest of 36.29% in joint
repurchase agreement with DB Alex Brown
LLC, 1.81%, dated 8/30/02, to be
repurchased at $400,896,609 on 9/3/02,
collateralized by U.S. Treasury Bonds,
5.50%-6.125%, 8/15/28-8/15/29, with a
value of $410,193,562 (Cost
$145,455,000)
$145,455,000 $145,455,000
- ------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(Cost $1,671,376,913) 100.1% 1,637,392,344
- ------------------------------------------------------------
LIABILITIES IN EXCESS OF
OTHER ASSETS (0.1) (2,399,339)
------------------------------
NET ASSETS 100.0% $1,634,993,005
==============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
OPPENHEIMER GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES August 31, 2002
- --------------------------------------------------------------------------------
=========================================================================
ASSETS
- -------------------------------------------------------------------------
Investments, at value (cost $1,671,376,913)--
see accompanying statement $
1,637,392,344
- -------------------------------------------------------------------------
Cash
611,843
- -------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest
sold 716,433
Interest and
dividends 649,612
Other
14,203
- --------------
Total assets
1,639,384,435
=========================================================================
LIABILITIES
- -------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest
redeemed 2,079,475
Transfer and shareholder servicing agent
fees 812,090
Distribution and service plan
fees 642,356
Trustees'
compensation
419,183
Shareholder
reports 401,180
Other
37,146
- --------------
Total
liabilities
4,391,430
=========================================================================
NET ASSETS
$1,634,993,005
==============
=========================================================================
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------
Par value of shares of beneficial interest
$ 68,521
- -------------------------------------------------------------------------
Additional paid-in capital
2,341,849,093
- -------------------------------------------------------------------------
Overdistributed net investment
income (402,691)
- -------------------------------------------------------------------------
Accumulated net realized loss on investment
transactions (672,537,349)
- -------------------------------------------------------------------------
Net unrealized depreciation on
investments (33,984,569)
- --------------
NET ASSETS
$1,634,993,005
==============
14
OPPENHEIMER GROWTH FUND
================================================================================
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $1,173,027,251 and 48,489,125 shares of beneficial
interest
outstanding)
$24.19
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering
price) $25.67
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $317,725,011 and 13,937,727
shares of beneficial interest
outstanding) $22.80
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $75,228,794 and 3,245,756
shares of beneficial interest
outstanding) $23.18
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $2,242,739 and 93,476 shares
of beneficial interest
outstanding) $23.99
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $66,769,210 and 2,754,559
shares of beneficial interest
outstanding) $24.24
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
OPPENHEIMER GROWTH FUND
STATEMENT OF OPERATIONS For the Year Ended August 31, 2002
- --------------------------------------------------------------------------------
=========================================================================
INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $35,014)
$ 7,920,000
- -------------------------------------------------------------------------
Interest
7,455,844
- -------------
Total investment
income 15,375,844
=========================================================================
EXPENSES
- -------------------------------------------------------------------------
Management
fees
12,880,111
- -------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
3,313,032
Class
B
4,141,613
Class
C
931,561
Class
N
8,087
- -------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class
A
4,947,368
Class
B
1,465,583
Class
C
328,649
Class
N
5,563
Class
Y
320,809
- -------------------------------------------------------------------------
Shareholder
reports 1,503,019
- -------------------------------------------------------------------------
Trustees'
compensation
121,287
- -------------------------------------------------------------------------
Custodian fees and
expenses 99,581
- -------------------------------------------------------------------------
Other
93,018
- -------------
Total
expenses
30,159,281
Less reduction to custodian
expenses (11,345)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class A, B, C and
N (131,324)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class
Y (90,843)
- -------------
Net
expenses
29,925,769
=========================================================================
NET INVESTMENT
LOSS (14,549,925)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
- -------------------------------------------------------------------------
Net realized gain (loss) on:
Investments
(315,329,422)
Closing and expiration of option contracts
written 207,652
- -------------
Net realized
loss (315,121,770)
- -------------------------------------------------------------------------
Net change in unrealized depreciation on
investments (23,465,967)
- -------------
Net realized and unrealized
loss (338,587,737)
=========================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(353,137,662)
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
OPPENHEIMER GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
2002 2001
===============================================================================
OPERATIONS
- -------------------------------------------------------------------------------
Net investment income (loss) $
(14,549,925) $ 8,048,187
- -------------------------------------------------------------------------------
Net realized loss
(315,121,770) (357,415,519)
- -------------------------------------------------------------------------------
Net change in unrealized depreciation
(23,465,967) (1,979,523,397)
- -------------------------------
Net decrease in net assets resulting
from operations
(353,137,662) (2,328,890,729)
===============================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dividends from net investment income:
Class A
(7,204,260) --
Class B
- -- --
Class C
- -- --
Class N
(7,852) --
Class Y
(714,194) --
- -------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
- -- (169,073,487)
Class B
- -- (57,798,213)
Class C
- -- (10,658,043)
Class N
- -- --
Class Y
- -- (10,089,485)
===============================================================================
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A
(124,336,568) 154,610,675
Class B
(92,299,250) 69,919,439
Class C
(10,045,794) 36,664,993
Class N
2,370,990 292,597
Class Y
(6,698,416) 2,236,334
===============================================================================
NET ASSETS
- -------------------------------------------------------------------------------
Total decrease
(592,073,006) (2,312,785,919)
- -------------------------------------------------------------------------------
Beginning of period
2,227,066,011 4,539,851,930
- -------------------------------
End of period [including undistributed
(overdistributed) net investment income
of $(402,691) and $7,619,531, respectively]
$1,634,993,005 $2,227,066,011
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31,
2002 2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.20
$ 62.31 $ 39.77 $ 31.54 $ 40.42
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.13) .18 (.02) .10 .73
Net realized and unrealized gain (loss) (4.74)
(30.05) 25.42 11.69 (5.05)
- -------------------------------------------------------
Total from investment operations (4.87)
(29.87) 25.40 11.79 (4.32)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.14) -- (.03) (.48) (.66)
Distributions from net realized gain
- -- (3.24) (2.83) (3.08) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders
(.14) (3.24) (2.86) (3.56) (4.56)
- --------------------------------------------------------------------------------
Net asset value, end of period $24.19
$29.20 $62.31 $39.77 $31.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (16.77)%
(49.87)% 67.10% 39.39% (11.62)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,173,027
$1,553,066 $3,176,435 $1,730,087 $1,356,905
- --------------------------------------------------------------------------------
Average net assets (in thousands) $1,430,735
$2,149,795 $2,390,125 $1,620,201 $1,640,181
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss)
(0.54)% 0.45% (0.01)% 0.24% 1.90%
Expenses
1.31% 1.06% 1.01% 1.05% 1.00%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate
60% 92% 49% 106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
OPPENHEIMER GROWTH FUND
CLASS B YEAR ENDED AUGUST 31,
2002 2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.60
$ 59.55 $ 38.37 $ 30.54 $ 39.34
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.54) (.10) (.21) (.20) .43
Net realized and unrealized gain (loss) (4.26)
(28.61) 24.22 11.32 (4.89)
- -------------------------------------------------------
Total from investment operations (4.80)
(28.71) 24.01 11.12 (4.46)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- -- -- (.21) (.44)
Distributions from net realized gain
- -- (3.24) (2.83) (3.08) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders
- -- (3.24) (2.83) (3.29) (4.34)
- --------------------------------------------------------------------------------
Net asset value, end of period $22.80
$27.60 $59.55 $38.37 $30.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (17.39)%
(50.26)% 65.82% 38.27% (12.32)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $317,725
$483,298 $996,000 $445,629 $330,442
- --------------------------------------------------------------------------------
Average net assets (in thousands) $415,965
$692,159 $676,485 $410,058 $353,574
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss)
(1.30)% (0.31)% (0.78)% (0.58)% 1.08%
Expenses
2.08% 1.83% 1.78% 1.86% 1.81%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate
60% 92% 49% 106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED AUGUST 31,
2002 2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.06
$ 60.48 $ 38.92 $ 30.93 $ 39.87
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.43) (.04) (.09) (.20) .46
Net realized and unrealized gain (loss) (4.45)
(29.14) 24.48 11.47 (4.99)
- --------------------------------------------------------
Total from investment operations (4.88)
(29.18) 24.39 11.27 (4.53)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- -- -- (.21) (.51)
Distributions from net realized gain
- -- (3.24) (2.83) (3.07) (3.90)
- --------------------------------------------------------
Total dividends and/or distributions
to shareholders
- -- (3.24) (2.83) (3.28) (4.41)
- --------------------------------------------------------------------------------
Net asset value, end of period $23.18
$28.06 $60.48 $38.92 $30.93
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (17.39)%
(50.26)% 65.87% 38.28% (12.33)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $75,229
$102,144 $176,150 $57,970 $44,377
- --------------------------------------------------------------------------------
Average net assets (in thousands) $93,082
$133,823 $103,076 $53,501 $43,817
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss)
(1.31)% (0.32)% (0.77)% (0.58)% 1.06%
Expenses
2.08% 1.84% 1.78% 1.86% 1.81%(3)
- --------------------------------------------------------------------------------
Portfolio turnover rate
60% 92% 49% 106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
OPPENHEIMER GROWTH FUND
CLASS N YEAR ENDED AUGUST
31, 2002 2001(1)
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $
29.13 $ 35.39
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
(loss) (.13)(2) (.01)
Net realized and unrealized loss
(4.78)(2) (6.25)
- ---------------------------------
Total from investment operations
(4.91) (6.26)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income (.23) --
Distributions from net realized
gain -- --
- ---------------------------------
Total dividends and/or distributions to
shareholders (.23) --
- --------------------------------------------------------------------------------
Net asset value, end of period
$23.99 $29.13
=================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3)
(17.00)% (17.69)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands)
$2,243 $274
- --------------------------------------------------------------------------------
Average net assets (in thousands)
$1,623 $ 70
- --------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment loss
(0.90)% (0.33)%
Expenses
1.57% 1.40%
- --------------------------------------------------------------------------------
Portfolio turnover
rate 60% 92%
1. For the period from March 1, 2001 (inception of
offering) to August 31, 2001.
2. Per share amounts calculated based on the average shares
outstanding during
the period.
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.
21
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED AUGUST 31,
2002 2001 2000 1999 1998
================================================================================
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.27
$ 62.33 $ 39.76 $ 31.54 $ 40.43
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.06) .28 .16 .18 .87
Net realized and unrealized gain (loss) (4.73)
(30.10) 25.37 11.69 (5.09)
- -------------------------------------------------------
Total from investment operations (4.79)
(29.82) 25.53 11.87 (4.22)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.24) -- (.13) (.58) (.77)
Distributions from net realized gain
- -- (3.24) (2.83) (3.07) (3.90)
- -------------------------------------------------------
Total dividends and/or distributions
to shareholders
(.24) (3.24) (2.96) (3.65) (4.67)
- --------------------------------------------------------------------------------
Net asset value, end of period $24.24
$29.27 $62.33 $39.76 $31.54
========================================================
================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (16.50)%
(49.77)% 67.56% 39.74% (11.38)%
- --------------------------------------------------------------------------------
================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $66,769 $
88,284 $191,267 $ 93,936 $132,146
- --------------------------------------------------------------------------------
Average net assets (in thousands) $81,127
$124,168 $134,650 $116,615 $135,098
- --------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss)
(0.25)% 0.67% 0.27% 0.65% 2.16%
Expenses
1.13% 0.86% 0.73% 0.80% 0.71%(3)
Expenses, net of voluntary waiver of
transfer agent fees and/or reduction
to custodian expenses
1.02% 0.86% 0.73% 0.80% 0.71%
- --------------------------------------------------------------------------------
Portfolio turnover rate
60% 92% 49% 106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Growth 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).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the
Fund are maintained
in U.S. dollars. Prices of securities denominated in
foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related
to the purchase and sale of foreign securities and
investment income are
translated at the rates of exchange prevailing on the
respective dates of such
transactions.
The effect of changes in foreign currency exchange rates
on investments is
separately identified from the fluctuations arising from
changes in market
values of securities held and reported with all other
foreign currency gains
and losses in the Fund's Statement of Operations.
23
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 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.
As of August 31, 2002, the Fund had approximately
$229,706,000 of
post-October losses available to offset future capital
gains, if any. Such
losses, if unutilized, will expire in 2011.
As of August 31, 2002, the Fund had available for federal
income tax purposes
unused capital loss carryforwards as follows:
EXPIRING
------------------------
2009 $ 50,983,636
2010 391,696,099
------------
Total $442,679,735
============
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded
retirement plan for
the Fund's independent trustees. Benefits are based on
years of service and
fees paid to each trustee during the years of service.
During the year ended
August 31, 2002, the Fund's projected benefit obligations
were increased by
$55,263 and payments of $12,454 were made to retired
trustees, resulting in an
accumulated liability of $402,757 as of August 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 periodically
adjusted as though an
equivalent amount had been 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.
24
OPPENHEIMER GROWTH FUND
- --------------------------------------------------------------------------------
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 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 August 31, 2002, amounts have been reclassified
to reflect a
decrease in paid-in capital of $14,454,009. Overdistributed
net investment
income was decreased by the same amount. Net assets of the
Fund were unaffected
by the reclassifications.
The tax character of distributions paid during the years
ended August 31, 2002
and August 31, 2001 was as follows:
YEAR
ENDED YEAR ENDED
AUGUST 31,
2002 AUGUST 31, 2001
- -----------------------------------------------------------
Distributions paid from:
Ordinary income
$7,926,306 $ 96,345,987
Long-term capital gain
- -- 151,273,241
Return of capital
- -- --
- ---------------------------
Total
$7,926,306 $247,619,228
===========================
As of August 31, 2002, the components of distributable
earnings on a tax basis
were as follows:
Overdistributed net
investment income $ (402,691)
Accumulated net realized loss (672,537,349)
Net unrealized depreciation (33,984,569)
-------------
Total $(706,924,609)
=============
- --------------------------------------------------------------------------------
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.
25
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par
value shares of
beneficial interest. Transactions in shares of beneficial
interest were as
follows:
YEAR ENDED AUGUST 31, 2002
YEAR ENDED AUGUST 31, 2001(1)
SHARES
AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------
CLASS A
Sold 6,933,882 $ 195,310,273
10,569,340 $ 434,907,471
Dividends and/or
distributions reinvested 229,470
6,758,016 3,414,802 158,822,473
Redeemed (11,867,029) (326,404,857)
(11,769,825) (439,119,269)
- ------------------------------------------------------------
Net increase (decrease) (4,703,677)
$(124,336,568) 2,214,317 $ 154,610,675
============================================================
- --------------------------------------------------------------------------------
CLASS B
Sold 2,659,840 $
70,453,666 5,557,121 $ 229,365,850
Dividends and/or
distributions reinvested --
- -- 1,227,686 54,263,720
Redeemed (6,235,475) (162,752,916)
(5,997,793) (213,710,131)
- ------------------------------------------------------------
Net increase (decrease) (3,575,635) $
(92,299,250) 787,014 $ 69,919,439
============================================================
- --------------------------------------------------------------------------------
CLASS C
Sold 1,099,282 $
29,093,790 1,717,522 $ 69,151,022
Dividends and/or
distributions reinvested --
- -- 217,183 9,762,405
Redeemed (1,493,796) (39,139,584)
(1,207,014) (42,248,434)
- ------------------------------------------------------------
Net increase (decrease) (394,514) $
(10,045,794) 727,691 $ 36,664,993
============================================================
- --------------------------------------------------------------------------------
CLASS N
Sold 140,675 $
3,970,419 9,401 $ 292,765
Dividends and/or
distributions reinvested 268
7,845 -- --
Redeemed (56,863)
(1,607,274) (5) (168)
- ------------------------------------------------------------
Net increase (decrease) 84,080 $
2,370,990 9,396 $ 292,597
============================================================
- --------------------------------------------------------------------------------
CLASS Y
Sold 877,421 $
24,490,320 1,574,830 $$ 65,369,945
Dividends and/or
distributions reinvested 24,235
713,722 216,565 10,076,798
Redeemed (1,162,874) (31,902,458)
(1,844,136) (73,210,409)
- ------------------------------------------------------------
Net increase (decrease) (261,218) $
(6,698,416) (52,741) $ 2,236,334
============================================================
1. For the year ended August 31, 2001, for Class A, B, C
and Y shares and for
the period from March 1, 2001 (inception of offering) to August 31, 2001, for
Class N shares.
26
OPPENHEIMER GROWTH FUND
================================================================================
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 August 31, 2002, were $999,741,770 and
$1,084,966,491, respectively.
As of August 31, 2002,
unrealized appreciation (depreciation) based on cost of securities for federal
income tax purposes of $1,671,528,206 was composed of:
Gross unrealized appreciation $
153,121,143
Gross unrealized depreciation
(187,257,005)
- ----------
Net unrealized depreciation $
(34,135,862)
=============
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 which provides for a 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 $1.0 billion, 0.56% of the next $2.0
billion, and 0.54% of the average annual net assets in excess of $4.5 billion.
- --------------------------------------------------------------------------------
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. 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.
27
OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
================================================================================
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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)
- ---------------------------------------------------------------------------------
August 31, 2002 $2,350,474 $668,545
$204,213 $2,130,360 $174,319 $31,178
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
- -------------------------------------------------------------------------------
August 31, 2002 $21,386 $1,099,479
$22,633 $249
- --------------------------------------------------------------------------------
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 August 31, 2002 , payments under the Class A Plan
totaled $3,313,032, all of which were paid by the Distributor to recipients, and
included $156,580 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 August 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 $4,141,613 $3,277,861
$11,192,681 3.52%
Class C Plan 931,561 193,657
1,590,674 2.11
Class N Plan 8,087 8,000
56,842 2.53
================================================================================
5. OPTION ACTIVITY
The Fund may buy and sell put
and call options, or write put and covered call options on portfolio securities
in order to produce incremental earnings or protect against changes in the value
of portfolio securities.
28
OPPENHEIMER GROWTH FUND
The Fund generally purchases put options or writes covered call options to hedge
against adverse movements in the value of portfolio holdings. When an option is
written, the Fund receives a premium and becomes obligated to sell or purchase
the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal exchange on
which the option is traded and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon the expiration or closing of
the option transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the cost of
the security for a purchased put or call option is adjusted by the amount of
premium received or paid.
Securities designated to cover outstanding call options are noted in the Statement of
Investments where applicable. Shares subject to call, expiration date, exercise
price, premium received and market value are detailed in a note to the Statement
of Investments. Options written are reported as a liability in the Statement of
Assets and Liabilities. Realized gains and losses are reported in the Statement
of Operations.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for
the year ended August 31, 2002 was as follows:
CALL OPTIONS
- ----------------------------
NUMBER
OF AMOUNT OF
CONTRACTS PREMIUMS
- ------------------------------------------------------
Options outstanding as of
August 31, 2001
- -- $ --
Options written
1,750 207,652
Options closed or expired
(1,750) (207,652)
- ------------------------
Options outstanding as of
August 31, 2002
- -- $ --
========================
================================================================================
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions 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 August 31,
2002.
OPPENHEIMER GROWTH FUND
Appendix A
- ------------------------------------------------------------
Industry Classifications
- ------------------------------------------------------------
Aerospace amp;amp; Defense Household Durables
Air Freight amp;amp; Couriers Household Products
Airlines Industrial Conglomerates
Auto Components Insurance
Automobiles Internet amp;amp; Catalog Retail
Banks Internet Software amp;amp; Services
Beverages Information Technology Consulting amp;amp;
Services
Biotechnology Leisure Equipment amp;amp; Products
Building Products Machinery
Chemicals Marine
Commercial Services amp;amp; Supplies Media
Communications Equipment Metals amp;amp; Mining
Computers amp;amp; Peripherals Multiline Retail
Construction amp;amp; Engineering Multi-Utilities
Construction Materials Office Electronics
Containers amp;amp; Packaging Oil amp;amp; Gas
Distributors Paper amp;amp; Forest Products
Diversified Financials Personal Products
Diversified Telecommunication Pharmaceuticals
Services
Electric Utilities Real Estate
Electrical Equipment Road amp;amp; Rail
Electronic Equipment amp;amp; Instruments Semiconductor Equipment amp;amp; Products
Energy Equipment amp;amp; Services Software
Food amp;amp; Drug Retailing Specialty Retail
Food Products Textiles amp;amp; Apparel
Gas Utilities Tobacco
Health Care Equipment amp;amp; Supplies Trading Companies amp;amp; Distributors
Health Care Providers amp;amp; Services Transportation Infrastructure
Hotels Restaurants amp;amp; Leisure Water Utilities
Wireless Telecommunication Services
B-11
Appendix B
OppenheimerFunds Special Sales Charge Arrangements and
- -------------------------------------------------------
Waivers
- -------
In certain cases, the initial sales charge that applies to
purchases of Class A shares2 of the Oppenheimer funds or
the contingent deferred sales charge that may apply to
Class A, Class B or Class C shares may be waived.3 That is
because of the economies of sales efforts realized by
OppenheimerFunds Distributor, Inc., (referred to in this
document as the "Distributor"), or by dealers or other
financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers
relating to Retirement Plans do not apply to Oppenheimer
municipal funds, because shares of those funds are not
available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and
in the Prospectus and Statement of Additional Information
of the applicable Oppenheimer funds, the term "Retirement
Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k)
of the Internal Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans4
4) Group Retirement Plans5
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"),
including traditional IRAs, Roth IRAs,
SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the
applicability of a special arrangement or waiver in a
particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this
document as the "Transfer Agent") of the particular
Oppenheimer fund. These waivers and special arrangements
may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc.
(referred to in this document as the "Manager").
Waivers that apply at the time shares are redeemed must be
requested by the shareholder and/or dealer in the
redemption request.
I. Applicability of Class A Contingent Deferred Sales Charges
in Certain Cases
- ------------------------------------------------------------
Purchases of Class A Shares of Oppenheimer Funds That Are
Not Subject to Initial Sales Charge but May Be Subject to
the Class A Contingent Deferred Sales Charge (unless a
waiver applies).
There is no initial sales charge on purchases of
Class A shares of any of the Oppenheimer funds in the cases
listed below. However, these purchases may be subject to
the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer
Rochester National Municipals and Rochester Fund
Municipals) of the beginning of the calendar month of their
purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these
waivers that are subject to the Class A contingent deferred
sales charge, the Distributor will pay the applicable
concession described in the Prospectus under "Class A
Contingent Deferred Sales Charge."6 This waiver provision
applies to:
|_| Purchases of Class A shares aggregating $1 million or
more.
|_| Purchases of Class A shares by a Retirement Plan that
was permitted to purchase such shares at net asset
value but subject to a contingent deferred sales
charge prior to March 1, 2001. That included plans
(other than IRA or 403(b)(7) Custodial Plans)
that: 1) bought shares costing $500,000 or more,
2) had at the time of purchase 100 or more
eligible employees or total plan assets of
$500,000 or more, or 3) certified to the
Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover
IRA, if the purchases are made:
1) through a broker, dealer, bank or registered
investment adviser that has made special
arrangements with the Distributor for those
purchases, or
2) by a direct rollover of a distribution from a
qualified Retirement Plan if the administrator
of that Plan has made special arrangements with
the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that
have any of the following record-keeping
arrangements:
1) The record keeping is performed by Merrill
Lynch Pierce Fenner amp;amp; Smith, Inc. ("Merrill
Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor
signs the record-keeping service agreement with
Merrill Lynch, the Plan must have $3 million or
more of its assets invested in (a) mutual
funds, other than those advised or managed by
Merrill Lynch Investment Management, L.P.
("MLIM"), that are made available under a
Service Agreement between Merrill Lynch and the
mutual fund's principal underwriter or
distributor, and (b) funds advised or managed
by MLIM (the funds described in (a) and (b) are
referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is
performed on a daily valuation basis by a
record keeper whose services are provided under
a contract or arrangement between the
Retirement Plan and Merrill Lynch. On the date
the plan sponsor signs the record keeping
service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets
(excluding assets invested in money market
funds) invested in Applicable Investments.
3) The record keeping for a Retirement Plan is
handled under a service agreement with Merrill
Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more
eligible employees (as determined by the
Merrill Lynch plan conversion manager).
II. Waivers of Class A Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------
A. Waivers of Initial and Contingent Deferred Sales Charges
for Certain Purchasers.
Class A shares purchased by the following investors are not
subject to any Class A sales charges (and no concessions
are paid by the Distributor on such purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and
employees (and their "immediate families") of the
Fund, the Manager and its affiliates, and
retirement plans established by them for their
employees. The term "immediate family" refers to
one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers
and sisters, sons- and daughters-in-law, a
sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews; relatives by virtue of
a remarriage (step-children, step-parents, etc.)
are included.
|_| Registered management investment companies, or
separate accounts of insurance companies having an
agreement with the Manager or the Distributor for
that purpose.
|_| Dealers or brokers that have a sales agreement with
the Distributor, if they purchase shares for their
own accounts or for retirement plans for their
employees.
|_| Employees and registered representatives (and their
spouses) of dealers or brokers described above or
financial institutions that have entered into
sales arrangements with such dealers or brokers
(and which are identified as such to the
Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the
time of purchase that the purchase is for the
purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment
advisors that have entered into an agreement with
the Distributor providing specifically for the use
of shares of the Fund in particular investment
products made available to their clients. Those
clients may be charged a transaction fee by their
dealer, broker, bank or advisor for the purchase
or sale of Fund shares.
|_| Investment advisors and financial planners who have
entered into an agreement for this purpose with
the Distributor and who charge an advisory,
consulting or other fee for their services and buy
shares for their own accounts or the accounts of
their clients.
|_| "Rabbi trusts" that buy shares for their own
accounts, if the purchases are made through a
broker or agent or other financial intermediary
that has made special arrangements with the
Distributor for those purchases.
|_| Clients of investment advisors or financial planners
(that have entered into an agreement for this
purpose with the Distributor) who buy shares for
their own accounts may also purchase shares
without sales charge but only if their accounts
are linked to a master account of their investment
advisor or financial planner on the books and
records of the broker, agent or financial
intermediary with which the Distributor has made
such special arrangements . Each of these
investors may be charged a fee by the broker,
agent or financial intermediary for purchasing
shares.
|_| Directors, trustees, officers or full-time employees
of OpCap Advisors or its affiliates, their
relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares
for those persons.
|_| Accounts for which Oppenheimer Capital (or its
successor) is the investment advisor (the
Distributor must be advised of this arrangement)
and persons who are directors or trustees of the
company or trust which is the beneficial owner of
such accounts.
|_| A unit investment trust that has entered into an
appropriate agreement with the Distributor.
|_| Dealers, brokers, banks, or registered investment
advisers that have entered into an agreement with
the Distributor to sell shares to defined
contribution employee retirement plans for which
the dealer, broker or investment adviser provides
administration services.
|_| Retirement Plans and deferred compensation plans and
trusts used to fund those plans (including, for
example, plans qualified or created under sections
401(a), 401(k), 403(b) or 457 of the Internal
Revenue Code), in each case if those purchases are
made through a broker, agent or other financial
intermediary that has made special arrangements
with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former
Quest for Value Advisors) whose Class B or Class C
shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to
the termination of the Class B and Class C
TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan that had agreed with the
former Quest for Value Advisors to purchase shares
of any of the Former Quest for Value Funds at net
asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund
clearinghouse, if that arrangement was consummated
and share purchases commenced by December 31, 1996.
B. Waivers of Initial and Contingent Deferred Sales Charges
in Certain Transactions.
Class A shares issued or purchased in the following
transactions are not subject to sales charges (and no
concessions are paid by the Distributor on such purchases):
|_| Shares issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers,
to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or
other distributions reinvested from the Fund or
other Oppenheimer funds (other than Oppenheimer
Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the
Distributor.
|_| Shares purchased through a broker-dealer that has
entered into a special agreement with the
Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds
using the proceeds of shares redeemed in the prior
30 days from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries)
on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also
applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were
purchased and paid for in this manner. This waiver
must be requested when the purchase order is
placed for shares of the Fund, and the Distributor
may require evidence of qualification for this
waiver.
|_| Shares purchased with the proceeds of maturing
principal units of any Qualified Unit Investment
Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan
repayments by a participant in a Retirement Plan
for which the Manager or an affiliate acts as
sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge
for Certain Redemptions.
The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent
deferred sales charge are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are
limited annually to no more than 12% of the
account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law
or involuntary redemptions of small accounts
(please refer to "Shareholder Account Rules and
Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans
for any of the following purposes:
1) Following the death or disability (as defined
in the Internal Revenue Code) of the
participant or beneficiary. The death or
disability must occur after the participant's
account was established.
2) To return excess contributions.
3) To return contributions made due to a mistake
of fact.
4) Hardship withdrawals, as defined in the plan.7
5) Under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code, or, in
the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the
Internal Revenue Code.
6) To meet the minimum distribution requirements
of the Internal Revenue Code.
7) To make "substantially equal periodic payments"
as described in Section 72(t) of the Internal
Revenue Code.
8) For loans to participants or beneficiaries.
9) Separation from service.8
10) Participant-directed redemptions to
purchase shares of a mutual fund (other than a
fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special
arrangements with the Distributor.
11) Plan termination or "in-service
distributions," if the redemption proceeds are
rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special
agreement with the Distributor allowing this
waiver.
|_| For distributions from retirement plans that have $10
million or more in plan assets and that have
entered into a special agreement with the
Distributor.
|_| For distributions from retirement plans which are
part of a retirement plan product or platform
offered by certain banks, broker-dealers,
financial advisors, insurance companies or record
keepers which have entered into a special
agreement with the Distributor.
III. Waivers of Class B, Class C and Class N Sales Charges
of Oppenheimer Funds
- ---------------------------------------------------------------
The Class B, Class C and Class N contingent deferred sales
charges will not be applied to shares purchased in certain
types of transactions or redeemed in certain circumstances
described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales
charges will be waived for redemptions of shares in the
following cases:
|_| Shares redeemed involuntarily, as described in
"Shareholder Account Rules and Policies," in the
applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans
following the death or disability of the last
surviving shareholder. The death or disability
must have occurred after the account was
established, and for disability you must provide
evidence of a determination of disability by the
Social Security Administration.
|_| The contingent deferred sales charges are generally
not waived following the death or disability of a
grantor or trustee for a trust account. The
contingent deferred sales charges will only be
waived in the limited case of the death of the
trustee of a grantor trust or revocable living
trust for which the trustee is also the sole
beneficiary. The death or disability must have
occurred after the account was established, and
for disability you must provide evidence of a
determination of disability by the Social Security
Administration.
|_| Distributions from accounts for which the
broker-dealer of record has entered into a special
agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement
Plans whose records are maintained on a daily
valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S.
Government Trust from accounts of clients of
financial institutions that have entered into a
special arrangement with the Distributor for this
purpose.
|_| Redemptions requested in writing by a Retirement Plan
sponsor of Class C shares of an Oppenheimer fund
in amounts of $500,000 or more and made more than
12 months after the Retirement Plan's first
purchase of Class C shares, if the redemption
proceeds are invested in Class N shares of one or
more Oppenheimer funds.
|_| Distributions9 from Retirement Plans or other
employee benefit plans for any of the following
purposes:
1) Following the death or disability (as defined
in the Internal Revenue Code) of the
participant or beneficiary. The death or
disability must occur after the participant's
account was established in an Oppenheimer fund.
2) To return excess contributions made to a
participant's account.
3) To return contributions made due to a mistake
of fact.
4) To make hardship withdrawals, as defined in the
plan.10
5) To make distributions required under a
Qualified Domestic Relations Order or, in the
case of an IRA, a divorce or separation
agreement described in Section 71(b) of the
Internal Revenue Code.
6) To meet the minimum distribution requirements
of the Internal Revenue Code.
7) To make "substantially equal periodic payments"
as described in Section 72(t) of the Internal
Revenue Code.
8) For loans to participants or beneficiaries.11
9) On account of the participant's separation from
service.12
10) Participant-directed redemptions to
purchase shares of a mutual fund (other than a
fund managed by the Manager or a subsidiary of
the Manager) offered as an investment option in
a Retirement Plan if the plan has made special
arrangements with the Distributor.
11) Distributions made on account of a plan
termination or "in-service" distributions, if
the redemption proceeds are rolled over
directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's
account under an Automatic Withdrawal Plan
after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions
does not exceed 10% of the account's value,
adjusted annually.
13) Redemptions of Class B shares under an
Automatic Withdrawal Plan for an account other
than a Retirement Plan, if the aggregate value
of the redeemed shares does not exceed 10% of
the account's value, adjusted annually.
14) For distributions from 401(k) plans
sponsored by broker-dealers that have entered
into a special arrangement with the Distributor
allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under
an Automatic Withdrawal Plan from an account other
than a Retirement Plan if the aggregate value of
the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain
Transactions.
The contingent deferred sales charge is also waived on
Class B and Class C shares sold or issued in the following
cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment
companies or separate accounts of insurance
companies having an agreement with the Manager or
the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the
Fund is a party.
|_| Shares sold to present or former officers, directors,
trustees or employees (and their "immediate
families" as defined above in Section I.A.) of the
Fund, the Manager and its affiliates and
retirement plans established by them for their
employees.
IV. Special Sales Charge Arrangements for Shareholders of
Certain Oppenheimer Funds Who Were Shareholders of
Former Quest for Value Funds
- -------------------------------------------------------------
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares described
in the Prospectus or Statement of Additional Information of
the Oppenheimer funds are modified as described below for
certain persons who were shareholders of the former Quest
for Value Funds. To be eligible, those persons must have
been shareholders on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to
those former Quest for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer
Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer
Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
These arrangements also apply to shareholders of the
following funds when they merged (were reorganized) into
various Oppenheimer funds on November 24, 1995:
Quest for Value U.S. Government Income Fund Quest for
Value New York Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest
for Value National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value
California Tax-Exempt Fund
All of the funds listed above are referred to in this
Appendix as the "Former Quest for Value Funds." The
waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_| acquired by such shareholder pursuant to an exchange
of shares of an Oppenheimer fund that was one of
the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares
of another Oppenheimer fund that were acquired
pursuant to the merger of any of the Former Quest
for Value Funds into that other Oppenheimer fund
on November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for
Certain Former Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table
sets forth the initial sales charge rates for Class A
shares purchased by members of "Associations" formed for
any purpose other than the purchase of securities. The
rates in the table apply if that Association purchased
shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC
Distributors prior to November 24, 1995.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales Charge Concession as
Number of Eligible Charge as a % of as a % of Net Amount % of Offering
Employees or Members Offering Price Invested Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
For purchases by Associations having 50 or more
eligible employees or members, there is no initial sales
charge on purchases of Class A shares, but those shares are
subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the
lower of either the sales charge rate in the table based on
the number of members of an Association, or the sales
charge rate that applies under the Right of Accumulation
described in the applicable fund's Prospectus and Statement
of Additional Information. Individuals who qualify under
this arrangement for reduced sales charge rates as members
of Associations also may purchase shares for their
individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.
|X| Waiver of Class A Sales Charges for Certain
Shareholders. Class A shares purchased by the following
investors are not subject to any Class A initial or
contingent deferred sales charges:
o Shareholders who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired shares of
any of the Former Quest for Value Funds by merger of a
portfolio of the AMA Family of Funds.
o Shareholders who acquired shares of any Former Quest
for Value Fund by merger of any of the portfolios of the
Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions. The Class A contingent deferred
sales charge will not apply to redemptions of Class A
shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer
that is or was not permitted to receive a sales load or
redemption fee imposed on a shareholder with whom that
dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations
adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales
Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to
March 6, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of
Class A, Class B or Class C shares of an Oppenheimer fund.
The shares must have been acquired by the merger of a
Former Quest for Value Fund into the fund or by exchange
from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged. Those shares must have
been purchased prior to March 6, 1995 in connection with:
o withdrawals under an automatic withdrawal plan
holding only either Class B or Class C shares if the
annual withdrawal does not exceed 10% of the initial
value of the account value, adjusted annually, and
o liquidation of a shareholder's account if the
aggregate net asset value of shares held in the account
is less than the required minimum value of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or
After March 6, 1995 but Prior to November 24, 1995. In the
following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been
acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that
was a Former Quest For Value Fund or into which such Former
Quest for Value Fund merged. Those shares must have been
purchased on or after March 6, 1995, but prior to November
24, 1995:
o redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination of total
disability by the U.S. Social Security Administration);
o withdrawals under an automatic withdrawal plan (but
only for Class B or Class C shares) where the annual
withdrawals do not exceed 10% of the initial value of
the account value; adjusted annually, and
o liquidation of a shareholder's account if the
aggregate net asset value of shares held in the account
is less than the required minimum account value.
A shareholder's account will be credited with the
amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the
Oppenheimer fund described in this section if the proceeds
are invested in the same Class of shares in that fund or
another Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of
Certain Oppenheimer Funds Who Were Shareholders of
Connecticut Mutual Investment Accounts, Inc.
- ---------------------------------------------------------
The initial and contingent deferred sale charge rates and
waivers for Class A and Class B shares described in the
respective Prospectus (or this Appendix) of the following
Oppenheimer funds (each is referred to as a "Fund" in this
section):
Oppenheimer U. S. Government Trust,
Oppenheimer Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders
who were shareholders of the following funds (referred to
as the "Former Connecticut Mutual Funds") on March 1, 1996,
when OppenheimerFunds, Inc. became the investment adviser
to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut
Mutual Total Return Account
Connecticut Mutual Government Securities Account CMIA
LifeSpan Capital Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan
Balanced Account
Connecticut Mutual Growth Account CMIA Diversified
Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|X| Class A Contingent Deferred Sales Charge. Certain
shareholders of a Fund and the other Former Connecticut
Mutual Funds are entitled to continue to make additional
purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A
contingent deferred sales charge that was in effect prior
to March 18, 1996 (the "prior Class A CDSC"). Under the
prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1%
contingent deferred sales charge on an amount equal to the
current market value or the original purchase price of the
shares sold, whichever is smaller (in such redemptions, any
shares not subject to the prior Class A CDSC will be
redeemed first).
Those shareholders who are eligible for the prior
Class A CDSC are:
1) persons whose purchases of Class A shares of a
Fund and other Former Connecticut Mutual Funds
were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases
pursuant to the Fund's policies on Combined
Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former
Connecticut Mutual Funds, and
2) persons whose intended purchases under a
Statement of Intention entered into prior to
March 18, 1996, with the former general
distributor of the Former Connecticut Mutual
Funds to purchase shares valued at $500,000 or
more over a 13-month period entitled those
persons to purchase shares at net asset value
without being subject to the Class A initial
sales charge
Any of the Class A shares of a Fund and the other
Former Connecticut Mutual Funds that were purchased at net
asset value prior to March 18, 1996, remain subject to the
prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant
to this arrangement they will be subject to the prior Class
A CDSC.
|X| Class A Sales Charge Waivers. Additional Class A
shares of a Fund may be purchased without a sales charge,
by a person who was in one (or more) of the categories
below and acquired Class A shares prior to March 18, 1996,
and still holds Class A shares:
1) any purchaser, provided the total initial
amount invested in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made
pursuant to the Combined Purchases, Statement
of Intention and Rights of Accumulation
features available at the time of the initial
purchase and such investment is still held in
one or more of the Former Connecticut Mutual
Funds or a Fund into which such Fund merged;
2) any participant in a qualified plan, provided
that the total initial amount invested by the
plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled
$500,000 or more;
3) Directors of the Fund or any one or more of the
Former Connecticut Mutual Funds and members of
their immediate families;
4) employee benefit plans sponsored by Connecticut
Mutual Financial Services, L.L.C. ("CMFS"), the
prior distributor of the Former Connecticut
Mutual Funds, and its affiliated companies;
5) one or more members of a group of at least
1,000 persons (and persons who are retirees
from such group) engaged in a common business,
profession, civic or charitable endeavor or
other activity, and the spouses and minor
dependent children of such persons, pursuant to
a marketing program between CMFS and such
group; and
6) an institution acting as a fiduciary on behalf
of an individual or individuals, if such
institution was directly compensated by the
individual(s) for recommending the purchase of
the shares of the Fund or any one or more of
the Former Connecticut Mutual Funds, provided
the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and
(2) above may be subject to the Class A CDSC of the Former
Connecticut Mutual Funds described above.
Additionally, Class A shares of a Fund may be
purchased without a sales charge by any holder of a
variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the
Panorama Separate Account which is beyond the applicable
surrender charge period and which was used to fund a
qualified plan, if that holder exchanges the variable
annuity contract proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge
Waivers.
In addition to the waivers set forth in the Prospectus and
in this Appendix, above, the contingent deferred sales
charge will be waived for redemptions of Class A and Class
B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former
Connecticut Mutual Fund provided that the Class A or Class
B shares of the Fund to be redeemed or exchanged were (i)
acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former
Connecticut Mutual Fund. Additionally, the shares of such
Former Connecticut Mutual Fund must have been purchased
prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in
Section 72(m)(7) of the Internal Revenue Code;
3) for retirement distributions (or loans) to
participants or beneficiaries from retirement plans
qualified under Sections 401(a) or 403(b)(7)of the
Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other
employee benefit plans;
4) as tax-free returns of excess contributions to such
retirement or employee benefit plans;
5) in whole or in part, in connection with shares sold
to any state, county, or city, or any
instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment
laws from paying a sales charge or concession in
connection with the purchase of shares of any
registered investment management company;
6) in connection with the redemption of shares of the
Fund due to a combination with another investment
company by virtue of a merger, acquisition or similar
reorganization transaction;
7) in connection with the Fund's right to involuntarily
redeem or liquidate the Fund;
8) in connection with automatic redemptions of Class A
shares and Class B shares in certain retirement plan
accounts pursuant to an Automatic Withdrawal Plan but
limited to no more than 12% of the original value
annually; or
9) as involuntary redemptions of shares by operation of
law, or under procedures set forth in the Fund's
Articles of Incorporation, or as adopted by the Board
of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders
of Advance America Funds, Inc.
- ------------------------------------------------------------
Shareholders of Oppenheimer Municipal Bond Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Strategic
Income Fund and Oppenheimer Capital Income Fund who
acquired (and still hold) shares of those funds as a result
of the reorganization of series of Advance America Funds,
Inc. into those Oppenheimer funds on October 18, 1991, and
who held shares of Advance America Funds, Inc. on March 30,
1990, may purchase Class A shares of those four Oppenheimer
funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares
of Oppenheimer Convertible Securities Fund
- ------------------------------------------------------------
Oppenheimer Convertible Securities Fund (referred to as the
"Fund" in this section) may sell Class M shares at net
asset value without any initial sales charge to the classes
of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were
permitted to purchase those shares at net asset value
without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and
employees (and their "immediate families" as
defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its
affiliates, and retirement plans established by
them or the prior investment advisor of the Fund
for their employees,
|_| registered management investment companies or
separate accounts of insurance companies that had
an agreement with the Fund's prior investment
advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with
the Distributor, if they purchase shares for their
own accounts or for retirement plans for their
employees,
|_| employees and registered representatives (and their
spouses) of dealers or brokers described in the
preceding section or financial institutions that
have entered into sales arrangements with those
dealers or brokers (and whose identity is made
known to the Distributor) or with the Distributor,
but only if the purchaser certifies to the
Distributor at the time of purchase that the
purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors
that had entered into an agreement with the
Distributor or the prior distributor of the Fund
specifically providing for the use of Class M
shares of the Fund in specific investment products
made available to their clients, and
|_| dealers, brokers or registered investment advisors
that had entered into an agreement with the
Distributor or prior distributor of the Fund's
shares to sell shares to defined contribution
employee retirement plans for which the dealer,
broker, or investment advisor provides
administrative services.
Oppenheimer Growth Fund
Internet Website:
www.oppenheimerfunds.com
------------------------
Investment Advisor
OppenheimerFunds, Inc.
498 Seventh Avenue,
New York, New York 10018
Distributor
OppenheimerFunds Distributor, Inc.
498 Seventh Avenue,
New York, New York 10018
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL.OPP (225.5677)
Custodian Bank
Citibank, N.A.
111 Wall Street
New York, New York 10005
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown, Rowe amp;amp; Maw
1675 Broadway
New York, New York 10019-5820
1234
PX270.002.1002(rev0203)
- --------
1 Mr. Motley was elected as Trustee to the Board I Funds
effective October 10, 2002.
2 Certain waivers also apply to Class M shares of
Oppenheimer Convertible Securities Fund.
3 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to
contingent deferred sales charges mean the Fund's Early
Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
4 An "employee benefit plan" means any plan or arrangement,
whether or not it is "qualified" under the Internal Revenue
Code, under which Class N shares of an Oppenheimer fund or
funds are purchased by a fiduciary or other administrator
for the account of participants who are employees of a
single employer or of affiliated employers. These may
include, for example, medical savings accounts, payroll
deduction plans or similar plans. The fund accounts must be
registered in the name of the fiduciary or administrator
purchasing the shares for the benefit of participants in
the plan.
5 The term "Group Retirement Plan" means any qualified or
non-qualified retirement plan for employees of a
corporation or sole proprietorship, members and employees
of a partnership or association or other organized group of
persons (the members of which may include other groups), if
the group has made special arrangements with the
Distributor and all members of the group participating in
(or who are eligible to participate in) the plan purchase
shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution
designated by the group. Such plans include 457 plans,
SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than
plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans
and non-qualified deferred compensation plans and IRAs that
purchase shares of an Oppenheimer fund or funds through a
single investment dealer, broker or other financial
institution that has made special arrangements with the
Distributor.
6 However, that concession will not be paid on purchases of
shares in amounts of $1 million or more (including any
right of accumulation) by a Retirement Plan that pays for
the purchase with the redemption proceeds of Class C shares
of one or more Oppenheimer funds held by the Plan for more
than one year.
7 This provision does not apply to IRAs.
8 This provision does not apply to 403(b)(7) custodial
plans if the participant is less than age 55, nor to IRAs.
9 The distribution must be requested prior to Plan
termination or the elimination of the Oppenheimer funds as
an investment option under the Plan.
10 This provision does not apply to IRAs.
11 This provision does not apply to loans from 403(b)(7)
custodial plans and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
12 This provision does not apply to 403(b)(7) custodial
plans if the participant is less than age 55, nor to IRAs.
SEMI ANNUAL REPORT
February 28, 2003
7 | OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS February 28, 2003 / Unaudited
Market Value
Shares See Note 1
- ---------------------------------------------------------------------------------
Common Stocks--85.8%
- ---------------------------------------------------------------------------------
Consumer Discretionary--19.1%
- ---------------------------------------------------------------------------------
Automobiles--4.5%
Harley-Davidson, Inc.
1,560,000 $ 61,760,400
- ---------------------------------------------------------------------------------
Multiline Retail--8.7%
Costco Wholesale
Corp. 1
1,550,000 47,306,000
- ---------------------------------------------------------------------------------
Kohl's Corp. 1
1,454,500 71,125,050
- -----------------
118,431,050
- ---------------------------------------------------------------------------------
Specialty Retail--5.9%
Bed Bath amp;amp;
Beyond, Inc. 1
2,445,000 80,782,800
- ---------------------------------------------------------------------------------
Consumer Staples--2.7%
- ---------------------------------------------------------------------------------
Food amp;amp; Drug Retailing--2.7%
Walgreen Co.
1,300,000 36,582,000
- ---------------------------------------------------------------------------------
Financials--14.3%
- ---------------------------------------------------------------------------------
Diversified Financials--8.9%
Freddie Mac
441,400 24,122,510
- ---------------------------------------------------------------------------------
SLM Corp.
900,000 98,055,000
- -----------------
122,177,510
- ---------------------------------------------------------------------------------
Insurance--5.4%
AMBAC Financial
Group, Inc.
715,600 34,957,060
- ---------------------------------------------------------------------------------
MBIA, Inc.
1,001,600 38,191,008
- -----------------
73,148,068
- ---------------------------------------------------------------------------------
Health Care--32.8%
- ---------------------------------------------------------------------------------
Biotechnology--8.3%
Amgen, Inc. 1
1,250,000 68,300,000
- ---------------------------------------------------------------------------------
Gilead Sciences, Inc. 1
1,350,000 45,900,000
- -----------------
114,200,000
- ---------------------------------------------------------------------------------
Health Care Equipment amp;amp; Supplies--14.8%
Biomet, Inc.
1,037,100 31,351,533
- ---------------------------------------------------------------------------------
Medtronic, Inc.
975,000 43,582,500
- ---------------------------------------------------------------------------------
Stryker Corp.
1,277,500 83,293,000
- ---------------------------------------------------------------------------------
Varian Medical
Systems, Inc. 1
863,000 43,624,650
- -----------------
201,851,683
Market Value
Shares See Note 1
- ---------------------------------------------------------------------------------
Health Care Providers amp;amp; Services--3.8%
Lincare Holdings, Inc. 1
1,754,200 $ 52,450,580
- ---------------------------------------------------------------------------------
Pharmaceuticals--5.9%
Forest Laboratories,
Inc. 1
950,000 47,310,000
- ---------------------------------------------------------------------------------
Johnson amp;amp; Johnson
500,000 26,225,000
- ---------------------------------------------------------------------------------
Pfizer, Inc.
250,000 7,455,000
- -----------------
80,990,000
- ---------------------------------------------------------------------------------
Industrials--0.7%
- ---------------------------------------------------------------------------------
Commercial Services amp;amp; Supplies--0.7%
Concord EFS, Inc. 1
910,000 10,101,000
- ---------------------------------------------------------------------------------
Information Technology--16.2%
- ---------------------------------------------------------------------------------
Computers amp;amp; Peripherals--6.1%
Dell Computer Corp. 1
2,300,000 62,008,000
- ---------------------------------------------------------------------------------
International Business
Machines Corp.
280,000 21,826,000
- -----------------
83,834,000
- ---------------------------------------------------------------------------------
Software--10.1%
Microsoft Corp.
3,000,000 71,100,000
- ---------------------------------------------------------------------------------
Oracle Corp. 1
2,500,000 29,900,000
- ---------------------------------------------------------------------------------
Symantec Corp. 1
900,000 36,450,000
- -----------------
137,450,000
- -----------------
Total Common Stocks
(Cost
$1,168,709,073)
1,173,759,091
- ---------------------------------------------------------------------------------
Other Securities--3.1%
Nasdaq-100 Unit
Investment Trust 1
(Cost $41,417,126)
1,700,000 42,789,000
Principal
Amount
- ---------------------------------------------------------------------------------
Short-Term Notes--2.9%
Crown Point Capital Co.,
1.29%, 3/3/03
(Cost $39,997,133) $
40,000,000 39,997,133
8 | OPPENHEIMER GROWTH FUND
Principal Market Value
Amount See Note 1
- ---------------------------------------------------------------------------------
Joint Repurchase Agreements--8.3%
- ---------------------------------------------------------------------------------
Undivided interest of 29.98% in joint repurchase
agreement (Market Value $378,392,000) with Banc
One Capital Markets, Inc., 1.31%, dated 2/28/03,
to be repurchased at $113,462,385 on 3/3/03,
collateralized by U.S. Treasury Nts., 3%--5.625%,
8/31/03--5/15/08, with a value of $346,658,393 and
U.S. Treasury Bonds, 3.625%, 3/31/04, with a
value of $39,549,064
(Cost $113,450,000) $
113,450,000 $ 113,450,000
Market Value
See Note 1
- ---------------------------------------------------------------------------------
Total Investments,
at Value
(Cost $1,363,573,332)
100.1% $ 1,369,995,224
- ---------------------------------------------------------------------------------
Liabilities in Excess
of Other Assets
(0.1) (1,952,983)
- ------------------------------------------------------
Net Assets
100.0% $ 1,368,042,241
======================================================
Footnotes to Statement of Investments
1. Non-income producing security.
See accompanying Notes to Financial Statements.
9 | OPPENHEIMER GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
February 28, 2003
- --------------------------------------------------------------------------------
Assets
Investments, at value (cost $1,363,573,332)--
see accompanying
statement
$1,369,995,224
- --------------------------------------------------------------------------------
Cash
652,729
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold
37,615,470
Shares of beneficial interest
sold 863,238
Interest and
dividends
575,524
Other
21,601
- ---------------
Total
assets
1,409,723,786
- --------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments
purchased
36,934,910
Shares of beneficial interest
redeemed 2,500,813
Shareholder
reports
807,644
Distribution and service plan
fees 526,888
Trustees'
compensation
419,422
Transfer and shareholder servicing agent
fees 370,127
Other
121,741
- ---------------
Total
liabilities
41,681,545
- --------------------------------------------------------------------------------
Net
Assets
$1,368,042,241
===============
- --------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest $ 64,384
- --------------------------------------------------------------------------------
Additional paid-in
capital 2,250,383,147
- --------------------------------------------------------------------------------
Overdistributed net investment
income (7,257,643)
- --------------------------------------------------------------------------------
Accumulated net realized loss on
investment
transactions
(881,569,539)
- --------------------------------------------------------------------------------
Net unrealized appreciation on
investments 6,421,892
- ---------------
Net
Assets
$1,368,042,241
===============
10 | OPPENHEIMER GROWTH FUND
- --------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $990,416,916 and
45,958,151 shares of beneficial interest
outstanding) $21.55
Maximum offering price per share
(net asset value plus sales charge of
5.75% of offering
price) $22.86
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net assets
of $251,887,306 and 12,454,099 shares of beneficial
interest
outstanding)
$20.23
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net assets
of $64,895,880 and 3,155,970 shares of beneficial
interest
outstanding)
$20.56
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge)
and offering price per share (based on net assets
of $4,814,691 and 222,875 shares of beneficial
interest
outstanding)
$21.60
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering
price per share (based on net assets of $56,027,448
and 2,593,065 shares of beneficial interest
outstanding) $21.61
See accompanying Notes to Financial Statements.
11 | OPPENHEIMER GROWTH FUND
STATEMENT OF OPERATIONS Unaudited
For the Six Months Ended February 28, 2003
- ---------------------------------------------------------------------------------
Investment Income
Dividends
$ 2,500,214
- --------------------------------------------------------------------------------
Interest
1,661,643
- ----------------
Total investment
income
4,161,857
- --------------------------------------------------------------------------------
Expenses
Management
fees
4,929,438
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
1,258,843
Class
B
1,425,624
Class
C
353,179
Class
N
8,427
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class
A
1,315,347
Class
B
820,967
Class
C
171,393
Class
Y
151,643
- --------------------------------------------------------------------------------
Shareholder
reports
883,313
- --------------------------------------------------------------------------------
Trustees'
compensation
46,352
- --------------------------------------------------------------------------------
Custodian fees and
expenses
27,579
- --------------------------------------------------------------------------------
Other
114,444
- ----------------
Total
expenses
11,506,549
Less reduction to custodian
expenses
(9,014)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class A (239)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class B (380,459)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class C (61,124)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class Y (38,904)
- ----------------
Net
expenses
11,016,809
- --------------------------------------------------------------------------------
Net Investment
Loss
(6,854,952)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on
investments
(209,032,190)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on
investments
40,406,461
- ----------------
Net realized and unrealized
loss
(168,625,729)
- --------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from
Operations
$(175,480,681)
================
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
February 28, 2003 August 31,
(Unaudited) 2002
- --------------------------------------------------------------------------------
Operations
Net investment
loss $
(6,854,952) $ (14,549,925)
- --------------------------------------------------------------------------------
Net realized
loss
(209,032,190) (315,121,770)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) 40,406,461
(23,465,967)
- ----------------------------------------------
Net decrease in net assets resulting from
operations (175,480,681)
(353,137,662)
- --------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class
A
- -- (7,204,260)
Class
B
- -- --
Class
C
- -- --
Class
N
- -- (7,852)
Class
Y
- -- (714,194)
- --------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class
A
(57,141,361) (124,336,568)
Class
B
(31,779,835) (92,299,250)
Class
C
(1,822,194) (10,045,794)
Class
N
2,986,835 2,370,990
Class
Y
(3,713,528) (6,698,416)
- --------------------------------------------------------------------------------
Net Assets
Total
decrease
(266,950,764) (592,073,006)
- --------------------------------------------------------------------------------
Beginning of
period
1,634,993,005 2,227,066,011
- ----------------------------------------------
End of period [including overdistributed net investment
income of $7,257,643 and $402,691,
respectively] $1,368,042,241
$1,634,993,005
==============================================
See accompanying Notes to Financial Statements.
13 | OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS
Six
Months
Year
Ended
Ended
February 28,
2003
August 31,
Class A
(Unaudited) 2002 2001 2000
1999 1998
- --------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $
24.19 $ 29.20 $ 62.31 $ 39.77 $ 31.54
$ 40.42
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.07) (.13) .18 (.02)
..10 .73
Net realized and unrealized gain (loss)
(2.57) (4.74) (30.05) 25.42
11.69 (5.05)
- --------------------------------------------------------------------------
Total from investment operations
(2.64) (4.87) (29.87) 25.40
11.79 (4.32)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- (.14) -- (.03) (.48)
(.66)
Distributions from net realized gain
- -- -- (3.24) (2.83) (3.08)
(3.90)
- --------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders
- -- (.14) (3.24) (2.86) (3.56)
(4.56)
- --------------------------------------------------------------------------------
Net asset value, end of period
$21.55 $24.19 $29.20 $62.31
$39.77 $31.54
==========================================================================
- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1
(10.91)% (16.77)% (49.87)% 67.10%
39.39% (11.62)%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $
990,417 $1,173,027 $1,553,066 $3,176,435 $1,730,087
$1,356,905
- --------------------------------------------------------------------------------
Average net assets (in thousands)
$1,092,267 $1,430,735 $2,149,795 $2,390,125
$1,620,201 $1,640,181
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(0.72)% (0.54)% 0.45% (0.01)%
0.24% 1.90%
Expenses
1.27% 1.31% 1.06% 1.01%
1.05% 1.00% 3
Expenses, net of voluntary waiver
of transfer agent fees and/or reduction
to custodian expenses
1.27% 4 1.31% 1.06% 1.01%
1.05% 1.00%
- --------------------------------------------------------------------------------
Portfolio turnover rate
37% 60% 92% 49%
106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
4. Less than 0.01%.
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER GROWTH FUND
Six
Months
Year
Ended
Ended
February 28,
2003
August 31,
Class B
(Unaudited) 2002 2001 2000
1999 1998
- --------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $
22.80 $ 27.60 $ 59.55 $ 38.37 $ 30.54
$ 39.34
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.29) (.54) (.10) (.21)
(.20) .43
Net realized and unrealized gain (loss)
(2.28) (4.26) (28.61) 24.22
11.32 (4.89)
- -------------------------------------------------------------------------
Total from investment operations
(2.57) (4.80) (28.71) 24.01
11.12 (4.46)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- -- -- -- (.21)
(.44)
Distributions from net realized gain
- -- -- (3.24) (2.83) (3.08)
(3.90)
- -------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders
- -- -- (3.24) (2.83) (3.29)
(4.34)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$20.23 $22.80 $27.60 $59.55
$38.37 $30.54
=========================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1
(11.27)% (17.39)% (50.26)% 65.82%
38.27% (12.32)%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period
(in thousands)
$251,887 $317,725 $483,298 $996,000
$445,629 $330,442
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$287,195 $415,965 $692,159 $676,485
$410,058 $353,574
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(1.55)% (1.30)% (0.31)% (0.78)%
(0.58)% 1.08%
Expenses
2.38% 2.08% 1.83% 1.78%
1.86% 1.81% 3
Expenses, net of voluntary waiver
of transfer agent fees and/or reduction
to custodian expenses
2.11% 2.08% 1.83% 1.78%
1.86% 1.81%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
37% 60% 92% 49%
106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year. less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
Six
Months
Year
Ended
Ended
February 28,
2003
August 31,
Class C
(Unaudited) 2002 2001 2000
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $
23.18 $ 28.06 $ 60.48 $ 38.92 $
30.93 $ 39.87
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.19) (.43) (.04) (.09)
(.20) .46
Net realized and unrealized gain (loss)
(2.43) (4.45) (29.14) 24.48
11.47 (4.99)
- ----------------------------------------------------------------------------
Total from investment operations
(2.62) (4.88) (29.18) 24.39
11.27 (4.53)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- -- -- --
(.21) (.51)
Distributions from net realized gain
- -- -- (3.24) (2.83)
(3.07) (3.90)
- ----------------------------------------------------------------------------
Total dividends and/or
distributions
to shareholders
- -- -- (3.24) (2.83)
(3.28) (4.41)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$20.56 $23.18 $28.06 $60.48
$38.92 $30.93
============================================================================
- ------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1
(11.30)% (17.39)% (50.26)% 65.87%
38.28% (12.33)%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)
$64,896 $75,229 $102,144 $176,150
$57,970 $44,377
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$71,164 $93,082 $133,823 $103,076
$53,501 $43,817
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(1.56)% (1.31)% (0.32)% (0.77)%
(0.58)% 1.06%
Expenses
2.29% 2.08% 1.84% 1.78%
1.86% 1.81% 3
Expenses, net of voluntary waiver
of transfer agent fees and/or reduction
to custodian expenses
2.12% 2.08% 1.84% 1.78%
1.86% 1.81%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
37% 60% 92% 49%
106% 34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER GROWTH FUND
Six Months Year
Ended Ended
February 28, 2003 August
31,
Class
N
(Unaudited) 2002 2001 1
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of
period $23.99
$29.13 $35.39
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
(loss)
..08 (.13) 2 (.01)
Net realized and unrealized
loss
(2.47) (4.78) 2 (6.25)
- -------------------------------------------------------
Total from investment
operations
(2.39) (4.91) (6.26)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income --
(.23) --
Distributions from net realized
gain --
- -- --
- -------------------------------------------------------
Total dividends and/or distributions to
shareholders --
(.23) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period
$21.60 $23.99 $29.13
=======================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value
3 (9.96)%
(17.00)% (17.69)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in
thousands) $4,815
$2,243 $274
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands)
$3,413 $1,623 $ 70
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income
(loss)
0.83% (0.90)% (0.33)%
Expenses
1.30% 1.57% 1.40%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate
37% 60% 92%
1. For the period from March 1, 2001 (inception of
offering) to August 31, 2001.
2. Per share amounts calculated based on the average shares
outstanding during
the period.
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.
17 | OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS Continued
Six
Months
Year
Ended
Ended
February 28,
2003
August 31,
Class Y
(Unaudited) 2002 2001 2000
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $
24.24 $ 29.27 $ 62.33 $ 39.76 $ 31.54 $
40.43
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.06) (.06) .28 .16
..18 .87
Net realized and unrealized gain (loss)
(2.57) (4.73) (30.10) 25.37 11.69
(5.09)
- ----------------------------------------------------------------------
Total from investment operations
(2.63) (4.79) (29.82) 25.53 11.87
(4.22)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
- -- (.24) -- (.13) (.58)
(.77)
Distributions from net realized gain
- -- -- (3.24) (2.83) (3.07)
(3.90)
- -------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders
- -- (.24) (3.24) (2.96) (3.65)
(4.67)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
$21.61 $24.24 $29.27 $62.33 $39.76
$31.54
======================================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1
(10.85)% (16.50)% (49.77)% 67.56% 39.74%
(11.38)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period
(in thousands)
$56,027 $66,769 $ 88,284 $191,267 $ 93,936
$132,146
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$62,727 $81,127 $124,168 $134,650 $116,615
$135,098
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(0.61)% (0.25)% 0.67% 0.27%
0.65% 2.16%
Expenses
1.29% 1.13% 0.86% 0.73% 0.80%
0.71% 3
Expenses, net of voluntary waiver of
transfer agent fees and/or reduction
to custodian expenses
1.16% 1.02% 0.86% 0.73% 0.80%
0.71%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
37% 60% 92% 49% 106%
34%
1. Assumes an investment on the business day before the
first day of the fiscal
period, with all dividends and distributions reinvested in
additional shares on
the reinvestment date, and redemption at the net asset
value calculated on the
last business day of the fiscal period. Sales charges are
not reflected in the
total returns. Total returns are not annualized for periods
of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for
the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Growth 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).
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of
the Fund are maintained
in U.S. dollars. Prices of securities denominated in
foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related
to the purchase and sale of foreign securities and
investment income are
translated at the rates of exchange prevailing on the
respective dates of such
transactions.
The effect of changes in foreign currency exchange
rates on investments is
separately identified from the fluctuations arising from
changes in market
values of securities held and reported with all other
foreign currency gains
and losses in the Fund's Statement of Operations.
19 | OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
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, 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.
As of February 28, 2003, the Fund had available for
federal income tax
purposes an estimated unused capital loss carryforward of
$881,418,187. This
estimated capital loss carryforward represents the
carryforward as of the end
of the last fiscal year, increased for losses deferred
under tax accounting
rules for the current fiscal year and is increased or
decreased by capital
losses or gains realized in the first six months of the
current fiscal year.
As of August 31, 2002, the Fund had available for federal
income tax purposes
unused capital loss carryforwards as follows:
Expiring
- -----------------------------------------
2009
$ 50,983,636
2010
391,696,099
- ------------
Total
$442,679,735
============
- --------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted an unfunded
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 six months
ended February 28, 2003, the Fund's projected benefit
obligations were
increased by $20,670 and payments of $15,659 were made to
retired trustees,
resulting in an accumulated liability of $407,768 as of
February 28, 2003.
20 | OPPENHEIMER GROWTH FUND
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 the annual compensation they are entitled to
receive from the
Fund. Under the plan, the compensation deferred is
invested by the Fund in the
fund(s) selected by the trustee. 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 primarily because of the recognition of
certain foreign
currency gains (losses) as ordinary income (loss) for 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 tax character of distributions paid during the six
months ended February
28, 2003 and the year ended August 31, 2002 was as follows:
Six Months
Ended Year Ended
February 28, 2003
August 31, 2002
- ----------------------------------------------------------------
Distributions paid from:
Ordinary income
$-- $7,926,306
Long-term capital gain
- -- --
Return of capital
- -- --
- ----------------------
Total
$-- $7,926,306
======================
- --------------------------------------------------------------------------------
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.
21 | OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par
value shares of
beneficial interest of each class. Transactions in shares
of beneficial
interest were as follows:
Six Months Ended
February 28, 2003 Year Ended August 31,
2002
Shares Amount
Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Class A
Sold
3,098,123 $ 71,547,455
6,933,882 $ 195,310,273
Dividends and/or
distributions reinvested
- -- --
229,470 6,758,016
Redeemed
(5,629,097) (128,688,816)
(11,867,029) (326,404,857)
- -----------------------------------------------------------------------------------
Net decrease
(2,530,974) $ (57,141,361)
(4,703,677) $(124,336,568)
===================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Class B
Sold
1,250,259 $ 27,229,356
2,659,840 $ 70,453,666
Dividends and/or
distributions reinvested
- -- --
- -- --
Redeemed
(2,733,887) (59,009,191)
(6,235,475) (162,752,916)
- -----------------------------------------------------------------------------------
Net decrease
(1,483,628) $ (31,779,835)
(3,575,635) $ (92,299,250)
===================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Class C
Sold
471,508 $ 10,445,584
1,099,282 $ 29,093,790
Dividends and/or
distributions reinvested
- -- --
- -- --
Redeemed
(561,294) (12,267,778)
(1,493,796) (39,139,584)
- -----------------------------------------------------------------------------------
Net decrease
(89,786) $ (1,822,194)
(394,514) $ (10,045,794)
===================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Class N
Sold
152,473 $ 3,519,753
140,675 $ 3,970,419
Dividends and/or
distributions reinvested
- -- --
268 7,845
Redeemed
(23,074) (532,918)
(56,863) (1,607,274)
- -----------------------------------------------------------------------------------
Net increase
129,399 $ 2,986,835
84,080 $ 2,370,990
===================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
Class Y
Sold
400,205 $ 9,235,795
877,421 $ 24,490,320
Dividends and/or
distributions reinvested
- -- --
24,235 713,722
Redeemed
(561,699) (12,949,323)
(1,162,874) (31,902,458)
- -----------------------------------------------------------------------------------
Net decrease
(161,494) $ (3,713,528)
(261,218) $ (6,698,416)
===================================================================================
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of
securities, other
than short-term obligations, for the six months ended
February 28, 2003, were
$502,286,213 and $471,181,242, respectively.
22 | OPPENHEIMER GROWTH FUND
- --------------------------------------------------------------------------------
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 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 $1.0 billion,
0.56% of the next $2.0 billion, and 0.54% of the average
annual net assets in
excess of $4.5 billion.
- --------------------------------------------------------------------------------
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% of average annual net
assets for all
classes. 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
Six Months on Class A Retained
by Advanced by Advanced by Advanced
by Advanced by
Ended Shares
Distributor Distributor 1 Distributor 1
Distributor 1 Distributor 1
- ---------------------------------------------------------------------------------------------------------------------------------
February 28, 2003 $903,856
$247,974 $71,910 $778,881
$67,206 $28,728
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
Six Months Ended Distributor
Distributor Distributor Distributor
- -----------------------------------------------------------------------------------------------------------
February 28, 2003 $8,411
$568,192 $10,447 3,271
- --------------------------------------------------------------------------------
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 six months ended
February 28, 2003,
payments under the Class A Plan totaled $1,258,843, all
23 | OPPENHEIMER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued
of which were paid by the Distributor to recipients, and
included $58,681 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 six
months ended February 28,
2003, 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 $1,425,624
$1,116,951 $10,717,921
4.26%
Class C Plan 353,179
76,346 1,677,745 2.59
Class N Plan 8,427
7,080 79,451 1.65
- --------------------------------------------------------------------------------
5. Bank Borrowings
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. The credit facility was
terminated on November 12,
2002.
The Fund had no borrowings through November 12, 2002.
24 | OPPENHEIMER GROWTH FUND
SUPPLEMENT FOR SELECT MANAGERS
OPPENHEIMER SELECT MANAGERS
Supplement dated May 7, 2003 to the
Prospectus dated March 28, 2003
The Prospectus is changed as follows:
1. The following paragraph is added to the end of the
section captioned "How the Fund is Managed" on Page 55:
At a recent meeting, the Board of Trustees of the Funds
determined (i) that it is in the best interest of the
shareholders of OSM - Mercury Advisors Samp;amp;P 500 Index
Fund that the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
reorganize into Oppenheimer Main Street Fund(R), (ii) that
it is in the best interest of the shareholders of OSM -
Mercury Advisors Focus Growth Fund that OSM - Mercury
Advisors Focus Growth Fund reorganize into Oppenheimer
Growth Fund, (iii) that it is in the best interest of
shareholders of OSM - QM Active Balanced Fund that OSM
- QM Active Balanced Fund reorganize into Oppenheimer
Multiple Strategies Fund, (iv) that it is in the best
interest of shareholders of OSM - Jennison Growth Fund
that OSM - Jennison Growth Fund reorganize into
Oppenheimer Growth Fund, (v) that it is in the best
interest of the shareholders of OSM - Salomon Brothers
All Cap Fund that OSM - Salomon Brothers All Cap Fund
reorganize into Oppenheimer Value Fund and (vi) that it
is the best interest of shareholders of OSM - Gartmore
Millennium Growth Fund II that OSM - Gartmore Millennium
Growth Fund II reorganize into Oppenheimer MidCap Fund.
The Board unanimously approved an agreement and plan of
reorganization for each of the reorganizations described
above to be entered into between each Oppenheimer Select
Manager fund and the respective acquiring fund (the
"reorganization plan") and the transactions contemplated
thereby (the "reorganization"). The Board further
determined that the reorganizations should be submitted
to the Funds' shareholders for approval, and recommended
that shareholders approve the reorganizations.
Shareholders of record as of a date to be determined by
the Board will be entitled to vote on the reorganization
and will receive the proxy statement describing the
reorganizations. The date for the shareholder meeting,
the record date for such meeting and such other
information necessary for shareholders to make a
decision on the proposed merger will be set forth in the
proxy statement.
2. Subject to approval by the Funds' shareholders,
concurrently with the reorganization of OSM - Mercury
Advisors Samp;amp;P 500 Index Fund into Oppenheimer Main Street
Fund(R), OSM - Mercury Advisors Focus Growth Fund into
Oppenheimer Growth Fund, OSM - QM Active Balanced Fund
into Oppenheimer Multiple Strategies Fund, OSM -
Jennison Growth Fund into Oppenheimer Growth Fund, OSM -
Salomon Brothers All Cap Fund into Oppenheimer Value
Fund and OSM - Gartmore Millennium Growth Fund II into
Oppenheimer MidCap Fund, Oppenheimer Select Managers
will no longer exist.
May 7, 2003 PS0505.018
OPPENHEIMER SELECT MANAGERS
QM Active Balanced Fund
Supplement dated May 19, 2003 to the
Prospectus dated March 28, 2003
The Prospectus is changed as follows:
Class Y shares of QM Active Balanced Fund are not currently
available for sale.
May 19, 2003 PS0505.019
PROSPECTUS
Oppenheimer
Select Managers
Prospectus dated March 28, 2003
Mercury Advisors Samp;P 500 Index Fund
Mercury Advisors Focus Growth Fund
QM Active Balanced Fund
Jennison Growth Fund
Salomon Brothers All Cap Fund
Gartmore Millennium Growth Fund II
As with all mutual
funds, the
Securities and
Exchange Commission
has not approved or
disapproved the
Funds' securities
nor has it
determined that
this Prospectus is
accurate or
complete. It is a
criminal offense to
represent otherwise.
CONTENTS
ABOUT THE FUNDS
OSM - Mercury Advisors Samp;amp;P 500 Index Fund
OSM - Mercury Advisors Focus Growth Fund
OSM - QM Active Balanced Fund
OSM - Jennison Growth Fund
OSM - Salomon Brothers All Cap Fund
OSM - Gartmore Millennium Growth Fund II
About the Funds' Investments
How the Funds are Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
Retirement Plans
How to Sell Shares
By Wire
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Master/Feeder Structure
Financial Highlights
ABOUT THE FUNDS
Oppenheimer Select Managers -
Mercury Advisors Samp;amp;P 500 Index Fund
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to
match the performance of the Standard amp;amp; Poor's 500 Composite
Stock Price Index (the "Samp;amp;P 500") as closely as possible
before the deduction of Fund expenses.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund is a
non-diversified mutual fund series of Oppenheimer Select
Managers (referred to in this Prospectus as the "Trust" or
"OSM") that invests all of its assets in the Master Samp;amp;P 500
Index Series of the Quantitative Master Series Trust, a
registered investment company (the "Master Fund") that has
the same goals as the Fund. All investments will be made by
the Master Fund. This structure is sometimes referred to as a
"master/feeder" structure. The Fund's investment results will
correspond directly to the investment results of the Master
Fund. For simplicity, the term "Fund" refers to the Fund
and/or the Master Fund, unless otherwise identified. For more
information on the master/feeder structure, see
"Master/Feeder Structure" on page 74.
The Fund normally invests at least 80% of its net
assets (plus borrowings for investment purposes) in
securities or other financial instruments in, or correlated
with, the Samp;amp;P 500. The Fund may invest in all 500 stocks in
the Samp;amp;P 500 in roughly the same proportions as their
weightings in the Samp;amp;P 500. The Fund may also invest in a
strategically selected sample of the 500 stocks in the Samp;amp;P
500 which has aggregate investment characteristics, such as
average market capitalization and industry weightings,
similar to the Samp;amp;P 500 as a whole, but which involves less
transaction cost than would be incurred by purchasing all 500
stocks. Fund Asset Management L.P., doing business as Mercury
Advisors, the investment adviser to the Master Fund (the
"Adviser"), may also purchase stocks not included in the Samp;amp;P
500 when it believes that it would be a cost effective way of
approximating the Samp;amp;P 500's performance to do so. If the
Adviser uses these techniques, the Fund may not track the Samp;amp;P
500 as closely as it would if it were fully replicating the
Samp;amp;P 500. The Fund may change the index it attempts to match
if the Adviser believes a different index would better enable
the Fund to match the performance of the market segment
represented by the Samp;amp;P 500 and, accordingly, the investment
objective of the Fund may be changed without shareholder
approval.
The Fund may invest in illiquid securities, repurchase
agreements, and may engage in securities lending. The Fund
will also invest in short term money market instruments such
as cash reserves to maintain liquidity. These instruments may
include obligations of the U.S. Government, its agencies, or
instrumentalities, highly rated bonds or comparable unrated
bonds, commercial paper, bank obligations and repurchase
agreements and commingled short-term liquidity funds. To the
extent the Fund invests in short term money market
instruments, it will generally also invest in options,
futures or other derivatives in order to seek to maintain
full exposure to the Samp;amp;P 500. The Fund will not invest in
options, futures, other derivative instruments or short term
money market instruments in order to lessen the Fund's
exposure to common stocks as a defensive strategy, but will
instead generally attempt to remain fully invested at all
times.
The Fund may invest in derivative instruments, and will
normally invest a substantial portion of its assets in
options and futures contracts linked to the performance of
the Samp;amp;P 500. Derivatives allow the Fund to increase or
decrease its exposure to the Samp;amp;P 500 quickly and at less cost
than buying or selling stocks. The Fund will invest in
options, futures and other derivative instruments in order to
gain market exposure quickly in the event of subscriptions,
to maintain liquidity in the event of redemptions and to keep
trading costs low. In connection with the use of derivative
instruments, the Fund may enter into short sales in order to
adjust the weightings of particular securities represented in
a derivative to more accurately reflect the securities'
weightings in the target index.
How Does the Fund's Adviser Decide What Securities To Buy or
Sell? The Adviser provides the day-to-day portfolio
management of the Fund's assets. The Master Fund's portfolio
manager is employed by the Adviser. The Adviser will not
attempt to buy or sell securities based on its economic,
financial or market analysis, but will instead employ a
"passive" investment approach. This means that the Adviser
will attempt to invest in a portfolio of assets whose
performance is expected to match approximately the
performance of the Samp;amp;P 500 before deduction of Fund expenses.
Except as otherwise provided in the Prospectus, the Adviser
will buy or sell securities only when it believes it is
necessary to do so in order to match the performance of the
Samp;amp;P 500. The portfolio manager monitors individual issuers
for changes in the factors above and these changes may
trigger a decision to sell a security.
Who is the Fund Designed For? The Fund is designed for
investors who want to invest in the securities of large U.S.
companies contained in the Samp;amp;P 500 and are willing to accept
the risk that the value of their investment may decline. The
Fund does not seek current income and the income from its
investments will likely be small. The Fund is not designed
for investors needing current income or preservation of
capital. Shares of the Fund are available for purchase by
retirement plans only. The Fund is not a complete investment
program.
Main Risks of Investing in the Fund
All investments have some degree of risk. The Fund's
investments are subject to changes in their value from a
number of factors, some of which are described below. The
risks described below collectively form the risk profile of
the Fund, and can affect the value of the Fund's investments,
its investment performance and its prices per share.
Particular investments and investment strategies also have
risks. These risks mean that you can lose money by investing
in the Fund. When you redeem your shares, they may be worth
more or less than what you paid for them. There is no
assurance that the Fund or the Master Fund will achieve its
investment objective.
Selection Risk. The Fund is subject to selection risk, which
is the risk that the Fund's investments, which may not fully
mirror the index, may underperform the stock market or other
funds with similar investment objectives and investment
strategies. The Fund will attempt to be fully invested at all
times, and will not hold a significant portion of its assets
in cash. The Fund will generally not attempt to hedge
against adverse market movements. Therefore, the Fund might
go down in value more than other mutual funds in the event of
a general market decline. In addition, the Fund has operating
and other expenses while the Samp;amp;P 500 does not. As a result,
while the Fund will attempt to track the Samp;amp;P 500 as closely
as possible, it will tend to underperform the Samp;amp;P 500 to some
degree over time.
Risks of Investing in Stocks. Because the Fund invests
primarily in stocks, the value of the Fund's portfolio will
be affected by changes in the stock markets. Market risk will
affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's portfolio securities
change. Prices of individual stocks do not all move in the
same direction uniformly or at the same time. Different stock
markets may also behave differently from each other.
Securities in the Fund's portfolio may not increase as much
as the market as a whole. Some securities may not be actively
traded, and therefore, may not be readily bought or sold.
Although at times some of the Fund's investments may
appreciate in value rapidly, investors should not expect that
most of the Fund's investments will appreciate rapidly.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
Risks of Derivative Investments. The Fund can use derivatives
for the management of cash balances as well as to increase or
decrease its exposure to the Samp;amp;P 500 quickly. In general
terms, a derivative investment is an investment contract
whose value depends on (or is derived from) the value of an
underlying asset, interest rate or index. Options and futures
are examples of derivatives the Fund can use.
The Fund may use derivatives for anticipatory hedging.
Anticipatory hedging is a strategy in which the Fund uses a
derivative to offset the risk that securities in which the
Fund intends to invest will increase in value before the Fund
has an opportunity to purchase the securities. The Fund will
use derivatives for anticipatory hedging in order to gain
exposure efficiently to its underlying indices or market
segments in the event the Fund receives cash inflows.
Derivatives may not always be available or cost efficient. If
the Fund invests in derivatives, the investments may not be
as effective as a hedge against price movements.
If the issuer of the derivative does not pay the amount
due, the Fund can lose money on the investment. Also, the
underlying security or investment on which the derivative is
based, and the derivative itself, may not perform the way the
portfolio manager expected it to perform. If that happens,
the Fund's share prices could fall, or its hedge might be
unsuccessful. Some derivatives may be illiquid, making it
difficult to sell them quickly at an acceptable price. The
Fund has limits on the amount of particular types of
derivatives it can hold. Using derivatives can increase the
volatility of the Fund's share prices.
Risks of Short Sales. When the Fund makes a short sale, it
must borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon
conclusion of the sale. If the price of the security sold
short increases between the time of the short sale and the
time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund
will realize a gain. Any gain will be decreased, and any loss
increased, by transaction costs. Although the Fund's gain is
limited to the price at which it sold the security short, its
potential loss is theoretically unlimited. If the Fund makes
short sales of securities that increase in value, it may
underperform similar mutual funds that do not make short
sales of securities they do not own.
Risks of Non-Diversification. The Fund is "non-diversified."
That means that compared to funds that are diversified, it
can invest a greater portion of its net assets in the
securities of one issuer, such as the Master Fund. However,
the Master Fund invests, under normal circumstances, at least
80% of its assets in securities or other financial
instruments which are contained in or correlated with
securities in the Samp;amp;P 500. Therefore, the portfolio
investments of the Master Fund may be diversified.
HOW RISKY IS THE FUND OVERALL? The Master Fund focuses its
investments on the stocks of large U.S. companies with the
intent of replicating the Samp;amp;P 500 before deduction of fees
and expenses. The price of the Master Fund's shares can go up
and down substantially. The Master Fund does not use
income-oriented investments to help cushion the Master Fund's
total return from changes in stock prices. The Fund invests
all of its assets in shares of the Master Fund and is
therefore non-diversified. It will therefore be vulnerable to
the effects of economic changes that affect shares of the
Master Fund. These changes can affect the value of the Fund's
price per share. In the OppenheimerFunds spectrum, the Fund
is generally more aggressive than funds that invest in both
stocks and bonds, but may be less volatile than mid-cap stock
funds.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund's performance
(for its Class A shares) since the Fund's inception and by
showing how the average annual total returns of the Fund's
shares compare to those of a broad-based market index. Please
remember that the Fund is intended to be a long-term
investment, and that performance results are historical, and
that past performance (particularly over a short-term period)
is not predictive of future results.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
7.71% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -17.30% (3rdQtr'02).
- --------------------------------------------------------------------------------
5 Years
Average Annual Total Returns (or life of
for the periods ended December 31, 2002 1 Year class, if less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception 2/16/01) -27.62% -21.15%
- --------------------------------------------------------------------------------
Samp;amp;P 500 Index (reflects no deduction for fees, -22.09% -15.80%1
expenses or taxes)
- --------------------------------------------------------------------------------
Class B Shares (inception 2/16/01) -27.56% -20.91%
- --------------------------------------------------------------------------------
Class C Shares (inception 2/16/01) -24.54% -19.23%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -24.10% -17.12%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception 2/16/01) -23.06% -18.29%
- --------------------------------------------------------------------------------
1From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N, the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Samp;amp;P 500 Index,
an unmanaged index of equity securities. The index
performance includes reinvestment of income but does not
reflect transaction costs, expenses or taxes. The Fund's
investments may vary from those in the index.
Fees and Expenses of the Fund
The following tables are provided to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays indirectly through its investment in
the Master Fund for management of its assets. The Fund pays
a variety of expenses directly for administration,
distribution of its shares and other services. Those
expenses are subtracted from the Fund's assets to calculate
the Fund's net asset value per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay
other expenses directly, such as sales charges and account
transaction charges. The numbers below are based on the
Fund's expenses during its fiscal year ended December 31,
2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on 5.75% None None None None
purchases (as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original
offering None1 5%2 1%3 1%4 None
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $500,000 or more of Class A
shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the sixth
year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement
plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- ---------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Management Fees 0.005% 0.005% 0.005% 0.005% 0.005%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Distribution and/or Service 0.24% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Other Expenses 1.79% 1.78% 1.70% 1.66% 46.32%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Total Annual Operating Expenses 2.035% 2.785% 2.705% 2.165% 46.325%
- ---------------------------------------------------------------------------------
The management fee listed is the fee paid by the Master Fund
and incurred indirectly by this Fund. This Fund does not pay
a management fee directly to the Adviser. The Adviser has
entered into a contractual arrangement with the Master Fund
to provide that the management fee for the Master Fund, when
combined with administrative fees of certain funds that
invest in the Master Fund (other than this Fund), will not
exceed a specific amount. As a result of this contractual
arrangement, the Adviser currently receives management fees
of 0.005%. This arrangement has a one-year term and is
renewable. Absent that contractual arrangement, the
management fee paid by the Master Fund to the Adviser would
be 0.05%.
Expenses may vary in future years. "Other Expenses" include
transfer agent fees, custodial fees, administration fees paid
to OppenheimerFunds, Inc., and accounting and legal expenses
that the Fund pays as well as the Fund's pro rata share of
the expenses of the Master Fund. The "Other Expenses" in the
table are based on, among other things, the fees the Fund
would have paid if the transfer agent had not waived a
portion of its fee under a voluntary undertaking to the Fund
to limit these fees to 0.25% per annum for Class Y shares and
0.35% per annum for all other classes. "Total Annual
Operating Expenses" were reduced by a voluntary expense
assumption undertaking by the Manager. With that expense
assumption and the transfer agent waiver, "Total Annual
Operating Expenses" were 1.085% for Class A, 1.835% for
Class B, 1.805% for Class C, 1.295% for Class N and 0.835%
for Class Y. Effective November 1, 2002, the limit on
transfer agent fees for Class Y shares increased to 0.35% of
average daily net assets per fiscal year. Had that limit been
in effect during the Fund's prior fiscal year, the Class Y
"Total Annual Operating Expenses" as percentage of average
daily net assets would have been .935%. Those voluntary
undertakings may be revised or terminated at any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $770 $1,176 $1,608 $2,803
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $782 $1,164 $1,672 $2,7711
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $374 $840 $1,432 $3,037
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $320 $678 $1,162 $2,498
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $10,000 $0 $0 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $770 $1,176 $1,608 $2,803
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $282 $864 $1,472 $2,7711
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $274 $840 $1,432 $3,037
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $220 $678 $1,162 $2,498
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $10,000 $0 $0 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
Oppenheimer Select Managers -
Mercury Advisors Focus Growth Fund
What is the Fund's Investment Objective? The Fund seeks
long-term capital appreciation.
What Does the Fund Mainly Invest In? The Fund is a
non-diversified aggressive growth mutual fund that invests
all of its assets in the Master Focus Twenty Trust (the
"Master Fund"), a mutual fund that has the same goals as the
Fund. All investments will be made by the Master Fund. This
structure is sometimes referred to as a "master/feeder"
structure. The Fund's investment results will correspond
directly to the investment results of the Master Fund. For
simplicity, the term "Fund" refers to the Fund and/or the
Master Fund, unless otherwise identified. For more
information on the master/feeder structure, see
"Master/Feeder Structure" on page 74.
The Fund generally invests at least 65% of its total
assets in equity securities. Normally, the Fund will invest
in the common stock of approximately 20 to 30 companies that
Fund Asset Management L.P., doing business as Mercury
Advisors, the investment adviser to the Master Fund (the
"Adviser"), believes have earnings growth and capital
appreciation potential (also known as "aggressive growth
companies"). The Fund may invest in companies of any size
but currently emphasizes common stocks of companies with
large stock market capitalizations (greater than $5
billion). To a lesser extent, the Fund also may invest in
preferred stock, convertible securities, warrants and rights
to subscribe to common stock of those companies. The Fund may
invest in excess of 35% of its total assets in cash or U.S.
dollar denominated high quality short-term debt instruments
for temporary defensive purposes, to maintain liquidity or
when economic or market conditions are unfavorable for
profitable investing. The Master Fund may lend its portfolio
securities and may invest uninvested cash balances in
affiliated money market funds. The Fund may also invest in
certain derivative securities. Derivatives are financial
instruments whose value is derived from another security, a
commodity (such as gold or oil), or an index such as the Samp;amp;P
500 Index. The Fund may also make short sales of securities.
How Does the Adviser Decide What Securities To Buy or Sell?
The Adviser provides the day-to-day portfolio management of
the Fund's assets. The Adviser selects securities of
companies that it believes have strong earnings growth and
capital appreciation potential. The Adviser begins its
investment process by creating a universe of rapidly growing
companies that possess certain growth characteristics. That
universe is continually updated. The Adviser then ranks each
company within its universe by using research models that
focus on growth characteristics such as positive earnings
surprises, upward earnings estimate revisions, and
accelerating sales and earnings growth. Finally, using its
own fundamental research and bottom-up approach to investing,
the Adviser evaluates the quality of each company's earnings
and tries to determine whether the company can sustain or
increase its current growth trend. The Adviser believes that
this disciplined investment process enables it to construct a
portfolio of investments with strong growth characteristics.
The Adviser monitors individual issuers for changes in the
factors above and these changes may trigger a decision to
sell a security.
Who Is the Fund Designed For? The Fund is designed primarily
for investors seeking capital appreciation in their
investment over the long term (at least 5 years). Those
investors should be willing to assume the greater risks of
short-term share price fluctuations that are typical for
funds seeking long-term capital appreciation, and in
particular for a non-diversified fund consisting of
relatively few aggressive growth companies. The Fund is
designed for investors who understand that the Fund's
strategy of investing in relatively few companies and
industries may subject the Fund to sector risk and increased
volatility. The Fund does not seek current income and is not
designed for investors needing current income or preservation
of capital. Because of its focus on long-term capital
appreciation, the Fund may be appropriate for a portion of a
retirement plan investment. The Fund is not a complete
investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks are subject to changes in their value
from a number of factors described below. There is also the
risk that poor security selection by the Adviser will cause
the Fund to underperform other funds having a similar
objective.
The risks described below can affect the value of the
Fund's investments, its investment performance and its prices
per share. Particular investments and investment strategies
also have risks. These risks mean that you can lose money by
investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is
no assurance that the Fund or the Master Fund will achieve
its investment objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and
their short-term volatility at times may be great. Because
the Fund invests primarily in common stocks, the value of the
Fund's portfolio will be affected by changes in the stock
markets in which it invests. Market risk will affect the
Fund's net asset value per share, which will fluctuate as the
values of the Fund's portfolio securities change. A variety
of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same
direction uniformly or at the same time. Different stock
markets may behave differently from each other.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
Risks of Growth Stocks. Stocks of growth companies,
particularly newer companies, may offer opportunities for
greater long-term capital appreciation but may be more
volatile than stocks of larger, more established companies.
They have greater risks if the company's earnings growth or
stock price fails to increase as expected.
SELECTION RISK. Selection risk is the risk that the
securities that Fund management selects will underperform the
markets, the relevant indices or other funds with similar
investment objectives and investment strategies. If Fund
management's expectations regarding particular stocks are not
met, the Fund may not achieve its investment objective.
SECTOR RISK. To the extent that the Fund concentrates its
investments in a specific sector, there is the possibility
that the investments within that sector will decline in price
due to industry-specific market or economic developments.
Risks of Derivative Investments. The Fund can use derivatives
for the management of cash balances as well as to increase or
decrease its exposure to risk quickly. In general terms, a
derivative investment is an investment contract whose value
depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options and futures are
examples of derivatives the Fund can use.
If the issuer of the derivative does not pay the amount
due, the Fund can lose money on the investment. Also, the
underlying security or investment on which the derivative is
based, and the derivative itself, may not perform the way the
portfolio manager expected it to perform. If that happens,
the Fund's share prices could fall, or its hedge might be
unsuccessful. Some derivatives may be illiquid, making it
difficult to value them or sell them quickly at an acceptable
price. The Fund has limits on the amount of particular types
of derivatives it can hold. Using derivatives can increase
the volatility of the Fund's share prices.
Risks of Non-Diversification. The Fund is "non-diversified."
That means that compared to funds that are diversified, it
can invest a greater portion of its assets in the securities
of one issuer. Having a higher percentage of its assets
invested in the securities of fewer issuers could result in
greater fluctuations of the Fund's share prices due to events
affecting a particular issuer. If the value of the Fund's
investments goes down, you may lose money.
HOW RISKY IS THE FUND OVERALL? In the short term, the stock
markets can be volatile, and the price of the Fund's shares
can go up and down substantially. Growth stocks may be more
volatile than other equity investments. The Master Fund
generally does not use income-oriented investments to help
cushion its total return from changes in stock prices. The
Master Fund focuses its investments in a limited number of
issuers. By concentrating in a smaller number of investments,
the Master Fund's and the Fund's risk is increased because
each investment has a greater effect on the Master Fund's and
the Fund's performance. The Fund invests all of its assets in
shares of the Master Fund and is therefore non-diversified.
It will therefore be vulnerable to the effects of market and
economic changes that affect the Master Fund. These changes
can affect the value of the Fund's price per share. Because
of the Fund's volatile nature, when the markets or specific
market sectors decline, the Fund may underperform the market
averages. The Fund is also subject to the risk that the
stocks that Fund management selects will underperform the
stock market, the relevant indices or other funds with
similar investment objectives and investment strategies. In
the OppenheimerFunds spectrum, the Fund is generally more
aggressive than funds that invest in both stocks and bonds or
in investment grade debt securities.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund (for its Class
A shares) since the Fund's inception and by showing how the
average annual total returns of the Fund's shares, both
before and after taxes, compare to those of broad-based
market indices. The table compares the average annual total
returns of the Fund's performance (for its Class A shares)
since the Fund's inception with those of the Standard amp;amp;
Poor's (Samp;amp;P) 500 Barra Growth Index, a broad measure of market
value. The Fund uses this index as its benchmark rather than
the Samp;amp;P 500 Index because the Samp;amp;P 500 Barra Growth Index
better reflects the Fund's growth investing style. The table
also compares the Fund's performance to the NASDAQ Index.
The after-tax returns for the other classes of shares will
vary.
The after-tax returns are shown for Class A shares only
and are calculated using the historical highest individual
federal marginal income tax rates in effect during the
periods shown, and do not reflect the impact of state or
local taxes. In certain cases, the figure representing
"Return After Taxes on Distributions and Sale of Fund Shares"
may be higher than the other return figures for the same
period. A higher after-tax return results when a capital loss
occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax
returns are calculated based on certain assumptions mandated
by regulation and your actual after-tax returns may differ
from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not
relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to
institutional investors not subject to tax. The Fund's past
investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
2.19% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -20.56% (3rdQtr'02).
- --------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years
(or life of
For the periods ended December 31, 2002 class, if less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception 2/16/01)
Return Before Taxes -42.51% -55.45%
Return After Taxes on Distributions -42.51% -55.45%
Return After Taxes on Distributions and -25.89% -40.68%
Sale of Fund Shares
- --------------------------------------------------------------------------------
Samp;amp;P 500 Barra Growth Index (reflects no -23.59% -15.48%1
deduction for fees, expenses or taxes)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NASDAQ Composite Index (reflects no deduction -31.53% -22.91%2
for fees, expenses or taxes)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares (inception 2/16/01) -42.50% -55.32%
- --------------------------------------------------------------------------------
Class C Shares (inception 2/16/01) -40.08% -54.33%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -39.62% -49.92%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception 2/16/01) -39.06% -53.91%
- --------------------------------------------------------------------------------
1From 2/28/01.
2From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Samp;amp;P Barra Growth
Index and the NASDAQ Composite Index. The Samp;amp;P 500 Barra
Growth Index is a widely recognized, unmanaged index of
common stock prices. The NASDAQ Composite Index is an
unmanaged broad-based index comprised of common stocks. The
index performance includes reinvestment of income but does
not reflect transaction costs, expenses or taxes. The Fund
will have investments that vary from those in the indices.
Fees and Expenses of the Fund
The following tables are provided to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays indirectly through its investment in
the Master Fund for management of its assets. The Fund pays a
variety of expenses directly for administration, distribution
of its shares and other services. Those expenses are
subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those
expenses indirectly. Shareholders pay other expenses
directly, such as sales charges and account transaction
charges. The numbers below are based on the Fund's expenses
during its fiscal period ended November 30, 2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class Class B Class C Class N Class Y
A Shares Shares Shares Shares
Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases 5.75% None None None None
(as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more ($500,000
for certain retirement plan accounts) of Class A shares. See
"How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the sixth
year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement
plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- -------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Management Fees 0.60% 0.60% 0.60% 0.60% 0.60%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Distribution and/or Service 0.24% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Other Expenses 2.52% 2.56% 2.53% 2.68% 88.54%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Annual Operating Expenses 3.36% 4.16% 4.13% 3.78% 89.14%
- -------------------------------------------------------------------------------
The management fee listed is the fee paid by the Master Fund
and incurred indirectly by this Fund. This Fund does not pay
a management fee directly to the Adviser. Expenses may vary
in future years. "Other Expenses" include transfer agent
fees, custodial fees, administration fees paid to
OppenheimerFunds, Inc., and accounting and legal expenses
that the Fund pays as well as the Fund's pro rata share of
the expenses of the Master Fund. The "Other Expenses" in the
table are based on, among other things, the fees the Fund
would have paid if the transfer agent had not waived a
portion of its fee under a voluntary undertaking to the Fund
to limit these fees to 0.25% per annum for Class Y shares and
0.35% per annum for all other classes. "Total Annual
Operating Expenses" were reduced by a voluntary expense
assumption undertaking by the Manager. With that expense
assumption and the transfer agent waiver, "Total Annual
Operating Expenses" were 2.34% for Class A, 3.13% for Class
B, 3.07% for Class C, 2.72% for Class N and 1.81% for Class
Y. Effective November 1, 2002, the limit on transfer agent
fees for Class Y shares increased to 0.35% of average daily
net assets per fiscal year. Had that limit been in effect
during the Fund's prior fiscal year, the Class Y "Total
Annual Operating Expenses" as percentage of average daily net
assets would have been 1.91%. Those voluntary undertakings
may be revised or terminated at any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed:1 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $894 $1,549 $2,225 $4,014
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $918 $1,564 $2,324 $4,0202
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $515 $1,255 $2,110 $4,314
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $480 $1,155 $1,949 $4,019
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,170 $5,981 $6,003 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $894 $1,549 $2,225 $4,014
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $418 $1,264 $2,124 $4,0202
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $415 $1,255 $2,110 $4,314
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $380 $1,155 $1,949 $4,019
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,170 $5,981 $6,003 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Includes expenses of both the Fund and the Master Fund.
2. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
Oppenheimer Select Managers - QM Active Balanced Fund
What is the Fund's Investment Objective? The Fund seeks
income and long-term growth of capital.
What Does the Fund Mainly Invest In? To seek income and
long-term growth of capital, the Fund invests mainly in a
wide variety of equity securities, debt securities and money
market instruments. The Fund's investments will be actively
shifted among these asset classes in order to capitalize on
valuation opportunities and to maximize the Fund's total
return. The Fund also invests in other equity securities,
such as non-convertible preferred stocks and securities
convertible into common stock.
Under normal market conditions, the Fund invests:
o 40% to 75% of its total assets in equity securities,
including common stocks and preferred stocks of issuers
of every size - small, medium and large capitalization.
o 25% to 60% of its total assets in investment-grade debt
securities.
o 0% to 35% of its total assets in money market
instruments.
The Fund can invest up to 35% of its total assets in
foreign equity and debt securities. Up to 30% of the Fund's
assets may be used in investment techniques involving
leverage, such as dollar rolls, forward rolls and reverse
repurchase agreements. The portfolio manager also may use
derivatives for hedging or to improve the Fund's returns.
How Do The Portfolio Managers Decide What Securities To Buy
or Sell? The Fund's investment adviser, OppenheimerFunds,
Inc. (the "Manager") has retained Prudential Investment
Management (the "Subadviser") to provide the day-to-day
portfolio management of the Fund's assets. The Fund's
portfolio managers are employed by the Subadviser. In
selecting securities for the Fund, the Fund's portfolio
managers use a quantitative model. They manage the stock
portion of the Fund's portfolio using behavioral finance
models to search for securities of companies believed to be
underpriced, while maintaining a risk profile like the
Standard amp;amp; Poor's 500 Composite Stock Price Index.
The portfolio managers allocate the Fund's investments
among equity and debt securities after assessing the relative
values of these different types of investments under
prevailing market conditions. The portfolio might hold
stocks, bonds and money market instruments in different
proportions at different times. While stocks and other equity
securities are normally emphasized to seek growth of capital,
the portfolio managers might buy bonds and other fixed-income
securities, instead of stocks, when they think that:
o common stocks in general appear to be overvalued,
o debt securities offer meaningful capital growth
opportunities relative to common stocks, or
o it is desirable to maintain liquidity pending
investment in equity securities to seek capital
growth opportunities.
The portfolio managers monitor individual issuers for
changes in the factors above and these changes may trigger a
decision to sell a security.
WHO IS THE FUND DESIGNED FOR? The Fund is designed for
investors seeking growth of capital over the long term with
the opportunity for some income. Those investors should be
willing to assume the risk of short-term share price
fluctuations that are typical for a fund emphasizing equity
investments. Since the Fund's income level will fluctuate, it
is not designed for investors needing an assured level of
current income. Because of its primary focus on long-term
growth of capital, the Fund may be appropriate for moderately
aggressive investors. Shares of the Fund are available for
purchase by retirement plans only. The Fund is not a complete
investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks and bonds are subject to changes in
their value from a number of factors, as described below.
There is also the risk that poor security selection by the
portfolio manager will cause the Fund to underperform other
funds having a similar objective.
The risks described below collectively form the risk
profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per
share. Particular investments and investment strategies also
have risks. These risks mean that you can lose money by
investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is
no assurance that the Fund will achieve its investment
objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and
their short-term volatility at times may be great. Because
the Fund normally focuses its investments in equity
securities, the value of the Fund's portfolio will be
affected by changes in the stock markets in which it invests.
Market risk will affect the Fund's net asset values per
share, which will fluctuate as the values of the Fund's
portfolio securities change. A variety of factors can affect
the price of a particular stock and the prices of individual
stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently
from each other. Because the Fund can buy both U.S. and
foreign stocks it could be affected by changes in domestic
and foreign stock markets.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer. The Fund invests
in securities of large companies and can also buy securities
of small and medium-capitalization companies, which may have
more volatile stock prices than large companies.
Industry Focus. At times the Fund may increase the relative
emphasis of its investments in stocks of companies in a
single industry. Stocks of issuers in a particular industry
may be affected by changes in economic conditions, or by
changes in government regulations, availability of basic
resources or supplies, or other events that affect that
industry more than others. To the extent that the Fund
increases the emphasis of its investments in a particular
industry, its share values may fluctuate in response to
events affecting that industry.
Risks of Foreign Investing. The Fund can invest in foreign
securities. The Fund currently does not intend to invest more
than 35% of its total assets in foreign securities. It can
buy securities of both foreign governments and companies.
While foreign securities may offer special investment
opportunities, they are subject to special risks that can
reduce the Fund's share prices and returns.
The change in value of a foreign currency against the
U.S. dollar will affect the U.S. dollar value of securities
denominated in that foreign currency. Currency rate changes
can also affect the distributions the Fund makes from the
income it receives from foreign securities. Foreign investing
can result in higher transaction and operating costs for the
Fund. Foreign issuers are not subject to the same accounting
and disclosure requirements that U.S. companies are subject
to. The value of foreign investments may be affected by
exchange control regulations, currency devaluation,
expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes
in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors.
INTEREST RATE RISK. The values of debt securities, including
U.S. government securities, are subject to change when
prevailing interest rates change. When interest rates fall,
the value of already-issued debt securities generally rise.
When interest rates rise, the values of already-issued debt
securities generally fall, and they may sell at a discount
from their face amount. The magnitude of these fluctuations
will often be greater for longer-term debt securities. The
Fund's share prices can go up or down when interest rates
change because of the effect of the changes on the value of
the Fund's investments in debt securities.
CREDIT RISK. Debt securities are subject to credit risk.
Credit risk is the risk that the issuer of a security might
not make interest and principal payments on the security as
they become due. If the issuer fails to pay interest, the
Fund's income may be reduced and if the issuer fails to repay
principal, the value of that security and of the Fund's
shares might fall. While the Fund's investments in U.S.
Government securities are subject to little credit risk, the
Fund's other investments in debt securities are subject to
risks of default. A downgrade in an issuer's credit rating or
other adverse news about an issuer can reduce a security's
market value.
The Fund can invest up to 20% of its total assets in
high yield, lower grade debt obligations rated below BBB by
Standard amp;amp; Poor's Ratings Group or Baa by Moody's Investors
Service, Inc. or the equivalent rating by another major
rating service. These lower-rated obligations - also known as
"junk bonds" - have a higher risk of default and tend to be
less liquid and more volatile than higher-grade obligations.
The Fund also may invest in obligations that are not rated,
but that the Subadviser believes are of comparable quality to
these obligations.
HOW RISKY IS THE FUND OVERALL? In the short term, the stock
markets can be volatile, and the price of the Fund's shares
can go up and down substantially. The Fund's income-oriented
investments may help cushion the Fund's total return from
changes in stock prices, but fixed-income securities have
their own risks and normally are not the primary emphasis of
the Fund. In the OppenheimerFunds spectrum, the Fund is more
conservative than aggressive growth stock funds, but has
greater risk than investment-grade bond funds.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund's performance
(for its Class A shares) since the Fund's inception and by
showing how the average annual total returns of the Fund's
shares compare to those of broad-based market indices.
Please remember that the Fund is intended to be a long-term
investment, and that performance results are historical, and
that past performance (particularly over a short-term period)
is not predictive of future results.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
5.21% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -11.11% (3rdQtr'02).
- --------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years
for the periods ended December (or life of class, if
31, 2002 less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception -17.47% -12.08%
2/16/01)
- --------------------------------------------------------------------------------
Samp;amp;P 500 Index (reflects no
deduction for fees, expenses or
taxes) -22.09% -15.80%1
- --------------------------------------------------------------------------------
Lehman Brothers
Government/Credit Bond Index
(reflects no deduction for fees, 9.84% 8.76%1
expenses or taxes)
- --------------------------------------------------------------------------------
Class B Shares (inception -17.46% -11.93%
2/16/01)
- --------------------------------------------------------------------------------
Class C Shares (inception -14.01% -9.98%
2/16/01)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -13.49% -8.46%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception -12.32% -9.09%
2/16/01)
- --------------------------------------------------------------------------------
1From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N, the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Samp;amp;P 500 Index
and the Lehman Brothers Government/Credit Bond Index. The Samp;amp;P
500 Index is an unmanaged index of equity securities and the
Lehman Brothers Government/Credit Bond Index is an unmanaged
index of intermediate and long-term government and investment
grade corporate debt securities. The indices performance
includes reinvestment of income but does not reflect
transaction costs, expenses or taxes. The Fund will have
investments that vary from those in the indices.
Fees and Expenses of the Fund
The following tables are meant to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays a variety of expenses directly for
management of its assets, administration, distribution of its
shares and other services. Those expenses are subtracted from
the Fund's assets to calculate the Fund's net asset values
per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such
as sales charges and account transaction charges. The
numbers below are based on the Fund's expenses during its
fiscal period ended November 30, 2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class Class B Class C Class N Class Y
A Shares Shares Shares Shares
Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases 5.75% None None None None
(as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $500,000 or more of Class A
shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the sixth
year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement
plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- --------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Fees 0.95% 0.95% 0.95% 0.95% 0.95%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution and/or Service 0.01% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Expenses 0.55% 0.80% 0.72% 0.77% 87.08%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.51% 2.75% 2.67% 2.22% 88.03%
- --------------------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include
transfer agent fees, custodial fees, and accounting and legal
expenses that the Fund pays. "Other Expenses" in the table
are based on, among other things, the fees the Fund would
have paid if the transfer agent had not waived a portion of
its fee under a voluntary undertaking to the Fund to limit
these fees to 0.25% per annum for Class Y shares and 0.35%
per annum for all other classes. "Total Annual Operating
Expenses" were reduced by a voluntary expense assumption
undertaking by the Manager. With that expense assumption and
the transfer agent waiver, "Total Annual Operating Expenses"
were 1.41% for Class A, 2.64% for Class B, 2.56% for Class C,
2.12% for Class N and 1.54% for Class Y. Effective November
1, 2002, the limit on transfer agent fees for Class Y shares
increased to 0.35% of average daily net assets per fiscal
year. Had that limit been in effect during the Fund's prior
fiscal year, the Class Y "Total Annual Operating Expenses" as
percentage of average daily net assets would have been
1.64%. Those expense undertakings may be revised or
terminated at any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $720 $1,025 $1,351 $2,273
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $778 $1,153 $1,654 $2,5051
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $370 $829 $1,415 $3,003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $325 $694 $1,190 $2,554
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,148 $6,170 $6,200 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $720 $1,025 $1,351 $2,273
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $278 $853 $1,454 $2,5051
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $270 $829 $1,415 $3,003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $225 $694 $1,190 $2,254
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,148 $6,170 $6,200 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
Oppenheimer Select Managers - Jennison Growth Fund
What is the Fund's Investment Objective? The Fund seeks
long-term growth of capital.
What Does the Fund Mainly Invest In? Under normal market
conditions, the Fund invests at least 65% of its total assets
in equity-related securities of companies that exceed $1
billion in market capitalization and that the portfolio
managers believe have above-average growth prospects. These
companies are generally considered medium to large
capitalization companies. They tend to have a unique market
niche, a strong new product profile or superior management.
Equity-related securities in which the Fund primarily invests
are common stocks, non-convertible preferred stocks and
convertible securities. The Fund may also invest in American
Depository Receipts ("ADRs"), warrants and rights that can be
exercised to obtain stock, and real estate investment trusts.
The Fund can invest up to 20% of its total assets in
foreign securities of both foreign governments and companies.
The Fund can invest in investment-grade fixed-income
securities, including mortgage-related securities, and U.S.
government obligations but does not generally do so. The Fund
also may engage in short sales and may use derivatives for
hedging or to improve the Fund's returns.
How Do the Portfolio Managers Decide What Securities To Buy
or Sell? The Fund's investment adviser, OppenheimerFunds,
Inc. (the "Manager") has retained Jennison Associates LLC
(the "Subadviser" or "Jennison") to provide the day-to-day
portfolio management of the Fund's assets. The Fund's
portfolio managers are employed by the Subadviser. In
selecting securities for the Fund, the Fund's portfolio
managers look to invest in large companies experiencing some
or all of the following:
o above-average revenue and earnings per share growth
o strong market position
o improving profitability and distinctive attributes such
as unique marketing ability
o strong research and development
o productive new product flow
o financial strength
Such companies generally trade at high prices relative
to their current earnings. The portfolio managers will
consider selling or reducing a stock position when, in the
opinion of the portfolio managers, the stock has experienced
a fundamental disappointment in earnings; it has reached an
intermediate-term price objective and its outlook no longer
seems sufficiently promising; a relatively more attractive
stock emerges; or the stock has experienced adverse price
movement. The portfolio managers monitor individual issuers
for changes in the factors above and these changes may
trigger a decision to sell a security.
Who Is the Fund Designed For? The Fund is designed for
investors seeking long-term growth of capital. Those
investors should be willing to assume the greater risks of
share price fluctuations that are typical for a growth fund
focusing on stock investments. Since the Fund does not seek
income and its income from investments will likely be small,
it is not designed for investors needing current income.
Because of its focus on long-term growth of capital, the Fund
may be appropriate for a portion of a retirement plan
investment. This Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks are subject to changes in their value
from a number of factors described below. There is also the
risk that poor security selection by the Fund's portfolio
managers will cause the Fund to underperform other funds
having a similar objective.
The risks described below collectively form the risk
profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per
share. These risks mean that you can lose money by investing
in the Fund. When you redeem your shares, they may be worth
more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment
objective.
RISKS OF INVESTING IN STOCKS. Because the Fund invests
primarily in common stocks of U.S. companies, the value of
the Fund's portfolio will be affected by changes in the U.S.
stock markets. Market risk will affect the Fund's net asset
values per share, which will fluctuate as the values of the
Fund's portfolio securities change. The prices of individual
stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently
from each other. Because the Fund can buy U.S. and foreign
stocks and ADRs, it could be affected by changes in domestic
and foreign stock markets.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
Risks of Foreign Investing. The Fund can invest in foreign
securities and in the securities of foreign issuers in the
form of ADRs. It can buy securities of both foreign
governments and companies. While foreign securities may offer
special investment opportunities, they are subject to special
risks that can reduce the Fund's share prices and returns.
The change in value of a foreign currency against the
U.S. dollar will affect the U.S. dollar value of securities
denominated in that foreign currency. Currency rate changes
can also affect the distributions the Fund makes from the
income it receives from foreign securities. Foreign investing
can result in higher transaction and operating costs for the
Fund. Foreign issuers are not subject to the same accounting
and disclosure requirements that U.S. companies are subject
to. The value of foreign investments may be affected by
exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental
economic or monetary policy in the U.S. or abroad, or other
political and economic factors. ADRs may not necessarily be
denominated in the same currency as the securities into which
they may be converted.
HOW RISKY IS THE FUND OVERALL? In the short term, the stock
markets can be volatile, and the price of the Fund's shares
can go up and down substantially. Growth stocks may be more
volatile than other equity investments. The Fund generally
does not use income-oriented investments to help cushion the
Fund's total return from changes in stock prices. In the
OppenheimerFunds spectrum, the Fund is generally more
aggressive than funds that invest in both stocks and bonds or
in investment grade debt securities, but may be less volatile
than small-cap and emerging markets stock funds.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund's performance
(for its Class A shares) since the Fund's inception and by
showing how the average annual total returns of the Fund's
shares compare to those of a broad-based market index. The
after-tax returns for the other classes of shares will vary.
The after-tax returns are shown for Class A shares only
and are calculated using the historical highest individual
federal marginal income tax rates in effect during the
periods shown, and do not reflect the impact of state or
local taxes. In certain cases, the figure representing
"Return After Taxes on Distributions and Sale of Fund Shares"
may be higher than the other return figures for the same
period. A higher after-tax return results when a capital loss
occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax
returns are calculated based on certain assumptions mandated
by regulation and your actual after-tax returns may differ
from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not
relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to
institutional investors not subject to tax. The Fund's past
investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
2.76% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -16.89% (2ndQtr'02).
- --------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years
(or life of
for the periods ended December 31, 2002 class, if less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception 2/16/01)
Return Before Taxes -34.79% -26.54%
Return After Taxes on Distributions -34.79% -26.54%
Return After Taxes on Distributions and -21.19% -20.62%
Sale of Fund Shares
- --------------------------------------------------------------------------------
Samp;amp;P 500 Index (reflects no deduction for fees, -22.09% -15.80%1
expenses or taxes)
- --------------------------------------------------------------------------------
Class B Shares (inception 2/16/01) -34.74% -26.42%
- --------------------------------------------------------------------------------
Class C Shares (inception 2/16/01) -31.99% -24.80%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -31.65% -22.59%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception 2/16/01) -30.78% -24.12%
- --------------------------------------------------------------------------------
1From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N, the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Samp;amp;P 500 Index,
an unmanaged index of equity securities. The index
performance includes reinvestment of income but does not
reflect transaction costs, expenses or taxes. The Fund's
investments vary from those in the index.
Fees and Expenses of the Fund
The following tables are meant to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays a variety of expenses directly for
management of its assets, administration, distribution of its
shares and other services. Those expenses are subtracted from
the Fund's assets to calculate the Fund's net asset values
per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The numbers
below are based on the Fund's expenses during its fiscal
period ended November 30, 2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class Class B Class C Class N Class Y
A Shares Shares Shares Shares
Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases 5.75% None None None None
(as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more ($500,000
for certain retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the
sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of
retirement plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- ----------------------------------------------------------------------
Class Class Class Class Class Y
A B C N Shares
Shares Shares Shares Shares
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Management Fees 0.95% 0.95% 0.95% 0.95% 0.95%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Distribution and/or Service 0.05% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Other Expenses 0.89% 1.13% 0.91% 1.11% 87.14%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total Annual Operating 1.89% 3.08% 2.86% 2.56% 88.09%
Expenses
- ----------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include
transfer agent fees, custodial fees, and accounting and legal
expenses that the Fund pays. "Other Expenses" in the table
are based on, among other things, the fees the Fund would
have paid if the transfer agent had not waived a portion of
its fee under a voluntary undertaking to the Fund to limit
these fees to 0.25% per annum for Class Y shares and 0.35%
per annum for all other classes. "Total Annual Operating
Expenses" were reduced by a voluntary expense assumption
undertaking by the Manager. With that expense assumption and
the transfer agent waiver, "Total Annual Operating Expenses"
were 1.39% for Class A, 2.51% for Class B, 2.31% for Class C,
2.01% for Class N and 1.43% for Class Y. Effective November
1, 2002, the limit on transfer agent fees for Class Y shares
increased to 0.35% of average daily net assets per fiscal
year. Had that limit been in effect during the Fund's prior
fiscal year, the Class Y "Total Annual Operating Expenses" as
percentage of average daily net assets would have been 1.53%.
Those expense undertakings may be revised or terminated at
any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $756 $1,135 $1,538 $2,659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $811 $1,251 $1,816 $2,8591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $389 $886 $1,509 $3,185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $359 $796 $1,360 $2,895
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,149 $6,167 $6,196 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $756 $1,135 $1,538 $2,659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $311 $951 $1,616 $2,8591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $289 $886 $1,509 $3,185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $259 $796 $1,360 $2,895
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,149 $6,167 $6,196 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
Oppenheimer Select Managers - Salomon Brothers All Cap Fund
What is the Fund's Investment Objective? The Fund seeks
capital appreciation.
What Does the Fund Mainly Invest In? The Fund is a
non-diversified mutual fund that invests mainly in common
stocks and common stock equivalents such as preferred stocks
and securities convertible into common stocks, of companies
Salomon Brothers Asset Management Inc. (the "Subadviser")
believes are undervalued in the marketplace. While the
Subadviser selects an investment primarily for its capital
appreciation potential, secondary consideration is given to a
company's dividend record and the potential for an improved
dividend return. The Fund generally invests in securities of
large, well-known companies, but may also invest a
significant portion of its assets in securities of small to
medium-sized companies when the Subadviser believes smaller
companies offer more attractive value opportunities. The Fund
may invest in non-dividend paying common stocks.
The Fund may invest in investment grade fixed-income
securities and may invest up to 20% of its net assets in
non-convertible debt securities rated below investment grade
or, if unrated, of equivalent quality as determined by the
Sub-adviser. Debt securities rated below investment grade are
normally referred to as "junk bonds". The Fund may invest
without limit in convertible debt securities of any quality.
The Fund may also invest up to 20% of its total assets in
securities of foreign issuers.
How Do The Portfolio Managers Decide What Securities To Buy
or Sell? The Fund's investment adviser, OppenheimerFunds,
Inc. (the "Manager") has retained the Subadviser to provide
the day-to-day portfolio management of the Fund's assets. The
Fund's portfolio managers are employed by the Subadviser. The
Subadviser employs a two-step stock selection process in its
search for undervalued stocks of temporarily out of favor
companies. First, it uses proprietary models and fundamental
research to try to identify stocks that are underpriced in
the market relative to their fundamental value. Next, the
Subadviser also emphasizes companies in those sectors of the
economy, which it believes are undervalued relative to other
sectors.
When evaluating an individual stock, the Subadviser
looks for:
o Low market valuations measured by the Subadviser's
valuation models,
o Positive changes in earnings prospects because of
factors such as:
New, improved or unique products and services
New or rapidly expanding markets for the company's
products
New management
Changes in the economic, financial, regulatory or
political environment particularly affecting the
company
Effective research, product development and
marketing
A business strategy not yet recognized by the
marketplace.
The portfolio managers monitor individual issuers for
changes in the factors above and these changes may trigger a
decision to sell a security.
Who Is The Fund Designed For? The Fund is designed for
investors seeking capital appreciation over the long term.
Those investors should be willing to assume the risks of
short-term share price fluctuations that are typical for a
fund focusing on stock investments. Since the Fund does not
seek income and its income from investments will likely be
small, it is not designed for investors needing current
income. Because of its focus on long-term growth, the Fund
may be appropriate for a portion of a retirement plan
investment. This Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks are subject to changes in their value
from a number of factors described below. There is also the
risk that poor security selection by the Fund's portfolio
managers will cause the Fund to underperform other funds
having a similar objective.
These risks collectively form the risk profile of the
Fund, and can affect the value of the Fund's investments, its
investment performance and its prices per share. These risks
mean that you can lose money by investing in the Fund. When
you redeem your shares, they may be worth more or less than
what you paid for them. There is no assurance that the Fund
will achieve its investment objective.
RISKS OF INVESTING IN STOCKS. Because the Fund invests
primarily in common stocks of U.S. companies, the value of
the Fund's portfolio will be affected by changes in the U.S.
stock markets. Market risk will affect the Fund's net asset
values per share, which will fluctuate as the values of the
Fund's portfolio securities change. The prices of individual
stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently
from each other.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
Industry Focus. At times the Fund may increase the relative
emphasis of its investments in stocks of companies in a
single industry. Stocks of issuers in a particular industry
may be affected by changes in economic conditions, changes in
government regulations, availability of basic resources or
supplies, or other events that affect that industry more than
others. To the extent that the Fund increases the relative
emphasis of its investments in a particular industry, its
share values may fluctuate in response to events affecting
that industry.
Risks of Foreign Investing. The Fund can invest in foreign
securities. The Fund currently does not intend to invest more
than 20% of its net assets in foreign securities. It can buy
securities of both foreign governments and companies. While
foreign securities may offer special investment
opportunities, they are subject to special risks that can
reduce the Fund's share prices and returns.
The change in value of a foreign currency against the
U.S. dollar will affect the U.S. dollar value of securities
denominated in that foreign currency. Currency rate changes
can also affect the distributions the Fund makes from the
income it receives from foreign securities. Foreign investing
can result in higher transaction and operating costs for the
Fund. Foreign issuers are not subject to the same accounting
and disclosure requirements that U.S. companies are subject
to. The value of foreign investments may be affected by
exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental
economic or monetary policy in the U.S. or abroad, or other
political and economic factors.
Risks of Investing in Debt Securities. Debt securities, such
as bonds, involve credit risk. This is the risk that the
borrower will not make timely payments of principal and
interest. The degree of credit risk depends on the issuer's
financial condition and on the terms of the bonds. These
securities are also subject to interest rate risk. There is
the risk that the value of the security may fall when
interest rates rise. In general, the market price of debt
securities with longer maturities will go up or down more in
response to changes in interest rates than the market price
of shorter term securities.
Risks of Non-Diversification. The Fund is "non-diversified."
That means that compared to funds that are diversified, it
can invest a greater portion of its assets in the securities
of one issuer. Having a higher percentage of its assets
invested in the securities of fewer issuers could result in
greater fluctuations of the Fund's share prices due to events
affecting a particular issuer.
HOW RISKY IS THE FUND OVERALL? In the short term, the stock
markets can be volatile, and the price of the Fund's shares
can go up and down substantially. Growth stocks may be more
volatile than other equity investments. The Fund generally
does not use income-oriented investments to help cushion the
Fund's total return from changes in stock prices. The Fund
focuses investments in a limited number of issuers and is
non-diversified. It will therefore be vulnerable to the
effects of economic changes that affect those issuers. In the
OppenheimerFunds spectrum, the Fund is generally more
aggressive than funds that invest in bonds or in investment
grade debt securities, but may be less volatile than
small-cap and emerging markets stock funds.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund's performance
(for its Class A shares) since the Fund's inception and by
showing how the average annual total returns of the Fund's
shares compare to those of a broad-based market index. The
after-tax returns for the other classes of shares will vary.
The after-tax returns are shown for Class A shares only
and are calculated using the historical highest individual
federal marginal income tax rates in effect during the
periods shown, and do not reflect the impact of state or
local taxes. In certain cases, the figure representing
"Return After Taxes on Distributions and Sale of Fund Shares"
may be higher than the other return figures for the same
period. A higher after-tax return results when a capital loss
occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax
returns are calculated based on certain assumptions mandated
by regulation and your actual after-tax returns may differ
from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not
relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to
institutional investors not subject to tax. The Fund's past
investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
11.84% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -18.34% (3rdQtr'02).
- --------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years
(or life of
for the periods ended December 31, 2002 class, if less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception 2/16/01)
Return Before Taxes -26.57% -17.26%
Return After Taxes on Distributions -26.57% -17.41%
Return After Taxes on Distributions and -16.18% -13.63%
Sale of Fund Shares
- --------------------------------------------------------------------------------
Russell 3000 Index (reflects no deduction for -21.54% -15.19%1
fees, expenses or taxes)
- --------------------------------------------------------------------------------
Class B Shares (inception 2/16/01) -26.50% -17.11%
- --------------------------------------------------------------------------------
Class C Shares (inception 2/16/01) -23.52% -15.32%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -23.07% -14.45%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception 2/16/01) -21.59% -14.25%
- --------------------------------------------------------------------------------
1From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N, the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Russell 3000
Index, an unmanaged index of large-capitalization U.S.
companies. The index performance includes reinvestment of
income but does not reflect transaction costs, expenses or
taxes. The Fund will have investments that vary from those in
the index.
Fees and Expenses of the Fund
The following tables are meant to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays a variety of expenses directly for
management of its assets, administration, distribution of its
shares and other services. Those expenses are subtracted from
the Fund's assets to calculate the Fund's net asset values
per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The numbers
below are based on the Fund's expenses during its fiscal
period ended November 30, 2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class Class B Class C Class N Class Y
A Shares Shares Shares Shares
Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases 5.75% None None None None
(as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more ($500,000
for certain retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the
sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement
plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- ----------------------------------------------------------------------
Class Class Class Class Class Y
A B C N Shares
Shares Shares Shares Shares
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Management Fees 1.10% 1.10% 1.10% 1.10% 1.10%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Distribution and/or Service 0.13 % 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Other Expenses 0.62% 0.65% 0.62% 0.63% 86.49%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total Annual Operating 1.85% 2.75% 2.72% 2.23% 87.59%
Expenses
- ----------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include
transfer agent fees, custodial fees, and accounting and legal
expenses that the Fund paid. "Other Expenses" in the table
are based on, among other things, the fees the Fund would
have paid if the transfer agent had not waived a portion of
its fee under a voluntary undertaking to the Fund to limit
these fees to 0.25% per annum for Class Y shares and 0.35%
per annum for all other classes. "Total Annual Operating
Expenses" were reduced by a voluntary expense assumption
undertaking by the Manager. With that expense assumption and
the transfer agent waiver, "Total Annual Operating Expenses"
were 1.59% for Class A, 2.44% for Class B, 2.41% for Class C,
1.98% for Class N and 1.12% for Class Y. Effective November
1, 2002, the limit on transfer agent fees for Class Y shares
increased to 0.35% of average daily net assets per fiscal
year. Had that limit been in effect during the Fund's prior
fiscal year, the Class Y "Total Annual Operating Expenses" as
percentage of average daily net assets would have been 1.22%.
Those expense undertakings may be revised or terminated at
any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $752 $1,123 $1,518 $2,619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $778 $1,153 $1,654 $2,6661
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $375 $844 $1,440 $3,051
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $326 $697 $1,195 $2,565
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,142 $6,193 $6,225 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $752 $1,123 $1,518 $2,619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $278 $853 $1,454 $2,6661
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $275 $844 $1,440 $3,051
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $226 $697 $1,195 $2,565
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,142 $6,193 $6,225 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
Oppenheimer Select Managers -
Gartmore Millennium Growth Fund II
What is the Fund's Investment Objective? The Fund seeks
long-term capital appreciation.
What Does the Fund Mainly Invest In? The Fund invests
primarily in securities of growth companies that are creating
fundamental changes in the economy. Typically, these
companies are characterized by new or innovative products,
services or processes, with the potential to enhance earnings
growth. Growth in earnings may lead to an increase in the
price of the stock. The Fund can invest in companies of any
size but primarily focuses on securities of small to mid
sized companies.
The Fund has the ability to have up to 20% of its total
assets in short positions.
How Does the Portfolio Manager Decide What Securities To Buy
or Sell? The Fund's investment adviser, OppenheimerFunds,
Inc. (the "Manager") has retained Gartmore Mutual Fund
Capital Trust (the "Subadviser") to provide the day-to-day
portfolio management of the Fund's assets. The Fund's
portfolio managers are employed by the Subadviser. In
analyzing specific companies for possible investment, the
Fund's portfolio managers ordinarily perform an assessment of
companies focusing on the following characteristics.:
o Global capacity.
o Market leadership.
o Brand and reputation.
o Management capability regarding innovation,
execution and acquisition.
It generally will sell securities if the portfolio
manager believes:
o the price of the security is overvalued
o the company's earnings are consistently lower than
expected
o more favorable opportunities are identified
The portfolio managers monitor individual issuers for
changes in the factors above and these changes may trigger a
decision to sell a security.
Who is the Fund Designed For? The Fund is designed primarily
for investors seeking long-term capital appreciation. Those
investors should be willing to assume the greater risks of
short-term share price fluctuations that are typical for an
aggressive growth fund. The Fund does not seek current income
and the income from its investments will likely be small. It
is not designed for investors needing current income or
preservation of capital. Because of its focus on long-term
capital appreciation, the Fund may be appropriate for a
portion of a retirement plan investment. This Fund is not a
complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's
investments in stocks are subject to changes in their value
from a number of factors described below. There is also the
risk that poor security selection by the Fund's portfolio
manager will cause the Fund to underperform other funds
having similar objectives.
The risks described below collectively form the risk
profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per
share. Particular investments and investment strategies also
have risks. These risks mean that you can lose money by
investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is
no assurance that the Fund will achieve its investment
objective.
RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and
their short-term volatility at times may be great. Because
the Fund invests primarily in common stocks, the value of the
Fund's portfolio will be affected by changes in the stock
markets. Market risk will affect the Fund's net asset value
per share, which will fluctuate as the values of the Fund's
portfolio securities change. A variety of factors can affect
the price of a particular stock and the prices of individual
stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently
from each other.
Other factors can affect a particular stock's price,
such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in
government regulations affecting the issuer or its industry.
Industry and Sector Focus. At times the Fund may increase the
relative emphasis of its investments in a particular industry
or sector. The prices of stocks of issuers in a particular
industry or sector may go up and down in response to changes
in economic conditions, government regulations, availability
of basic resources or supplies, or other events that affect
that industry or sector more than others. To the extent that
the Fund increases the relative emphasis of its investments
in a particular industry or sector, its share values may
fluctuate in response to events affecting that industry or
sector.
Risks of Growth Stocks. Stocks of growth companies,
particularly newer companies, may offer opportunities for
greater long-term capital appreciation but may be more
volatile than stocks of larger, more established companies.
They have greater risks if the company's earnings growth or
stock price fails to increase as expected.
Risks of Foreign Investing. The Fund can invest without limit
in foreign securities. The Fund currently does not intend to
invest more than 25% of its net assets in foreign securities.
It can buy securities of both foreign governments and
companies. While foreign securities may offer special
investment opportunities, they are subject to special risks
that can reduce the Fund's share prices and returns.
The change in value of a foreign currency against the
U.S. dollar will affect the U.S. dollar value of securities
denominated in that foreign currency. Currency rate changes
can also affect the distributions the Fund makes from the
income it receives from foreign securities. Foreign investing
can result in higher transaction and operating costs for the
Fund. Foreign issuers are not subject to the same accounting
and disclosure requirements that U.S. companies are subject
to. The value of foreign investments may be affected by
exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental
economic or monetary policy in the U.S. or abroad, or other
political and economic factors.
HOW RISKY IS THE FUND OVERALL? The Fund focuses its
investments on equity securities of growth companies for
long-term capital appreciation, and in the short term, they
can be volatile. The price of the Fund's shares can go up and
down substantially. The Fund generally does not use
income-oriented investments to help cushion the Fund's total
return from changes in stock prices, except for defensive
purposes. Foreign securities can be volatile, and the price
of the Fund's shares can go up and down because of events
affecting foreign markets or issuers. In the OppenheimerFunds
spectrum, the Fund is an aggressive investment vehicle,
designed for investors willing to assume greater risks in the
hope of achieving greater gains. In the short-term the Fund
may be less volatile than small-cap and emerging markets
stock funds, but it may be subject to greater fluctuations in
its share prices than funds that emphasize large
capitalization stocks, or funds that focus on both stocks and
bonds.
- ---------------------------------------------------------------
An investment in the Fund is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
- ---------------------------------------------------------------
The Fund's Past Performance
The bar chart and table below show one measure of the risks
of investing in the Fund, by showing the Fund's performance
(for its Class A shares) since the Fund's inception and by
showing how the average annual total returns of the Fund's
shares compare to those of a broad-based market index. The
after-tax returns for the other classes of shares will vary.
The after-tax returns are shown for Class A shares only
and are calculated using the historical highest individual
federal marginal income tax rates in effect during the
periods shown, and do not reflect the impact of state or
local taxes. In certain cases, the figure representing
"Return After Taxes on Distributions and Sale of Fund Shares"
may be higher than the other return figures for the same
period. A higher after-tax return results when a capital loss
occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. The after-tax
returns are calculated based on certain assumptions mandated
by regulation and your actual after-tax returns may differ
from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not
relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to
institutional investors not subject to tax. The Fund's past
investment performance, before and after taxes, is not
necessarily an indication of how the Fund will perform in the
future.
Annual Total Returns (Class A)
(as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing the
annual total return]
Sales charges and taxes are not included in the calculations
of return in this bar chart, and if those charges and taxes
were included, the returns may be less than those shown.
During the period shown in the bar chart, the highest return
(not annualized) before taxes for a calendar quarter was
1.51% (4thQtr'02) and the lowest return (not annualized)
before taxes for a calendar quarter was -16.71% (2ndQtr'02).
- --------------------------------------------------------------------------------
Average Annual Total Returns 1 Year 5 Years
(or life of
for the periods ended December 31, 2002 class, if less)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares (inception 2/16/01)
Return Before Taxes -33.51% -30.32%
Return After Taxes on Distributions -33.51% -30.32%
Return After Taxes on Distributions and -20.41% -23.42%
Sale of Fund Shares
- --------------------------------------------------------------------------------
Russell MidCap Growth Index (reflects no -27.41% -20.08%1
deduction for fees, expenses or taxes)
- --------------------------------------------------------------------------------
Class B Shares (inception 2/16/01) -33.63% -30.19%
- --------------------------------------------------------------------------------
Class C Shares (inception 2/16/01) -30.74% -28.65%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares (inception 3/1/01) -30.36% -24.90%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares (inception 2/16/01) -29.37% -27.94%
- --------------------------------------------------------------------------------
1From 2/28/01.
The Fund's average annual total returns include applicable
sales charges: for Class A, the current maximum initial sales
charge of 5.75%; for Class B, the contingent deferred sales
charge of 5% (1-year) and 4% (life of class); and for Class C
and Class N, the 1% contingent deferred sales charge for the
1-year period. There is no sales charge for Class Y. The
returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions
have been reinvested in additional shares. The performance of
the Fund's Class A shares is compared to the Russell MidCap
Growth Index, an unmanaged index which measures the
performance of those Russell Midcap companies with higher
price-to-book ratios and higher forecasted growth values. The
index performance includes reinvestment of income but does
not reflect transaction costs, expenses or taxes. The Fund
will have investments that vary from those in the index.
Fees and Expenses of the Fund
The following tables are provided to help you understand the
fees and expenses you may pay if you buy and hold shares of
the Fund. The Fund pays a variety of expenses directly for
management of its assets, administration, distribution of its
shares and other services. Those expenses are subtracted from
the Fund's assets to calculate the Fund's net asset value per
share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as
sales charges and account transaction charges. The numbers
below are based on the Fund's expenses during its fiscal
period ended November 30, 2002.
Shareholder Fees (charges paid directly from your investment):
- ---------------------------------------------------------------------------------
Class Class B Class C Class N Class Y
A Shares Shares Shares Shares
Shares
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases 5.75% None None None None
(as % of offering price)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of the lower of the original None1 5%2 1%3 1%4 None
offering
price or redemption proceeds)
- ---------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to
redemptions of investments of $1 million or more ($500,000
for certain retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The
contingent deferred sales charge declines to 1% in the
sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement
plan's first purchase of Class N shares.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- -------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Management Fees 1.20% 1.20% 1.20% 1.20% 1.20%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Distribution and/or Service 0.02% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Other Expenses 1.02% 1.46% 1.31% 1.44% 87.49%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Annual Operating Expenses 2.24% 3.66% 3.51% 3.14% 88.69%
- -------------------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include
agent fees, custodial fees, and accounting and legal expenses
that the Fund pays. "Other Expenses" in the table are based
on, among other things, the fees the Fund would have paid if
the transfer agent had not waived a portion of its fee under
a voluntary undertaking to the Fund to limit these fees to
0.25% per annum for Class Y shares and 0.35% per annum for
all other classes. "Total Annual Operating Expenses" were
reduced by a voluntary expense assumption undertaking by the
Manager. With that expense assumption and the transfer agent
waiver, "Total Annual Operating Expenses" were 1.73% for
Class A, 2.77% for Class B, 2.79% for Class C, 2.28% for
Class N and 1.62% for Class Y. Effective November 1, 2002,
the limit on transfer agent fees for Class Y shares increased
to 0.35% of average daily net assets per fiscal year. Had
that limit been in effect during the Fund's prior fiscal
year, the Class Y "Total Annual Operating Expenses" as
percentage of average daily net assets would have been 1.72%.
Those expense undertakings may be revised or terminated at
any time.
EXAMPLES. The following examples are intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The examples assume that you
invest $10,000 in a class of shares of the Fund for the time
periods indicated and reinvest your dividends and
distributions.
The first example assumes that you redeem all of your
shares at the end of those periods. The second example
assumes that you keep your shares. Both examples also assume
that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs
may be higher or lower because expenses will vary over time.
Based on these assumptions your expenses would be as follows:
- --------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $789 $1,235 $1,706 $3,002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $868 $1,420 $2,092 $3,3111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $454 $1,077 $1,822 $3,783
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $417 $969 $1,645 $3,448
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,158 $6,136 $6,162 $10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares $789 $1,235 $1,706 $3,002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares $368 $1,120 $1,892 $3,3111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares $354 $1,077 $1,822 $3,783
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Shares $317 $969 $1,645 $3,448
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y Shares $5,158 $6,136 $6,162 $10,000
- --------------------------------------------------------------------------------
In the first example, expenses include the initial sales
charge for Class A and the applicable Class B, Class C or
Class N contingent deferred sales charges. In the second
example, the Class A expenses include the sales charge, but
Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There are no sales charges
on Class Y shares.
1. Class B expenses for years 7 through 10 are based on Class
A expenses, because Class B shares automatically convert to
Class A shares 72 months after purchase.
About the Funds' Investments
THE FUNDS' PRINCIPAL INVESTMENT POLICIES. The allocation of
each Fund's (except the OSM - Mercury Advisors Samp;amp;P 500 Index
Fund) portfolio among different investments will vary over
time based on the portfolio manager's evaluation of economic
and market trends. Each Fund's portfolio might not always
include all of the different types of investments described
below. The Statement of Additional Information contains more
detailed information about the Funds' investment policies and
risks.
The Adviser or the Subadvisers, as the case may be, may
try to reduce risks for each Fund (except the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund) by carefully researching
securities before they are purchased. Each Fund other than
the OSM - Mercury Advisors Focus Growth Fund, the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Salomon
Brothers All Cap Fund is a diversified fund and attempts to
reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of
stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also,
each Fund does not concentrate 25% or more of its assets in
investments in any one industry. However, in replicating the
weighting of a particular industry in the Samp;amp;P 500, the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund may invest more than 25%
of its total assets in securities of issuers in that industry.
However, changes in the overall market prices of
securities and the income they pay can occur at any time. The
share prices of each Fund will change daily based on changes
in market prices of securities and market conditions and in
response to other economic events.
Stock Investments. The OSM - Mercury Advisors Focus Growth
Fund, OSM - Jennison Growth Fund, OSM - Gartmore
Millennium Growth Fund II and the OSM - Salomon
Brothers All Cap Fund currently focus on more
established U.S. companies. Growth companies, for
example, may be developing new products or services, or
they may be expanding into new markets for their
products. Newer growth companies tend to retain a large
part of their earnings for research, development or
investment in capital assets. Therefore, they often do
not tend to emphasize paying dividends and may not pay
any dividends for some time. The portfolio managers for
each of these Funds look for stocks of growth companies
for each Fund's portfolio that they believe will
increase in value over time.
The OSM - Mercury Advisors Focus Growth Fund and the
OSM - Jennison Growth Fund do not limit their
investments to issuers in a particular market
capitalization range or ranges. However, the OSM -
Mercury Advisors Focus Growth Fund currently emphasizes
common stocks of large-cap issuers and the OSM -
Jennison Growth Fund currently focuses on mid cap and
large cap issuers. The OSM - QM Active Balanced Fund,
the OSM - Salomon Brothers All Cap Fund, and the OSM -
Gartmore Millennium Growth Fund II may invest in the
common stocks of companies of every size, small, medium
and large capitalization. "Market capitalization"
refers to the total market value of an issuer's common
stock. The stock prices of large cap issuers tend to be
less volatile than the prices of midcap and small cap
companies in the short term, but these companies may
not afford the same growth opportunities as midcap and
small cap companies.
Portfolio Turnover. A change in the securities held by each
Fund is known as "portfolio turnover." Each Fund, with
the exception of the OSM - Mercury Advisors Samp;amp;P 500
Index Fund, may engage in short-term trading to try to
achieve its objective. Each Fund other than the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund might have a
turnover rate in excess of 100% annually, which may be
considered high. Portfolio turnover affects brokerage
costs the Funds pay. Because the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund employs a passive investment
approach, it is anticipated that its portfolio turnover
and trading costs will be lower than "actively" managed
funds. If a Fund realizes capital gains when it sells
its portfolio investments, it must generally pay those
gains out to the shareholders, increasing
non-retirement plan or non-IRA or non-education savings
account shareholders' taxable distributions.
Cyclical Opportunities. Each Fund (other than the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund) may also seek to
take advantage of changes in the business cycle by
investing in companies that are sensitive to those
changes if the respective Adviser or Subadviser
believes they have growth potential. For example, when
the economy is expanding, companies in the consumer
durables and technology sectors may benefit and offer
long-term growth opportunities. Other cyclical
industries include insurance and forest products, for
example. Those Funds focus on seeking growth over the
long term, but may seek to take tactical advantage of
short-term market movements or events affecting
particular issuers or industries.
Debt Securities. The OSM - QM Active Balanced Fund, the OSM -
Jennison Growth Fund and the OSM - Salomon Brothers All
Cap Fund may invest in corporate bond obligations, as
well as government obligations and mortgage-related
securities. The weighted average maturity of the debt
securities held by the OSM - QM Active Balanced Fund
will normally be between three and thirty years. Debt
securities are selected primarily for their income
possibilities and their relative emphasis in the
portfolio may be greater when the stock market is
volatile. For example, when interest rates are falling,
or when the credit quality of a particular issuer is
improving, the portfolio manager might buy debt
securities for their own appreciation possibilities.
The Funds have no limit on the range of maturities of
the debt securities they can buy.
The Subadvisers for the OSM - QM Active Balanced Fund,
the OSM - Jennison Growth Fund and the OSM - Salomon
Brothers All Cap Fund do not rely solely on ratings by
rating organizations in selecting debt securities, but
also use their own judgment to evaluate particular
issues as well as business and economic factors
affecting an issuer. The debt securities those Funds
buy may be rated by nationally-recognized rating
organizations or they may be unrated securities
assigned a rating by the respective Sub-Adviser.
The investments in debt securities by the OSM - QM
Active Balanced Fund and the OSM - Salomon Brothers All
Cap Fund, including convertible securities, can be
above or below investment grade in quality.
"Investment-grade" securities are those rated in the
four highest rating categories by Moody's Investors
Service or other rating organizations, or, if unrated,
assigned a comparable rating by the respective
Sub-Adviser. A list of the ratings definitions of the
principal ratings organizations is in Appendix A to the
Statement of Additional Information.
The OSM - Mercury Advisors Focus Growth Fund may invest
in investment grade, non-convertible debt securities
and U.S. Government securities of any maturity,
although typically not to a significant degree.
Debt securities, such as bonds, involve credit risk.
This is the risk that the borrower will not make timely
payments of principal and interest. The degree of
credit risk depends on the issuer's financial condition
and on the terms of the bonds. These securities are
also subject to interest rate risk. This is the risk
that the value of the security may fall when interest
rates rise. In general, the market price of debt
securities with longer maturities will go up or down
more in response to changes in interest rates than the
market price of shorter term debt securities.
CAN EACH FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The
Trust's Board of Trustees can change non-fundamental
investment policies for each Fund without shareholder
approval, although significant changes will be described in
supplements to this Prospectus. The OSM - Mercury Advisors
Samp;amp;P 500 Index Fund's non-fundamental policy of investing at
least 80% of its net assets (plus borrowings for investment
purposes) in securities or other financial instruments in, or
correlated with, the Samp;amp;P 500 will not be changed by the
Fund's Trustees without first providing shareholders 60 days
written notice. Non-fundamental policies of the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund can be changed by the Board of Trustees of
the Trust or the Board of Trustees of the Master Funds
without shareholder approval. Fundamental policies are those
that cannot be changed without the approval of a majority of
each Fund's outstanding voting shares, as defined in the
Investment Company Act of 1940, as amended. With the
exception of the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
and the OSM - Gartmore Millennium Growth Fund II, each Fund's
objective is a fundamental policy. The OSM - Mercury Advisors
Samp;amp;P 500 Index Fund's objective is a non-fundamental policy
which may be changed at any time by the Board of Trustees of
the Trust or the Board of Trustees of the Master Fund without
shareholder approval. The OSM - Gartmore Millennium Growth
Fund's objective is a non-fundamental policy which may be
changed at any time by the Trust's Board of Trustees without
shareholder approval. Other investment restrictions that are
fundamental policies are listed in the Statement of
Additional Information. An investment policy or technique is
not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, each Fund
can also use some or all of the investment techniques and
strategies described below. A Fund might not always use all
of the different types of techniques and investments
described below. These techniques have certain risks,
although some are designed to help reduce overall investment
or market risks.
Forward Rolls. OSM - QM Active Balanced Fund may enter into
"forward rolls" (also referred to as "mortgage dollar
rolls") transactions with respect to mortgage-related
securities. In this type of transaction, the Fund sells
a mortgage-related security to a buyer and
simultaneously agrees to repurchase a similar security
at a later date at a set price.
During the period between the sale and the purchase,
the Fund will not be entitled to receive interest and
principal payments on the securities that have been
sold. It is possible that the market value of the
securities the Fund sells may decline below the price
at which the Fund is obligated to repurchase
securities, or that the counterparty might default in
its obligation.
Equity Securities. While the OSM - Mercury Advisors Focus
Growth Fund, OSM - Jennison Growth Fund, OSM - Salomon
Brothers All Cap Fund and the OSM - Gartmore Millennium
Growth Fund II emphasize investments in common stocks,
those Funds can also buy preferred stocks, warrants and
securities convertible into common stock. The Adviser
or Subadviser, as the case may be, considers some
convertible securities to be "equity equivalents"
because of the conversion feature and in that case
their rating may have less impact on the investment
decision than in the case of other debt securities. The
OSM - QM Active Balanced Fund may also invest in
non-convertible preferred stocks and convertible
securities, warrants and rights. The OSM - Jennison
Growth Fund can also invest in warrants and rights that
can be exercised to obtain stock.
Convertible Securities. Convertible securities are generally
debt securities or preferred stocks that may be
converted into common stock. Convertible securities
typically pay current income as either interest (debt
security convertible) or dividends (preferred stocks).
A convertible security's value usually reflects both
the stream of current income payments and the value of
the underlying common stock. The market value of a
convertible security performs like a regular debt
security, that is, if market interest rates rise, the
value of a convertible security usually falls. Since it
is convertible into common stock, the convertible
security also has the same types of market and issuer
risk as the underlying common stock.
Warrants. A warrant gives the Fund the right to buy a
quantity of stock. The warrant specifies the amount of
underlying stock, the purchase (or "exercise") price,
and the date the warrant expires. The Fund has no
obligation to exercise the warrant and buy the stock.
A warrant has value only if the Fund exercises it
before it expires. If the price of the underlying stock
does not rise above the exercise price before the
warrant expires, the warrant generally expires without
any value and the Fund loses any amount it paid for the
warrant. Thus, investments in warrants may involve
substantially more risk than investments in common
stock. Warrants may trade in the same markets as their
underlying stock, however, the price of the warrant
does not necessarily move with the price of the
underlying stock.
Foreign Investing. The OSM - Jennison Growth Fund and the OSM
- Salomon Brothers All Cap Fund each can invest up to
20% of its total assets in foreign securities including
foreign equity securities of companies located in any
country, including developed countries and emerging
markets. The OSM - QM Active Balanced Fund may invest
up to 15% of its total assets in foreign equity
securities and up to 20% of its total assets in debt
securities of foreign issuers. The OSM - Gartmore
Millennium Growth Fund II may invest without limit in
foreign securities although it does not intend to
invest more than 25% of its net assets in foreign
securities. The OSM - Mercury Advisors Focus Growth
Fund may invest without limit in the securities of
foreign companies in the form of ADRs. In addition, the
OSM - Mercury Advisors Focus Growth Fund may invest up
to 10% of its total assets in other forms of securities
of foreign companies, including European Depository
Receipts ("EDRs") or other securities convertible into
securities of foreign companies. For purposes of these
limits, the respective Advisers or Subadvisers do not
consider ADR's and other similar receipts or shares to
be foreign securities.
While foreign securities may offer special investment
opportunities, they also have special risks that can
reduce a Fund's share prices and income. The change in
value of foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of
securities denominated in that foreign currency.
Currency rate changes can also affect the distributions
a Fund makes from the income it receives from foreign
securities if foreign currency values change against
the U.S. dollar. Foreign investing can result in higher
transaction and operating costs for the Fund investing
in them. Foreign issuers are not subject to the same
accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign
investments may be affected by exchange control
regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement
of transactions, changes in governmental, economic or
monetary policy in the U.S. or abroad, or other
political and economic factors. The risks of investing
in foreign securities are generally greater for
investments in emerging markets.
Depository Receipts. The OSM - Mercury Advisors Focus Growth
Fund, OSM - QM Active Balanced Fund and OSM - Jennison
Growth Fund may invest in securities of foreign issuers
in the form of Depository Receipts. Depository Receipts
involve the same risks as investing directly in foreign
securities. Those risks are discussed above under
"Foreign Investing." ADRs are receipts typically issued
by an American bank or trust company that show evidence
of underlying securities issued by a foreign
corporation. EDRs evidence a similar ownership
arrangement. The OSM - Mercury Advisors Focus Growth
Fund may also invest in unsponsored Depository
Receipts. The issuers of such unsponsored Depository
Receipts are not obligated to disclose material
information in the United States. Therefore, there may
be less information available regarding such issuers
and there may not be a correlation between such
information and the market value of the Depository
Receipts.
Illiquid and Restricted Securities. Investments may be
illiquid because of the absence of an active trading
market. If a Fund buys illiquid securities it may be
unable to quickly resell them or may be able to sell
them only at a price below current value. A restricted
security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is
registered under the Securities Act of 1933. Each Fund
will not invest more than 15% of its net assets in
illiquid or restricted securities. That percentage
limitation is not a fundamental policy. Certain
restricted securities that are eligible for resale to
qualified institutional purchasers may not be subject
to that limit. The respective Adviser or Subadviser
monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to
maintain adequate liquidity.
Rule 144A Securities. Rule 144A securities are restricted
securities that can be resold to qualified
institutional buyers but not to the general public.
Rule 144A securities may have an active trading market,
but carry the risk that the active trading market may
not continue.
Securities Lending. The Fund may lend securities with a value
of up to 33-1/3% of its total assets to financial
institutions that provide cash or securities issued or
guaranteed by the U.S. government as collateral.
Securities lending involves the risk that the borrower
may fail to return the securities in a timely manner or
at all. As a result, the Fund may lose money and there
may be a delay in recovering the loaned securities. The
Fund could also lose money if it does not recover the
securities and/or the value of the collateral falls,
including the value of investments made with cash
collateral. These events could trigger adverse tax
consequences.
Repurchase Agreements; Purchase and Sale Contracts. Each Fund
may enter into certain types of repurchase agreements
and each Fund other than OSM - Mercury Advisors Samp;amp;P 500
Index Fund may enter into purchase and sale contracts.
Under a repurchase agreement, the seller agrees to
repurchase a security (typically a security issued or
guaranteed by the U.S. Government) at a mutually agreed
upon time and price. This insulates the Fund from
changes in the market value of the security during the
period, except for currency fluctuations. A purchase
and sale contract is similar to a repurchase agreement,
but purchase and sale contracts provide that the
purchaser receives any interest on the security paid
during the period. If the seller fails to repurchase
the security in either situation and the market value
declines, the Fund may lose money.
Short Sales. The OSM - Gartmore Millennium Growth Fund II and
the OSM - Mercury Advisors Focus Growth Fund may invest
up to 20% and 5%, respectively, of their total assets
in short positions. The OSM - Mercury Advisors Samp;amp;P 500
Index Fund and the OSM - Jennison Growth Fund may also
invest in short positions. The Fund may make short
sales of securities, either as a hedge against
potential declines in value of a portfolio security or
to realize appreciation when a security that the Fund
does not own declines in value. When the Fund makes a
short sale, it borrows the security sold short and
delivers it to the broker-dealer through which it made
the short sale as collateral for its obligation to
deliver the security upon conclusion of the sale. The
Fund may have to pay a fee to borrow particular
securities and is often obligated to turn over any
payments received on such borrowed securities to the
lender of the securities.
The Fund's obligations to replace the borrowed security
will be secured by collateral deposited with the
broker-dealer, usually cash, U.S. Government securities
or other liquid securities similar to those borrowed.
With respect to uncovered short positions, the Fund
will also be required to deposit similar collateral
with its custodian to the extent, if any, necessary so
that the value of both collateral deposits in the
aggregate is at all times equal to at least 100% of the
current market value of the security sold short.
Depending on arrangements made with the broker-dealer
from which it borrowed the security, regarding payment
over of any payments received by the Fund on such
security, the Fund may not receive any payments
(including interest) on its collateral deposited with
such broker-dealer.
The Fund will not make a short sale if, after giving
effect to such sale, the market value of all securities
sold short exceeds 5% of the value of its total assets.
The Fund may also make short sales "against the box"
without being subject to such limitations. In this
type of short sale, at the time of the sale, the Fund
owns or has the immediate and unconditional right to
acquire the identical security at no additional cost.
Derivative Investments. Each Fund can invest in a number of
different kinds of "derivative" investments. Options,
futures contracts, structured notes such as indexed
securities or inverse securities, CMOs and hedging
instruments are "derivative instruments" the Funds can
use. In addition to using derivatives for hedging,
including anticipatory hedging for the OSM - Mercury
Advisors Focus Growth Fund and OSM - Mercury Advisors
Samp;amp;P 500 Index Fund, a Fund might use other derivative
investments because they offer the potential for
increased income and principal value. The Funds are not
required to use derivative investments in seeking their
objective.
Derivatives have risks. If the issuer of the derivative
investment does not pay the amount due, the Fund can
lose money on the investment. The underlying security
or investment on which the derivative is based, and the
derivative itself, may not perform the way the Adviser
or Subadviser expected it to perform. As a result of
these risks a Fund could realize less principal or
income from the investment than expected or its hedge
might be unsuccessful. If that happens, the Fund's
share prices could fall. Certain derivative investments
held by a Fund may be illiquid.
Certain types of investments or trading strategies
(such as borrowing money to increase the amount of
investment) may be subject to leverage risk. This means
a relatively small market movement may result in large
changes in the value of an investment. Certain
investments or trading strategies that involve leverage
can result in losses that greatly exceed the amount
originally invested. Derivatives may be difficult or
impossible to sell at the time that the seller would
like or at the price that the seller believes the
security is currently worth.
Hedging. Each Fund can buy and sell certain kinds of futures
contracts, put and call options. In addition, the OSM -
Mercury Advisors Focus Growth Fund, the OSM - Jennison
Growth Fund, the OSM - QM Active Balanced Fund, the OSM
- Salomon Brothers All Cap Fund and the OSM - Gartmore
Millennium Growth Fund II may enter into forward
contracts. The OSM - Mercury Advisors Focus Growth Fund
and the OSM - Salomon Brothers All Cap Fund may invest
in swaps. These are all referred to as "hedging
instruments." The Funds do not use hedging instruments
for speculative purposes. Each Fund has limits on the
extent of its use of hedging and the types of hedging
instruments that it can use.
Some of these strategies could be used to hedge a
Fund's portfolio against price fluctuations. Other
hedging strategies, such as buying futures and call
options, could increase a Fund's exposure to the
securities market. Forward contracts can be used to try
to manage foreign currency risks on the OSM - Jennison
Growth Fund's and OSM - Mercury Advisors Focus Growth
Fund's foreign investments. Foreign currency options
can be used to try to protect against declines in the
dollar value of foreign securities the OSM - Jennison
Growth Fund, the OSM - Gartmore Millennium Growth Fund
II or the OSM - Mercury Advisors Focus Growth Fund
owns, or to protect against an increase in the dollar
cost of buying foreign securities.
There are also special risks in particular hedging
strategies. Options trading involves the payment of
premiums and has special tax effects on a Fund. If the
Adviser or Sub-Adviser used a hedging instrument at the
wrong time or judged market conditions incorrectly, the
hedge might fail and the strategy could reduce the
respective Fund's return. Each Fund could also
experience losses if the prices of its futures and
options positions were not correlated with its other
investments or if it could not close out a position
because of an illiquid market.
Temporary Defensive and Interim Investments. In times of
unstable or adverse market or economic conditions, the
OSM - Mercury Advisors Focus Growth Fund, OSM - QM
Active Balanced Fund, OSM - Jennison Growth Fund, OSM -
Salomon Brothers All Cap Fund, and the OSM - Gartmore
Millennium Growth Fund II can invest up to 100% of
their assets in temporary defensive investments that
are inconsistent with the Funds' principal investment
strategies and the OSM - Mercury Advisors Focus Growth
Fund can invest up to 35% of its assets in temporary
defensive investments that are inconsistent with the
Fund's principal investment strategies. Generally they
would be cash equivalents (such as commercial paper),
money market instruments, short-term debt securities,
U.S. government securities, repurchase agreements, or
purchase and sales contracts. They could include other
investment grade debt securities. The Funds can also
invest in such short-term securities for cash
management purposes. To the extent a Fund invests in
these securities, either defensively or for cash
management purposes, the Fund's positions may be
inconsistent with its principal investment strategies
and the Fund might not achieve its investment objective.
How the Funds Are Managed
OppenheimerFunds, Inc. supervises the investment
program and handles the day-to-day administrative business of
the OSM - QM Active Balanced Fund, OSM - Jennison Growth
Fund, OSM - Salomon Brothers All Cap Fund and OSM - Gartmore
Millennium Growth Fund II. OppenheimerFunds, Inc. carries out
its duties, subject to the policies established by the
Trust's Board of Trustees, under an investment advisory
agreement that states OppenheimerFunds, Inc.'s
responsibilities. The agreement sets the fees each Fund pays
to OppenheimerFunds, Inc. and describes the expenses that
each Fund is responsible to pay to conduct its business.
OppenheimerFunds, Inc. also selects, contracts with and
compensates sub-advisers to manage the investment and
reinvestment of the assets of those Funds of the Trust.
OppenheimerFunds, Inc. does not manage any of the Funds'
portfolio assets. OppenheimerFunds, Inc. also (i) monitors
the compliance of the Adviser or Subadvisers with the
investment objectives and related policies of each Fund, (ii)
reviews the performance of the Sub-advisers and (iii) reports
periodically on such performance to the Trustees of the Trust.
The Trust and OppenheimerFunds, Inc. have received an
order from the Securities and Exchange Commission to permit
OppenheimerFunds, Inc. to appoint a Subadviser or change the
terms of a Subadvisory Agreement for a subadvised Fund
without first obtaining shareholder approval. That means the
Trust will be able to change subadvisers or the fees paid to
subadvisers from time to time without the expense and delays
associated with obtaining shareholder approval of the change.
OppenheimerFunds, Inc. has been an investment adviser
since January 1960. OppenheimerFunds, Inc. and its
subsidiaries and controlled affiliates managed assets of more
than $120 billion in assets as of December 31, 2002,
including other Oppenheimer funds with more than 7 million
shareholder accounts. OppenheimerFunds, Inc. is located at
498 Seventh Avenue, 10th Floor, New York, New York 10018.
OppenheimerFunds, Inc. has entered into an
Administration Agreement with the Trust on behalf of the OSM
- - Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund whereby OppenheimerFunds, Inc.
will maintain certain books and records on behalf of those
Funds and prepare certain reports. OppenheimerFunds, Inc.
shall also be responsible for filing with the Securities and
Exchange Commission and any state securities regulators
certain disclosure documents. Under the Agreement, both Funds
pay an Administration Fee to OppenheimerFunds, Inc. of 0.50%
of the average annual net assets of each such Fund.
Fund Asset Management, L.P., doing business as Mercury
Advisors (the "Adviser"), has entered into a
sub-administration agreement with OppenheimerFunds, Inc.
Under that agreement, the Adviser maintains certain books and
records and prepares certain reports on behalf of the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund.
OppenheimerFunds, Inc. has also entered into an
investment advisory agreement similar to those described
above, with the Trust on behalf of the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors Focus
Growth Fund. If the Board determines that the assets of the
OSM - Mercury Advisors Samp;amp;P 500 Index Fund or the OSM -
Mercury Advisors Focus Growth Fund should not be invested
exclusively in the applicable Master Fund, or if either
Fund's ability to invest in the applicable Master Fund is
terminated, then OppenheimerFunds, Inc. will assume the role
of adviser to those Funds under that investment advisory
agreement. Under that agreement, the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund would pay to OppenheimerFunds, Inc. an
advisory fee of 0.55% on an annual basis and the OSM -
Mercury Advisors Focus Growth Fund would pay an advisory fee
of 1.10% on an annual basis. If OppenheimerFunds, Inc.
assumes the role of adviser for OSM - Mercury Advisors Focus
Growth Fund or OSM - Mercury Advisors Samp;amp;P 500 Index Fund, the
administration and sub-administration arrangements with
respect to the applicable Fund will be terminated since
administrative services would be provided through the
investment advisory agreements.
The Adviser supervises the investment program and
handles the day-to-day business of the Master Samp;amp;P 500 Index
Series of the Quantitative Master Series Trust and the Master
Focus Twenty Trust, the Master Funds in which the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund, respectively, invest. The Adviser
carries out its duties, subject to the policies established
by the Board of Trustees of the applicable Master Fund, under
an investment advisory agreement with the Master Fund that
states the Adviser's responsibilities. Such agreement sets
the fees the Master Fund pays to the Adviser, and describes
the expenses that the Master Fund is responsible to pay to
conduct its business. The Adviser has entered into a
contractual arrangement that provides that the management fee
for the Master Samp;amp;P 500 Index Series, when combined with
administrative fees of certain funds that invest in the
applicable Master Fund (excluding the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund), will not exceed the annual rate of
0.005% of the average daily net assets of the Master Fund.
Absent such contractual arrangement, the management fee
payable by the Master Samp;amp;P 500 Index Series would be at the
annual rate of 0.05%. The Master Focus Twenty Trust pays the
Adviser a management fee at the annual rate of 0.60% of its
average daily net assets. The fees and expenses which each
Master Fund pays, including the management fee it pays to the
Adviser, are passed directly through to the relevant Fund in
proportion to the number of shares of the Master Fund owned
by that Fund.
The Adviser was organized as an investment adviser in
1977 and offers investment advisory services to more than 50
registered investment companies. The Adviser and its advisory
affiliates had approximately $439 billion in investment
company and other portfolio assets under management as of
February 2003.
The OSM - Mercury Advisors Samp;amp;P 500 Index Fund is
managed by a team of investment professionals who are
employed by Mercury Advisors.
The portfolio manager for the OSM - Mercury Advisors
Focus Growth Fund is Michael S. Hahn. Mr. Hahn has been
Portfolio Manager of the Master Fund and of OSM - Mercury
Advisors Focus Growth Fund since November 6, 2001 and has
been a portfolio manager of Merrill Lynch Investment Managers
since 2000 and was Associate Portfolio Manager of Merrill
Lynch Investment Managers from 1999 to 2000. Mr. Hahn was a
portfolio manager and analyst for the PBHG family of mutual
funds from 1996 to 1999.
Advisory Fees. Under each Fund's investment advisory
agreement (other than OSM - Mercury Advisors Samp;amp;P 500
Index Fund and OSM - Mercury Advisors Focus Growth
Fund), each Fund pays OppenheimerFunds, Inc. (the
"Manager") an Advisory fee at an annual rate that
declines on additional assets as the Fund grows. The
advisory fees are as follows:
Fund Advisory Fee
- ---- ------------
OSM - QM Active Balanced Fund 0.95% of the first $300
million of average
annual net assets of the
Fund and 0.90% of
average annual net assets
in excess of $300 million.
OSM - Jennison Growth Fund 0.95% of the first $300
million of average
annual net assets of the
Fund and 0.90% of
average annual net assets
in excess of $300 million.
OSM - Salomon Brothers All Cap Fund 1.10% of the first $100
million of average
annual net assets of the
Fund and 1.00% of
average annual net assets
in excess of $100 million.
OSM - Gartmore Millennium Growth 1.20% of the first $400
million of average
Fund II 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 Subadvisers. The Manager has retained Jennison Associates
LLC ("Jennison") as the Subadviser to provide the
day-to-day portfolio management of the OSM - Jennison
Growth Fund. Jennison is located at 466 Lexington
Avenue, New York, NY 10017. Jennison is a direct,
wholly-owned subsidiary of Prudential Investment
Management, which is a direct, wholly-owned subsidiary
of Prudential Asset Management Holding Company, which
is a direct, wholly-owned subsidiary of Prudential
Financial, Inc. Jennison has served as an investment
adviser since 1969 and has advised investment companies
since 1990. As of December 31, 2002, Jennison had
approximately $48 billion in assets under management.
The Manager, not the Fund, pays Jennison an annual fee
based on the Fund's average annual net assets.
The OSM - Jennison Growth Fund's portfolio managers,
Spiros "Sig" Segalas, Kathleen McCarragher and Michael
Del Balso, are employed by Jennison and are the persons
primarily responsible for the selection of the Fund's
portfolio securities.
Mr. Segalas has been in the investment business for
over forty-two years and has managed equity portfolios
for investment companies since 1990. Mr. Segalas is a
founding member, Director, President and Chief
Investment Officer of Jennison. Mr. Segalas received
his B.A. from Princeton University.
Ms. McCarragher is a Director and Executive Vice
President of Jennison. Prior to joining Jennison in
1998 she was a Managing Director and Director of Large
Cap Growth Equities at Weiss, Peck amp;amp; Greer L.L.C. Prior
to 1992, Ms. McCarragher served as an analyst,
portfolio manager and member of the Investment
Committee for State Street Research amp;amp; Management
Company. She received her B.B.A. from the University of
Wisconsin and her M.B.A. from Harvard University.
Mr. Del Balso is a Director and Executive Vice
President of Jennison, where he has been part of the
investment team since 1972. He received his B.A. from
Yale University and his M.B.A. from Columbia University.
The Manager has retained Prudential Investment
Management as the Subadviser to provide the day-to-day
portfolio management of the OSM - QM Active Balanced
Fund. Prudential Investment Management is located at
Prudential Plaza, 751 Broad Street, Newark, NJ 07102.
Prudential Investment Management has served as an
investment adviser to investment companies since 1984,
and as of December 31, 2002, had approximately $288
billion in assets under management. The Manager, not
the Fund, pays Prudential Investment Management an
annual fee based on the Fund's average annual net
assets.
The portfolio managers for the QM Active Balanced Fund
are Michael Lenarcic and John Van Belle. They became
the Fund's portfolio managers on February 8, 2002. They
are employed by Prudential Investment Management and
are the persons primarily responsible for the selection
of the Fund's securities. Mr. Lenarcic and Mr. Van
Belle are Managing Directors of Prudential Investments
Quantitative Management, a unit of Prudential
Investment Management. Mr. Lenarcic is a member of
Prudential Investment Management's Balanced Portfolio
Management Team. Mr. Van Belle is a member of
Prudential Investments International Asset Allocation
Team.
The Manager has retained Salomon Brothers Asset
Management Inc. ("Salomon Brothers") as the Subadviser
to provide the day-to-day portfolio management of the
OSM - Salomon Brothers All Cap Fund. Salomon Brothers
is located at 399 Park Avenue, New York , New York
10022. It is a wholly-owned subsidiary of Salomon Smith
Barney Holdings Inc., which in turn is a wholly-owned
subsidiary of Citigroup, Inc. Salomon Brothers has
served as an investment adviser to investment companies
since 1987, and as of December 31, 2002, Salomon
Brothers and its affiliates managed approximately $34.2
billion of assets. The Manager, not the Fund, pays
Salomon Brothers an annual fee based on the Fund's
average annual net assets.
The Fund is team managed by Salomon Brothers. The team
has an average of 26 years of investment experience..
The Manager has retained Gartmore Mutual Fund Capital
Trust ("GMFCT") as the Subadviser to provide the
day-to-day portfolio management of the OSM - Gartmore
Millennium Growth Fund II. GMFCT is located at 1200
River Road, Conshohocken, PA 19428.
GMFCT has served as an investment adviser to investment
companies since 1999, and as of December 31, 2002,
GMFCT and its affiliates and predecessors had
approximately $30.3 billion in assets under management.
The Manager, not the Fund, pays GMFCT an annual fee
based on the Fund's average annual net assets.
The Fund's portfolio managers, Aaron Harris (since
inception) and Nick Ford (since October 1, 2001), are
employed by GMFCT and are the persons primarily
responsible for the selection of the OSM - Gartmore
Millennium Growth Fund's portfolio securities. Mr.
Harris joined GMFCT in April 2000. Prior to joining
GMFCT, Mr. Harris was a portfolio manager, managing
portions of several portfolios for Nicholas Applegate
Capital Management. Mr. Harris manages funds similar to
the OSM - Gartmore Millennium Growth Fund II and other
global technology funds. Mr. Ford joined GMFCT in 1998,
serving as an investment manager on the U.S. equity
team. Prior to joining GMFCT, Mr. Ford served as the
director of U.S. equities at Clerical Medical
Investment Group in London. From 1995 to 1996, Mr. Ford
was a U.S. equities fund manager for Sun Alliance
Investment Management.
A B O U T Y O U R A C C O U N T
How to Buy Shares
HOW ARE SHARES PURCHASED? Shares of the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - QM Active Balanced
Fund are offered for sale only to retirement plans. Shares of
the other Funds may be purchased by retirement plans and
non-retirement plan investors alike. A retirement plan can
buy shares several ways as described below. References in
this Prospectus to "you" or "your" apply to the retirement
plan sponsor, or account owner in the case of an IRA or
403(b) account. The Funds' Distributor, OppenheimerFunds
Distributor, Inc., may appoint certain servicing agents to
accept purchase (and redemption) orders. The Distributor, in
its sole discretion, may reject any purchase order for the
Funds' shares.
Participants in a qualified retirement plan (e.g.,
401(k), profit-sharing plan or money purchase pension plan)
should note that shares of the Funds are purchased on their
behalf by the plan's administrator in accordance with the
respective plan's provisions. Plan participants should
contact their Plan administrator to find out how to instruct
the Plan to buy shares of the Funds for their account. It is
the responsibility of the Plan administrator or other Plan
service provider to forward purchase instructions to the
Fund's Distributor. In the case of qualified plans, the
following explanation of how to purchase Fund shares is
intended for Plan administrators and Plan service providers.
Buying Shares Through Your Dealer. You can buy shares through
any dealer, broker or financial institution that has a
sales agreement with the Distributor. Your dealer will
place your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it
with a check payable to "OppenheimerFunds Distributor,
Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the
Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your
investment with a financial advisor before you make a
purchase to be sure that the Fund is appropriate for
you.
o Paying by Federal Funds Wire. Shares purchased through
the Distributor may be paid for by Federal Funds wire.
The minimum investment is $2,500. Before sending a
wire, call the Distributor's Wire Department at
1.800.225.5677 to notify the Distributor of the wire
and to receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink.
With AccountLink, you pay for shares by electronic
funds transfers from your bank account. Shares are
purchased for your account by a transfer of money from
your bank account through the Automated Clearing House
(ACH) system. You can provide those instructions
automatically, under an Asset Builder Plan, described
below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below.
Please refer to "AccountLink," below for more details.
o Buying Shares Through Asset Builder Plans. You may
purchase shares of a Fund automatically each month from
your account at a bank or other financial institution
under an Asset Builder Plan with AccountLink. Details
are in the Asset Builder Application and the Statement
of Additional Information.
WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases,
you can buy Fund shares with a minimum initial investment of
$1,000 and make additional investments at any time with as
little as $50. There are reduced minimums available under the
following special investment plans:
o If you establish one of the many types of retirement
plan accounts that OppenheimerFunds offers, more fully
described below under "Special Investor Services," you
can start your account with as little as $500.
o By using an Asset Builder Plan or Automatic Exchange
Plan (details are in the Statement of Additional
Information), or government allotment plan, you can
make subsequent investments (after making the initial
investment of $500) for as little as $50. For any type
of account established under one of these plans prior
to November 1, 2002, the minimum additional investment
will remain $25.
o The minimum investment requirement does not apply to
reinvesting dividends from a Fund or other Oppenheimer
funds (a list of them appears in the Statement of
Additional Information, or you can ask your dealer or
call the Transfer Agent), or reinvesting distributions
from unit investment trusts that have made arrangements
with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their
offering price which is the net asset value per share plus
any initial sales charge that applies. The offering price
that applies to a purchase order is based on the next
calculation of the net asset value per share that is made
after the Distributor receives the purchase order at its
offices in Colorado, or after any agent appointed by the
Distributor receives the order.
Net Asset Value. Each Fund calculates the net asset value of
each class of shares as of the close of The New York
Stock Exchange ("the Exchange"), on each day the
Exchange is open for trading (referred to in this
Prospectus as a "regular business day"). The Exchange
normally closes at 4:00 P.M., Eastern time, but may
close earlier on some days. All references to time in
this Prospectus mean "Eastern time."
The net asset value per share is determined by dividing
the value of a Fund's net assets attributable to a
class by the number of shares of that class that are
outstanding. To determine net asset value, the Fund's
Board of Trustees has established procedures to value
each Fund's securities, in general, based on market
value. The Board has adopted special procedures for
valuing illiquid and restricted securities and
obligations for which market values cannot be readily
obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and
U.S. holidays, the values of some of a Fund's foreign
investments may change on days when investors cannot
buy or redeem Fund shares.
If, after the close of the principal market on which a
security held by a Fund is traded, and before the time
the Fund's securities are priced that day, an event
occurs that the Manager or the Adviser deems likely to
cause a material change in the value of such security,
the Fund's Board of Trustees has authorized the Manager
or the Adviser, as applicable, subject to the Board's
review, to ascertain a fair value for such security. A
security's valuation may differ depending on the method
used for determining value.
The Offering Price. To receive the offering price for a
particular day, in most cases the Distributor or its
designated agent must receive your order by the time
the Exchange closes that day. If your order is received
on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price
that is determined after your order is received.
Buying Through a Dealer. If you buy shares through a dealer,
your dealer must receive the order by the close of the
Exchange and transmit it to the Distributor so that it
is received before the Distributor's close of business
on a regular business day (normally 5:00 P.M.) to
receive that day's offering price, unless your dealer
has made alternative arrangements with the Distributor.
Otherwise, the order will receive the next offering
price that is determined.
- ---------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? Each Fund offers
investors five different classes of shares. The different
classes of shares represent investments in the same portfolio
of securities, but the classes are subject to different
expenses and will likely have different share prices. When
you buy shares, be sure to specify the class of shares. If
you do not choose a class, your investment will be made in
Class A shares.
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million for
regular accounts or lesser amounts for certain
retirement plans). The amount of that sales charge will
vary depending on the amount you invest. The sales
charge rates are listed in "How Can You Buy Class A
Shares?" below.
- ---------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 6 years of buying them, you will normally
pay a contingent deferred sales charge. That contingent
deferred sales charge varies depending on how long you
own your shares, as described in "How Can You Buy Class
B Shares?" below.
- ---------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 12 months of buying them, you will
normally pay a contingent deferred sales charge of
1.0%, as described in "How Can You Buy Class C Shares?"
below.
- ---------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only
through certain retirement plans), you pay no sales
charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your
shares within 18 months of the retirement plan's first
purchase of Class N shares, you may pay a contingent
deferred sales charge of 1.0%, as described in "How Can
You Buy Class N Shares?" below.
Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements
with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that
the Fund is an appropriate investment for you, the decision
as to which class of shares is best suited to your needs
depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much
you plan to invest and how long you plan to hold your
investment. If your goals and objectives change over time and
you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider
another class of shares. Each Fund's operating costs that
apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your
investment results over time.
The discussion below is not intended to be investment
advice or a recommendation, because each investor's financial
considerations are different. The discussion below assumes
that you will purchase only one class of shares and not a
combination of shares of different classes. Of course, these
examples are based on approximations of the effects of
current sales charges and expenses projected over time, and
do not detail all of the considerations in selecting a class
of shares. You should analyze your options carefully with
your financial advisor before making that choice.
How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty,
knowing how long you expect to hold your investment
will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses,
your choice will also depend on how much you plan to
invest. For example, the reduced sales charges
available for larger purchases of Class A shares may,
over time, offset the effect of paying an initial sales
charge on your investment, compared to the effect over
time of higher class-based expenses on shares of Class
B, Class C or Class N. For retirement plans that
qualify to purchase Class N shares, Class N shares will
generally be more advantageous than Class B and Class C
shares.
o Investing for the Shorter Term. While each Fund is
meant to be a long-term investment, if you have a
relatively short-term investment horizon (that is, you
plan to hold your shares for not more than six years),
you should probably consider purchasing Class A or
Class C shares rather than Class B shares. That is
because of the effect of the Class B contingent
deferred sales charge if you redeem within SIX years,
as well as the effect of the Class B asset-based sales
charge on the investment return for that class in the
short-term. Class C shares might be the appropriate
choice (especially for investments of less than
$100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding
them one year.
However, if you plan to invest more than $100,000 for
the shorter term, then as your investment horizon
increases toward six years, Class C shares might not be
as advantageous as Class A shares. That is because the
annual asset-based sales charge on Class C shares will
have a greater impact on your account over the longer
term than the reduced front-end sales charge available
for larger purchases of Class A shares.
And for non-retirement plan investors who invest $1
million or more, in most cases Class A shares will be
the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of
$500,000 or more of Class B shares or $1 million or
more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing
less than $100,000 for the longer-term, for example for
retirement, and do not expect to need access to your
money for seven years or more, Class B shares may be
appropriate.
Are There Differences in Account Features That Matter to You?
Some account features may not be available to Class B,
Class C and Class N shareholders. Other features may
not be advisable (because of the effect of the
contingent deferred sales charge) for Class B, Class C
and Class N shareholders. Therefore, you should
carefully review how you plan to use your investment
account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B, Class C
and Class N shareholders will be reduced by the
additional expenses borne by those classes that are not
borne by Class A or Class Y shares, such as the Class
B, Class C and Class N asset-based sales charge
described below and in the Statement of Additional
Information. Share certificates are only available for
Class A shares. If you are considering using your
shares as collateral for a loan, that may be a factor
to consider.
How Do Share Classes Affect Payments to Your Broker? A
financial advisor may receive different compensation
for selling one class of shares than for selling
another class. It is important to remember that Class
B, Class C and Class N contingent deferred sales
charges and asset-based sales charges have the same
purpose as the front-end sales charge on sales of Class
A shares: to compensate the Distributor for concessions
and expenses it pays to dealers and financial
institutions for selling shares. The Distributor may
pay additional compensation from its own resources to
securities dealers or financial institutions based upon
the value of shares of each Fund owned by the dealer or
financial institution for its own account or for its
customers.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to
the Statement of Additional Information details the
conditions for the waiver of sales charges that apply in
certain cases, and the special sales charge rates that apply
to purchases of shares of each Fund by certain groups, or
under specified retirement plan arrangements or in other
special types of transactions. To receive a waiver or special
sales charge rate, you must advise the Distributor when
purchasing shares or the Transfer Agent when redeeming shares
that a special condition applies.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at
their offering price, which is normally net asset value plus
an initial sales charge. However, in some cases, described
below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other
cases, reduced sales charges may be available, as described
below or in the Statement of Additional Information. Out of
the amount you invest, the Fund receives the net asset value
to invest for your account.
The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by
the Distributor or allocated to your dealer as a concession.
The Distributor reserves the right to reallow the entire
concession to dealers. The current sales charge rates and
concessions paid to dealers and brokers are as follows:
------------------------------------------------------------------------------
Amount of Purchase Front-End Sales Front-End Sales Concession As
Charge As a
Charge As a Percentage of
Percentage of Net Percentage of
Offering Price Amount Invested Offering Price
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Less than $25,000 5.75% 6.10% 4.75%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
------------------------------------------------------------------------------
Can You Reduce Class A Sales Charges? You may be eligible to
buy Class A shares at reduced sales charge rates under
the Fund's "Right of Accumulation" or a Letter of
Intent, as described in "Reduced Sales Charges" in the
Statement of Additional Information.
Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one
or more of the Oppenheimer funds aggregating $1 million
or more, or for certain purchases by particular types
of retirement plans that were permitted to purchase
such shares prior to March 1, 2001 ("grandfathered
retirement accounts"). Retirement plans are not
permitted to make initial purchases of Class A shares
subject to a contingent deferred sales charge. The
Distributor pays dealers of record concessions in an
amount equal to 1.0% of purchases of $1 million or more
other than by grandfathered retirement accounts. For
grandfathered retirement accounts, the concession is
0.75% of the first $2.5 million of purchases plus 0.25%
of purchases in excess of $2.5 million. In either case,
the concession will not be paid on purchases of shares
by exchange or that were previously subject to a
front-end sales charge and dealer concession.
If you redeem any of those shares within an 18-month
"holding period" measured from the beginning of the
calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of
the lesser of:
o the aggregate net asset value of the redeemed shares at
the time of redemption (excluding shares purchased by
reinvestment of dividends or capital gain
distributions) or
o the original net asset value of the redeemed shares.
The Class A contingent deferred sales charge will not
exceed the aggregate amount of the concessions the
Distributor paid to your dealer on all purchases of
Class A shares of all Oppenheimer funds you made that
were subject to the Class A contingent deferred sales
charge.
Purchases by Certain Retirement Plans. There is no initial
sales charge on purchases of Class A shares of any one
or more Oppenheimer funds by retirement plans that have
$10 million or more in plan assets and that have
entered into a special agreement with the Distributor
and by retirement plans which are part of a retirement
plan product or platform offered by certain banks,
broker-dealers, financial advisors, insurance companies
or recordkeepers which have entered into a special
agreement with the Distributor. The Distributor
currently pays dealers of record concessions in an
amount equal to 0.25% of the purchase price of Class A
shares by those retirement plans from its own resources
at the time of sale, subject to certain exceptions as
described in the Statement of Additional Information.
There is no contingent deferred sales charge upon the
redemption of such shares.
HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at
net asset value per share without an initial sales charge.
However, if Class B shares are redeemed within six years from
the beginning of the calendar month of their purchase, a
contingent deferred sales charge will be deducted from the
redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses
of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
The amount of the contingent deferred sales charge will
depend on the number of years since you invested and the
dollar amount being redeemed, according to the following
schedule for the Class B contingent deferred sales charge
holding period:
- -------------------------------------------------------------------------------
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(As % of Amount Subject to Charge)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0 - 1 5.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2 - 3 3.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3 - 4 3.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4 - 5 2.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
More than 6 None
- -------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the
contingent deferred sales charge, all purchases are
considered to have been made on the first regular business
day of the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares
automatically convert to Class A shares 72 months after
you purchase them. This conversion feature relieves
Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B
Distribution and Service Plan, described below. The
conversion is based on the relative net asset value of
the two classes, and no sales load or other charge is
imposed. When any Class B shares that you hold convert,
any other Class B shares that were acquired by
reinvesting dividends and distributions on the
converted shares will also convert to Class A shares.
For further information on the conversion feature and
its tax implications, see "Class B Conversion" in the
Statement of Additional Information.
How Can you Buy Class C Shares? Class C shares are sold at
net asset value per share without an initial sales charge.
However, if Class C shares are redeemed within a holding
period of 12 months from the beginning of the calendar month
of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C
contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing
distribution-related services to the Fund in connection with
the sale of Class C shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered
for sale to retirement plans (including IRAs and 403(b)
plans) that purchase $500,000 or more of Class N shares of
one or more Oppenheimer funds or to group retirement plans
(which do not include IRAs and 403(b) plans) that have assets
of $500,000 or more or 100 or more eligible participants. See
"Availability of Class N shares" in the Statement of
Additional Information for other circumstances where Class N
shares are available for purchase.
A contingent deferred sales charge of 1.0% will be
imposed upon the redemption of Class N shares, if:
o The group retirement plan is terminated or Class N
shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first
purchase of Class N shares of any Oppenheimer fund, or
o With respect to an IRA or 403(b) plan, Class N shares
are redeemed within 18 months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
Retirement plans that offer Class N shares may impose
charges on plan participant accounts. The procedures for
buying, selling, exchanging and transferring the Fund's other
classes of shares (other than the time those orders must be
received by the Distributor or Transfer Agent in Colorado)
and the special account features applicable to purchasers of
those other classes of shares described elsewhere in this
Prospectus do not apply to Class N shares offered through a
group retirement plan. Instructions for buying, selling,
exchanging or transferring Class N shares offered through a
group retirement plan must be submitted by the plan, not by
plan participants for whose benefit the shares are held.
Who Can Buy Class Y Shares? Class Y shares are sold at net
asset value per share without a sales charge directly to
institutional investors that have special agreements with the
Distributor for this purpose. They may include insurance
companies, registered investment companies and employee
benefit plans. Individual investors cannot buy Class Y shares
directly.
An institutional investor that buys Class Y shares for
its customers' accounts may impose charges on those accounts.
The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than
the time those orders must be received by the Distributor or
Transfer Agent at their Colorado office) and the special
account features available to investors buying those other
classes of shares do not apply to Class Y shares.
Instructions for buying, selling, exchanging or transferring
Class Y shares must be submitted by the institutional
investor, not by its customers for whose benefit the shares
are held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. Each Fund has adopted a
Service Plan for Class A shares. It reimburses the
Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up
to 0.25% of the average annual net assets of Class A
shares of the Fund. The Distributor currently uses all
of those fees to pay dealers, brokers, banks and other
financial institutions quarterly for providing personal
service and maintenance of accounts of their customers
that hold Class A shares. With respect to Class A
shares subject to a Class A contingent deferred sales
charge purchased by grandfathered retirement accounts,
the Distributor pays the 0.25% service fee to dealers
in advance for the first year after the shares are sold
by the dealer. During the first year the shares are
sold, the Distributor retains the service fee. After
the shares have been held for a year, the Distributor
pays the service fee to dealers on a quarterly basis.
Distribution and Service Plans for Class B, Class C and Class
N Shares. Each Fund has adopted Distribution and
Service Plans for Class B, Class C and Class N shares
to pay the Distributor for its services and costs in
distributing Class B, Class C and Class N shares and
servicing accounts. Under the plans, each Fund pays the
Distributor an annual asset-based sales charge of 0.75%
on Class B and Class C shares and 0.25% on Class N
shares. The Distributor also receives a service fee of
0.25% per year under the Class B, Class C and Class N
plans.
The asset-based sales charge and service fees increase
Class B and Class C expenses by 1.0% and increase Class
N expenses by 0.50% of the net assets per year of the
respective class. Because these fees are paid out of
each Fund's assets on an on-going basis, over time
these fees will increase the cost of your investment
and may cost you more than other types of sales charges.
The Distributor uses the service fees to compensate
dealers for providing personal services for accounts
that hold Class B, Class C or Class N shares. The
Distributor pays the 0.25% service fees to dealers in
advance for the first year after the shares are sold by
the dealer. After the shares have been held for a year,
the Distributor pays the service fees to dealers on a
quarterly basis. The Distributor retains the service
fees for accounts for which it renders the required
personal services.
The Distributor currently pays a sales concession of
3.75% of the purchase price of Class B shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class B shares is therefore 4.00% of
the purchase price. The Distributor retains the Class B
asset-based sales charge. See the Statement of
Additional Information for exceptions.
The Distributor currently pays a sales concession of
0.75% of the purchase price of Class C shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class C shares is therefore 1.0% of the
purchase price. The Distributor pays the asset-based
sales charge as an ongoing concession to the dealer on
Class C shares that have been outstanding for a year or
more. See the Statement of Additional Information for
exceptions.
The Distributor currently pays a sales concession of
0.75% of the purchase price of Class N shares to
dealers from its own resources at the time of sale.
Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the
time of sale of Class N shares is therefore 1.0% of the
purchase price. The Distributor retains the asset-based
sales charge on Class N shares. See the Statement of
Additional Information for exceptions.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your
Fund account with an account at a U.S. bank or other
financial institution. It must be an Automated Clearing House
(ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by
telephone (through a service representative or by
PhoneLink) or automatically under Asset Builder Plans,
or
o have the Transfer Agent send redemption proceeds or
transmit dividends and distributions directly to your
bank account. Please call the Transfer Agent for more
information.
You may purchase shares by telephone only after your
account has been established. To purchase shares in amounts
up to $250,000 through a telephone representative, call the
Distributor at 1.800.225.5677. The purchase payment will be
debited from your bank account.
AccountLink privileges should be requested on your
Application or your dealer's settlement instructions if you
buy your shares through a dealer. After your account is
established, you can request AccountLink privileges by
sending signature-guaranteed instructions and proper
documentation to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on
your account as well as to your dealer representative of
record unless and until the Transfer Agent receives written
instructions terminating or changing those privileges. After
you establish AccountLink for your account, any change of
bank account information must be made by signature-guaranteed
instructions to the Transfer Agent signed by all shareholders
who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a
number of account transactions automatically using a
touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the PhoneLink number,
1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1.800.225.5677. You must
have established AccountLink privileges to link your
bank account with a Fund to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares
automatically by phone from your Fund account to
another OppenheimerFunds account you have already
established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the
applicable Fund will send the proceeds directly to your
AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send
requests for certain types of account transactions to the
Transfer Agent by fax (telecopier). Please call
1.800.225.5677 for information about which transactions may
be handled this way. Transaction requests submitted by fax
are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information
about each Fund, as well as your account balance, on the
OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in
the account registration (and the dealer of record) may
request certain account transactions through a special
section of that website. To perform account transactions or
obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want to
have Internet account transaction capability for your
account, please call the Transfer Agent at 1.800.225.5677. At
times, the website may be inaccessible or its transaction
features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. Each Fund has
several plans that enable you to sell shares automatically or
exchange them to another OppenheimerFunds account on a
regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If you redeem some or all of your
Class A or Class B shares of a Fund, you have up to six
months to reinvest all or part of the redemption proceeds in
Class A shares of the Fund or other Oppenheimer funds without
paying a sales charge. This privilege applies only to Class A
shares that you purchased subject to an initial sales charge
and to Class A or Class B shares on which you paid a
contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C, Class N or Class Y
shares. You must be sure to ask the Distributor for this
privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of each Fund for your
retirement plan account. If you participate in a plan
sponsored by your employer, the plan trustee or administrator
must buy the shares for your plan account. The Distributor
also offers a number of different retirement plans that
individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular
IRAs, Roth IRAs, SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for
small business owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for
employees of eligible tax-exempt organizations, such as
schools, hospitals and charitable organizations.
401(k) Plans. These are special retirement plans for
businesses.
Pension and Profit-Sharing Plans. These plans are designed
for businesses and self-employed individuals.
Please call the Distributor for OppenheimerFunds
retirement plan documents, which include applications and
important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any
regular business day. Your shares will be sold at the next
net asset value calculated after your order is received in
proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer
Agent. Each Fund lets you sell your shares by writing a
letter, by wire, or by telephone. You can also set up
Automatic Withdrawal Plans to redeem shares on a regular
basis. If you have questions about any of these procedures,
and especially if you are redeeming shares in a special
situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent
first, at 1.800.225.5677, for assistance.
Certain Requests Require a Signature Guarantee. To protect
you and a Fund from fraud, the following redemption
requests must be in writing and must include a
signature guarantee (although there may be other
situations that also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a
check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of
record on your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are being redeemed by someone (such as an
Executor) other than the owners.
Where Can You Have Your Signature Guaranteed? The Transfer
Agent will accept a guarantee of your signature by a
number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings
association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities,
municipal securities or government securities, or
o a U.S. national securities exchange, a registered
securities association or a clearing agency.
If you are signing on behalf of a corporation,
partnership or other business or as a fiduciary, you
must also include your title in the signature.
Retirement Plan Accounts. There are special procedures to
sell shares in an OppenheimerFunds retirement plan
account. Call the Transfer Agent for a distribution
request form. Special income tax withholding
requirements apply to distributions from retirement
plans. You must submit a withholding form with your
redemption request to avoid delay in getting your money
and if you do not want tax withheld. If your employer
holds your retirement plan account for you in the name
of the plan, you must ask the plan trustee or
administrator to request the sale of the Fund shares in
your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally
sends your money by check, you can arrange to have the
proceeds of shares you sell sent by Federal Funds wire
to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve
wire system. The minimum redemption you can have sent
by wire is $2,500. There is a $10 fee for each request.
To find out how to set up this feature on your account
or to arrange a wire, call the Transfer Agent at
1.800.225.5677.
HOW DO you SELL SHARES BY MAIL? Write a letter of instruction
that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the
account is registered, and
o Any special documents requested by the Transfer Agent
to assure proper authorization of the person asking to
sell the shares.
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer
representative of record may also sell your shares by
telephone. To receive the redemption price calculated on a
particular regular business day, your call must be received
by the Transfer Agent by the close of the Exchange that day,
which is normally 4:00 P.M., but may be earlier on some days.
You may not redeem shares held in an OppenheimerFunds
retirement plan account or under a share certificate by
telephone.
o To redeem shares through a service representative or
automatically on PhoneLink, call 1.800.225.5677.
Whichever method you use, you may have a check sent to
the address on the account statement, or, if you have linked
your Fund account to your bank account on AccountLink, you
may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be
redeemed by telephone in any seven-day period. The
check must be payable to all owners of record of the
shares and must be sent to the address on the account
statement. This service is not available within 30 days
of changing the address on an account.
Telephone Redemptions Through AccountLink or by Wire. There
are no dollar limits on telephone redemption proceeds
sent to a bank account designated when you establish
AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You
do not receive dividends on the proceeds of the shares
you redeemed while they are waiting to be transferred.
If you have requested Federal Funds wire privileges for
your account, the wire of the redemption proceeds will
normally be transmitted on the next bank business day
after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable
the Fund to sell securities to pay the redemption
proceeds. No dividends are accrued or paid on the
proceeds of shares that have been redeemed and are
awaiting transmittal by wire.
CAN YOU SELL SHARES THROUGH your DEALER? The Distributor has
made arrangements to repurchase Fund shares from dealers and
brokers on behalf of their customers. Brokers or dealers may
charge for that service. If your shares are held in the name
of your dealer, you must redeem them through your dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If
you purchase shares subject to a Class A, Class B, Class C or
Class N contingent deferred sales charge and redeem any of
those shares during the applicable holding period for the
class of shares, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are
eligible for a waiver of that sales charge based on the
categories listed in Appendix C to the Statement of
Additional Information and you advise the Transfer Agent of
your eligibility for the waiver when you place your
redemption request.)
A contingent deferred sales charge will be based on the
lesser of the net asset value of the redeemed shares at the
time of redemption or the original net asset value. A
contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an
increase in net asset value over the initial purchase
price,
o shares purchased by the reinvestment of dividends or
capital gains distributions, or
o shares redeemed in the special circumstances described
in Appendix C to the Statement of Additional
Information.
To determine whether a contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the
following order:
1. shares acquired by reinvestment of dividends and
capital gains distributions,
2. shares held for the holding period that applies to the
class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when
you exchange shares of a Fund for shares of other Oppenheimer
funds. However, if you exchange them within the applicable
contingent deferred sales charge holding period, the holding
period will carry over to the fund whose shares you acquire.
Similarly, if you acquire shares of a Fund by exchanging
shares of another Oppenheimer fund that are still subject to
a contingent deferred sales charge holding period, that
holding period will carry over to the applicable Fund.
How to Exchange Shares
Shares of each Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. Shares of each Fund can be
purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several
conditions:
o Shares of the fund selected for exchange must be
available for sale in your state of residence.
o The prospectuses of both funds must offer the exchange
privilege.
o You must hold the shares you buy when you establish
your account for at least seven days before you can
exchange them. After the account is open seven days,
you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the
fund whose shares you purchase by exchange.
o Before exchanging into a fund, you must obtain and read
its prospectus.
Shares of a particular class of each Fund may be
exchanged only for shares of the same class in the other
Oppenheimer funds. For example, you can exchange Class A
shares of a Fund only for Class A shares of another fund. In
some cases, sales charges may be imposed on exchange
transactions. For tax purposes, exchanges of shares involve a
sale of the shares of the fund you own and a purchase of the
shares of the other fund, which may result in a capital gain
or loss. Please refer to "How to Exchange Shares" in the
Statement of Additional Information for more details.
You can find a list of Oppenheimer funds currently
available for exchanges in the Statement of Additional
Information or obtain one by calling a service representative
at 1.800.225.5677. That list can change from time to time.
HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be
requested in writing or by telephone:
Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the
account. Send it to the Transfer Agent at the address
on the back cover. Exchanges of shares held under
certificates cannot be processed unless the Transfer
Agent receives the certificates with the request.
Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative or
by using PhoneLink for automated exchanges by calling
1.800.225.5677. Telephone exchanges may be made only
between accounts that are registered with the same
name(s) and address. Shares held under certificates may
not be exchanged by telephone.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain
exchange policies you should be aware of:
o Shares are redeemed from one fund and purchased from
the other fund in the exchange transaction on the same
regular business day on which the Transfer Agent
receives an exchange request that conforms to the
policies described above. It must be received by the
close of the Exchange that day, which is normally 4:00
P.M. but may be earlier on some days.
o The interests of a Fund's long-term shareholders and
its ability to manage its investments may be adversely
affected when its shares are repeatedly bought and sold
in response to short-term market fluctuations--also
known as "market timing." When large dollar amounts are
involved, a Fund may have difficulty implementing
long-term investment strategies, because it cannot
predict how much cash it will have to invest. Market
timing also may force a Fund to sell portfolio
securities at disadvantageous times to raise the cash
needed to buy a market timer's Fund shares. These
factors may hurt a Fund's performance and its
shareholders. When the Manager believes frequent
trading would have a disruptive effect on a Fund's
ability to manage its investments, the Manager and the
Fund may reject purchase orders and exchanges into the
Fund by any person, group or account that the Manager
believes to be a market timer.
o Each Fund may amend, suspend or terminate the exchange
privilege at any time. Each Fund will provide you
notice whenever it is required to do so by applicable
law, but it may impose changes at any time for
emergency purposes.
o If the Transfer Agent cannot exchange all the shares
you request because of a restriction cited above, only
the shares eligible for exchange will be exchanged.
Shareholder Account Rules and Policies
More information about each Fund's policies and procedures
for buying, selling and exchanging shares is contained in the
Statement of Additional Information.
A $12 annual fee is assessed on any account valued at less
than $500. The fee is automatically deducted from
accounts annually on or about the second to last
business day of September. See the Statement of
Additional Information, or visit the OppenheimerFunds
website, to learn how you can avoid this fee and for
circumstances when this fee will not be assessed.
The offering of shares may be suspended during any period in
which the determination of net asset value is
suspended, and the offering may be suspended by the
Board of Trustees at any time the Board believes it is
in a Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated
by a Fund at any time. The Fund will provide you notice
whenever it is required to do so by applicable law. If
an account has more than one owner, the Fund and the
Transfer Agent may rely on the instructions of any one
owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the
account unless the Transfer Agent receives cancellation
instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other
procedures to confirm that telephone instructions are
genuine, by requiring callers to provide tax
identification numbers and other account data or by
using PINs, and by confirming such transactions in
writing. The Transfer Agent and the Fund will not be
liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in
proper form. From time to time, the Transfer Agent in
its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients
by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for
obtaining their clients' permission to perform those
transactions, and are responsible to their clients who
are shareholders of a Fund if the dealer performs any
transaction erroneously or improperly.
The redemption price for shares will vary from day to day
because the value of the securities in each Fund's
portfolio fluctuates. The redemption price, which is
the net asset value per share, will normally differ for
each class of shares. The redemption value of your
shares may be more or less than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is
forwarded by check, or through AccountLink or by
Federal Funds wire (as elected by the shareholder)
within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under
unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or
suspended. For accounts registered in the name of a
broker-dealer, payment will normally be forwarded
within three business days after redemption.
The Transfer Agent may delay processing any type of
redemption payment as described under "How to Sell
Shares" for recently purchased shares, but only until
the purchase payment has cleared. That delay may be as
much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or
arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase
payment has cleared.
Involuntary redemptions of small accounts may be made by each
Fund if the account value has fallen below $500 for
reasons other than the fact that the market value of
shares has dropped. In some cases, involuntary
redemptions may be made to repay the Distributor for
losses from the cancellation of share purchase orders.
Shares may be "redeemed in kind" under unusual circumstances
(such as a lack of liquidity in the Fund's portfolio to
meet redemptions). This means that the redemption
proceeds will be paid with liquid securities from a
Fund's portfolio.
"Backup withholding" of federal income tax may be applied
against taxable dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish a
Fund your correct, certified Social Security or
Employer Identification Number when you sign your
application, or if you under-report your income to the
Internal Revenue Service.
To avoid sending duplicate copies of materials to households,
a Fund will mail only one copy of each prospectus,
annual and semi-annual report and annual notice of a
Fund's privacy policy to shareholders having the same
last name and address on the Fund's records. The
consolidation of these mailings, called householding,
benefits the Funds through reduced mailing expense.
If you want to receive multiple copies of these
materials, you may call the Transfer Agent at
1.800.225.5677. You may also notify the Transfer Agent
in writing. Individual copies of prospectuses, reports
and privacy notices will be sent to you commencing
within 30 days after the Transfer Agent receives your
request to stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. Each Fund intends to declare dividends separately
for each class of shares from net investment income annually
and to pay dividends to shareholders in December on a date
selected by the Board of Trustees. Dividends and
distributions paid on Class A, and Class Y shares will
generally be higher than dividends for Class B shares, Class
C shares and Class N shares, which normally have higher
expenses than Class A shares and Class Y shares. Each Fund
has no fixed dividend rate and cannot guarantee that it will
pay any dividends or distributions.
CAPITAL GAINS. Each Fund may realize capital gains on the
sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital
gains in December of each year. Each Fund may make
supplemental distributions of dividends and capital gains
following the end of its fiscal year. There can be no
assurance that a Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When
you open your account, specify on your application how you
want to receive your dividends and distributions. You have
four options:
Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and capital gains distributions
in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to
reinvest some distributions (dividends, short-term
capital gains or long-term capital gains distributions)
in the Fund while receiving the other types of
distributions by check or having them sent to your bank
account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a
check for all dividends and capital gains distributions
or have them sent to your bank through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds
Account. You can reinvest all distributions in the same
class of shares of another OppenheimerFunds account you
have established.
TAXES. For retirement plan participants using each Fund as an
investment option under their plan, dividends and capital
gain distributions from each Fund generally will not be
subject to current federal personal income tax, but if they
are reinvested in the Fund under the plan, those dividends
and distributions will accumulate on a tax-deferred basis. In
general, retirement plans and, in particular, distributions
from retirement plans, are governed by complex federal and
state tax rules. Plan participants should contact their Plan
administrator, refer to their plan's Summary Plan
Description, and/or speak to a professional tax adviser
regarding the tax consequences of participating in the Plan
and making withdrawals from their Plan account.
If your shares are not held in a tax-deferred
retirement account, you should be aware of the following tax
implications of investing in each Fund. Distributions are
subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and
net investment income are taxable as ordinary income.
Long-term capital gains are taxable as long-term capital
gains when distributed to shareholders. It does not matter
how long you have held your shares. Whether you reinvest your
distributions in additional shares or take them in cash, the
tax treatment is the same.
If more than 50% of a Fund's assets are invested in
foreign securities at the end of any fiscal year, the Fund
may elect under the Internal Revenue Code to permit
shareholders to take a credit or deduction on their federal
income tax returns for foreign taxes paid by that Fund.
Every year each Fund will send you and the IRS a
statement showing the amount of any taxable distribution you
received in the previous year. Any long-term capital gains
will be separately identified in the tax information a Fund
sends you after the end of the calendar year.
Avoid "Buying a Dividend." If you buy shares on or just
before the ex-dividend date, or just before a Fund
declares a capital gains distribution, you will pay the
full price for the shares and then receive a portion of
the price back as a taxable dividend or capital gain.
Remember, There May be Taxes on Transactions. Because each
Fund's share prices fluctuate, you may have a capital
gain or loss when you sell or exchange your shares. A
capital gain or loss is the difference between the
price you paid for the shares and the price you
received when you sold them. Any capital gain is
subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions
made by a Fund may be considered a non-taxable return
of capital to shareholders. If that occurs, it will be
identified in notices to shareholders.
This information is only a summary of certain federal
income tax information about your investment. You should
consult with your tax advisor about the effect of an
investment in a Fund on your particular tax situation.
MASTER/FEEDER STRUCTURE
Unlike many other mutual funds which directly buy and manage
their own portfolio securities, the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors Focus
Growth Fund seek to achieve their investment objectives by
investing all of their assets in another registered
investment company with the same goals as the Fund. All
investments are made by the respective Master Fund. Investors
in each Fund will acquire an indirect interest in the
respective Master Fund.
Other "feeder" funds may also invest in the Master Fund
and all the feeder funds bear the Master Fund's expenses in
proportion to their assets. This structure may enable the
feeder funds to reduce costs through economies of scale. A
larger investment portfolio may also reduce certain
transaction costs to the extent that contributions to and
redemptions from the Master Fund by feeder funds may offset
each other and produce a lower net cash flow. Each feeder
fund can set its own transaction minimums, fund specific
expenses, and other conditions.
Each Fund may withdraw from its respective Master Fund
at any time for any reason and may invest all of its assets
in another pooled investment vehicle or retain an investment
adviser to manage the Fund's assets directly. The OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund may change the Master Fund in
which it will invest if the Trustees believe such change
would be in the best interests of Fund shareholders.
Smaller feeder funds may be harmed by the actions of
larger feeder funds. For example, a larger feeder fund could
have more voting power than a Fund over the operations of the
Master Fund. Whenever the Master Fund holds a vote of its
feeder funds, the feeder funds, including the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund, will pass the vote through to its own
shareholders.
Financial Highlights
The Financial Highlights Table is presented to help you
understand each Fund's financial performance since inception.
Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate
that an investor would have earned (or lost) on an investment
in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte
amp;amp; Touche LLP, the Funds' independent auditors, whose report,
along with each Fund's financial statements, is included in
the Statement of Additional Information, which is available
on request.
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 $8.56
$10.00 $8.50 $10.00 $8.49 $10.00
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.04)
(.03) (.02) (.06) (.06) (.02)
Net realized and unrealized loss (2.03)
(1.41) (2.08) (1.44) (2.03) (1.49)
- --------------------------------------------------------
Total from investment operations (2.07)
(1.44) (2.10) (1.50) (2.09) (1.51)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $6.49
$8.56 $6.40 $8.50 $6.40 $8.49
========================================================
=================================================================================================
Total Return, at Net Asset Value 2 (24.18)% (14.40)%
(24.71)% (15.00)% (24.62)% (15.10)%
=================================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $4,981 $5,234
$1,296 $354 $2,194 $968
- -------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,862 $4,683
$ 620 $221 $1,528 $232
- -------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.59)%
(0.50)% (1.29)% (1.37)% (1.32)% (1.31)%
Expenses 1.89%
1.44% 3.08% 2.45% 2.86% 2.46%
Expenses, net of voluntary reimbursement
of expenses and/or voluntary waiver of
transfer agent fees 1.39%
1.44% 2.51% 2.24% 2.31% 2.10%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 77%
56% 77% 56% 77% 56%
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.
17 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
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 $
8.52 $9.45 $ 8.57 $10.00
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss
(.05) (.02) (.03) (.03)
Net realized and unrealized loss
(2.02) (.91) (2.03) (1.40)
- -------------------------------------
Total from investment operations
(2.07) (.93) (2.06) (1.43)
- ----------------------------------------------------------------------------------------
Net asset value, end of period
$6.45 $8.52 $6.51 $ 8.57
=====================================
========================================================================================
Total Return, at Net Asset Value 3
(24.30)% (9.84)% (24.04)% (14.30)%
========================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)
$1,313 $361 $1 $1
- ----------------------------------------------------------------------------------------
Average net assets (in thousands)
$1,031 $122 $1 $1
- ----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss
(0.82)% (0.90)% (0.41)% (0.38)%
Expenses
2.56% 1.98% 88.09% 501.48%
Expenses, net of voluntary reimbursement
of expenses and/or voluntary waiver of
transfer agent fees
2.01% 1.71% 1.43% 1.25%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate
77% 56% 77% 56%
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.
18 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Select Managers Jennison Growth Fund (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 growth of
capital. The Fund's
investment advisor is OppenheimerFunds, Inc. (the
Manager). The Manager has
entered into a sub-advisory agreement with Jennison
Associates LLC (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.
19 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
As of November 30, 2002, the Fund had available for
federal income tax purposes
unused capital loss carryforwards as follows:
Expiring
----------------------
2009 $ 637,074
2010 1,804,042
Total $2,441,116
==========
As of November 30, 2002, the Fund had approximately
$110,000 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 a
decrease in paid-in capital of $65,535. 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.
20 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
As of November 30, 2002, the components of distributable
earnings on a tax
basis were as follows:
Accumulated net realized loss
$(2,574,178)
Net unrealized depreciation
(222,430)
- ------------
Total
$(2,796,608)
============
- --------------------------------------------------------------------------------
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.
21 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
================================================================================
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 215,428 $1,516,617
618,231 $6,011,437
Redeemed (59,923) (437,851)
(7,999) (67,740)
- -------------------------------------------------------
Net increase 155,505 $1,078,766
610,232 $5,943,697
=======================================================
- --------------------------------------------------------------------------------
Class B
Sold 178,140 $1,172,929
53,558 $ 474,235
Redeemed (17,259) (117,392)
(12,050) (101,497)
- -------------------------------------------------------
Net increase 160,881 $1,055,537
41,508 $ 372,738
=======================================================
- --------------------------------------------------------------------------------
Class C
Sold 261,409 $1,843,044
117,610 $ 985,629
Redeemed (32,313) (214,363)
(3,775) (32,797)
- -------------------------------------------------------
Net increase 229,096 $1,628,681
113,835 $ 952,832
=======================================================
- --------------------------------------------------------------------------------
Class N
Sold 193,853 $1,476,441
43,880 $ 380,385
Redeemed (32,720) (223,619)
(1,519) (11,471)
- -------------------------------------------------------
Net increase 161,133 $1,252,822
42,361 $ 368,914
=======================================================
- --------------------------------------------------------------------------------
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
$10,389,327 and $5,857,931, respectively.
As of November 30, 2002, unrealized appreciation
(depreciation) based on cost of
securities for federal income tax purposes of $10,024,841
was composed of:
Gross unrealized appreciation $
266,294
Gross unrealized depreciation
(511,792)
- ----------
Net unrealized depreciation
$(245,498)
==========
22 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
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 which provides
for a fee at an
annual rate of 0.95% of the first $300 million of average
annual net assets of
the Fund and 0.90% of average annual net assets in excess
of $300 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 Jennison
Associates LLC 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 $35,059 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 $34,373 $10,966
$1,016 $38,831 $15,462 $12,938
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.
23 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
4. Fees and Other Transactions with Affiliates CONTINUED
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
- -------------------------------------------------------------------------------
November 30, 2002 $-- $3,447
$546 $530
- --------------------------------------------------------------------------------
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 $2,332, all of which were paid by
the Distributor to
recipients, and included $349 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 November 30, 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 $ 6,176 $ 5,596 $
64,956 5.01%
Class C Plan 15,244 12,258
315,521 14.38
Class N Plan 5,143 4,763
111,848 8.52
================================================================================
5. Option Activity
The Fund may buy and sell put and call options, or write
put and covered call
options on portfolio securities in order to produce
incremental earnings or
protect against changes in the value of portfolio
securities.
The Fund generally purchases put options or writes
covered call options to
hedge against adverse movements in the value of portfolio
holdings. When an
option is written, the Fund receives a premium and becomes
obligated to sell or
purchase the underlying security at a fixed price, upon
exercise of the option.
24 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
Options are valued daily based upon the last sale price
on the principal
exchange on which the option is traded and unrealized
appreciation or
depreciation is recorded. The Fund will realize a gain or
loss upon the
expiration or closing of the option transaction. When an
option is exercised,
the proceeds on sales for a written call option, the
purchase cost for a written
put option, or the cost of the security for a purchased put
or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options
are noted in the
Statement of Investments where applicable. Shares subject
to call, expiration
date, exercise price, premium received and market value are
detailed in a note
to the Statement of Investments. Options written are
reported as a liability in
the Statement of Assets and Liabilities. Realized gains and
losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives
up the opportunity
for profit if the market price of the security increases
and the option is
exercised. The risk in writing a put option is that the
Fund may incur a loss if
the market price of the security decreases and the option
is exercised. The risk
in buying an option is that the Fund pays a premium whether
or not the option is
exercised. The Fund also has the additional risk of not
being able to enter into
a closing transaction if a liquid secondary market does not
exist.
Written option activity for the year ended November 30,
2002 was as follows:
Call Options
------------------------
Number of Amount of
Contracts Premiums
- -----------------------------------------------------
Options outstanding as of
November 30, 2001 -- $ --
Options written 18 2,919
Options closed or expired (18) (2,919)
------------------------
Options outstanding as of
November 30, 2002 -- $ --
========================
================================================================================
6. 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.
25 | oppenheimer select managers
Jennison Growth Fund
INFORMATION AND SERVICES
For More Information on The Select Managers Funds
The following additional information about each Fund is
available without charge upon request:
STATEMENT OF ADDITIONAL INFORMATION. This document includes
additional information about each Fund's investment policies,
risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this
Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about
each Fund's investments and performance is available in each
Fund's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Funds'
performance during its last fiscal year.
How to Get More Information
You can request the Statement of Additional Information,
the Annual and Semi-Annual Reports, the notice explaining
the Funds' privacy policy and other information about
each Fund or your account:
By Telephone: Call OppenheimerFunds Services
toll-free:
1.800.CALL OPP (225.5677)
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet: You can send us a request by
e-mail or
read or download documents on the
OppenheimerFunds website:
WWW.OPPENHEIMERFUNDS.COM
Information about each Fund including the Statement of
Additional Information can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 1.202.942.8090.
Reports and other information about each Fund are
available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after
payment of a duplicating fee by electronic request at the
SEC's e-mail address: publicinfo@sec.gov or by writing to
the SEC's Public Reference Section, Washington, D.C.
20549-0102.
No one has been authorized to provide any information
about the Funds or to make any representations about the
Funds other than what is contained in this Prospectus.
This Prospectus is not an offer to sell shares of the
Funds, nor a solicitation of an offer to buy shares of
the Funds, to any person in any state or other
jurisdiction where it is unlawful to make such an offer.
The Trust's SEC File No.: 811-10153 The Funds' shares are
distributed by:
PR0000.001.0303 (logo)
OppenheimerFunds(R) Distributor, Inc.
Printed on recycled paper.
STATEMENT OF INFORMATION
Oppenheimer Select Managers
Mercury Advisors Samp;amp;P 500 Index Fund
Mercury Advisors Focus Growth Fund
QM Active Balanced Fund
Jennison Growth Fund
Salomon Brothers All Cap Fund
Gartmore Millennium Growth Fund II
6803 South Tucson Way, Centennial, Colorado 80112
1.800.525.7048
Statement of Additional Information dated March 28, 2003
This Statement of Additional Information is not a
Prospectus. This document contains additional information
about the Funds and supplements information in the
Prospectus dated March 28, 2003. It should be read together
with the Prospectus. You can obtain the Prospectus by
writing to the Funds' Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217, or by
calling the Transfer Agent at the toll-free number shown
above, or by downloading it from the OppenheimerFunds
Internet web site at www.oppenheimerfunds.com.
Contents
Page
About the Funds
Additional Information About the Funds' Investment Policies
and Risks..............................................................2
The Funds' Investment Policies.....................................2
Other Investment Techniques and Strategies.........................15
Investment Restrictions............................................34
How the Funds are Managed .............................................42
Organization and History...........................................42
Trustees and Officers of the Trust.................................44
The Manager........................................................56
Brokerage Policies of the Funds........................................64
Distribution and Service Plans.........................................70
Performance of the Funds...............................................75
About Your Account
How To Buy Shares......................................................80
How To Sell Shares.....................................................91
How To Exchange Shares.................................................96
Dividends, Capital Gains and Taxes.....................................99
Additional Information About the Funds.................................104
Financial Information About the Funds
Independent Auditors' Reports and Financial Statements.................106
Appendix A: Ratings Definitions.......................................A-1
Appendix B: Industry Classifications...................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers..............C-1
ABOUT THE FUNDS
Additional Information About the Funds' Investment Policies
and Risks
The investment objective, the principal investment
policies and the main risks of each Fund are described in
the Prospectus. This Statement of Additional Information
contains supplemental information about those policies and
risks and the types of securities that each Fund's
investment Adviser or subadviser can select for the Fund.
Additional information is also provided about the
strategies that the Fund may use to try to achieve its
objective.
The Funds' Investment Policies
Oppenheimer Select Managers - Mercury Advisors Samp;amp;P 500
Index Fund
The Fund seeks to achieve its investment objective by
investing all of its assets in the Master Samp;amp;P 500 Index
Series of the Quantitative Master Series Trust (the "Master
Fund") which has the same investment objective as the Fund.
The Fund's investment experience and results will
correspond directly to the investment experience of the
Master Fund in which it invests. Thus, all investments are
made at the level of the Master Fund. For simplicity,
however, with respect to investment objective, policies and
restrictions, this Statement of Additional Information,
like the Prospectus, uses the term "Fund" to include the
Fund and the Master Fund in which the Fund invests. The
following is a description of the investment policies of
the Fund.
The Fund's investment objective is not a fundamental
policy and may be changed by the Board of Trustees of the
Fund with 60 days notice to shareholders but, without
shareholder approval. The Trustees may also change the
target index of the Fund if they consider that a different
index would facilitate the management of the Fund in a
manner which better enables the Fund to seek to mirror the
total return of the market segment represented by the then
existing target index.
The investment objective of the Fund is to match the
performance of the Standard amp;amp; Poor's 500 Composite Stock
Price Index (the "Samp;amp;P 500") as closely as possible before
the deduction of Fund expenses. There can be no assurance
that the investment objective of the Fund will be achieved.
In seeking to mirror the total return of the Samp;amp;P 500,
Fund Asset Management, L.P., doing business as Mercury
Advisors (the "Adviser") generally will allocate the Master
Fund's investments among common stocks in approximately the
same weightings as the Samp;amp;P 500. In addition, the Adviser
may use options and futures contracts and other types of
financial instruments relating to all or a portion of the
Samp;amp;P 500. At times the Fund may not invest in all of the
common stocks in the Samp;amp;P 500, or in the same weightings as
in the Samp;amp;P 500. At those times, the Fund chooses
investments so that the market capitalizations, industry
weighting and other fundamental characteristics of the
stocks and derivative instruments chosen are similar to the
Samp;amp;P 500 as a whole. The Fund may also engage in securities
lending.
The Samp;amp;P 500 is composed of the common stocks of 500
large capitalization companies from various industrial
sectors, most of which are listed on the New York Stock
Exchange (the "NYSE"). A company's stock market
capitalization is the total market value of its outstanding
shares. The Samp;amp;P 500 represents a significant portion of the
market value of all common stocks publicly traded in the
United States.
About Indexing and Management of the Fund
About Indexing. The Fund is not managed according to
traditional methods of "active" investment management,
which involve the buying and selling of securities based
upon economic, financial, and market analyses and
investment judgment. Instead, the Fund, utilizing
essentially a "passive" or "indexing" investment approach,
seeks to replicate, before the Fund's expenses (which can
be expected to reduce the total return of a Fund), the
total return of its respective index.
Indexing and Managing the Fund. The Fund will be
substantially invested in securities in the Samp;amp;P 500, and
will invest at least 80% of its net assets (plus any
borrowings for investment purposes) at the time of
investment in equity securities or other financial
instruments which are contained in or correlated with
securities in the Samp;amp;P 500.
Because the Fund seeks to mirror the total return of
the Samp;amp;P 500, generally the Adviser will not attempt to
judge the merits of any particular security as an
investment but will seek only to mirror the total return of
the securities in the Samp;amp;P 500. However, the Adviser may
omit or remove a security which is included in the Samp;amp;P 500
from the Fund's portfolio if, following objective criteria,
the Adviser judges the security to be insufficiently liquid
or believes the merit of the investment has been
substantially impaired by extraordinary events or financial
conditions.
The Adviser may acquire certain financial instruments
based upon individual securities or based upon or
consisting of one or more baskets of securities (which
basket may be based upon the Samp;amp;P 500). Certain of these
instruments may represent an indirect ownership interest in
such securities or baskets. Others may provide for the
payment to the Fund or by the Fund of amounts based upon
the performance (positive, negative or both) of a
particular security or basket. The Adviser will select such
instruments when it believes that the use of the instrument
will correlate substantially with the expected total return
of a target security or index. In connection with the use
of such instruments, the Adviser may enter into short sales
in an effort to adjust the weightings of particular
securities represented in the basket to more accurately
reflect such securities' weightings in the Samp;amp;P 500.
The Fund's ability to mirror the total return of the
Samp;amp;P 500 may be affected by, among other things, transaction
costs, administration and other expenses incurred by the
Fund, taxes, changes in either the composition of the Samp;amp;P
500 or the assets of the Fund, and the timing and amount of
Fund investors' contributions and withdrawals, if any. In
addition, the Fund's total return will be affected by
incremental operating costs (e.g., transfer agency,
accounting) that will be borne by the Fund. Under normal
circumstances, it is anticipated that the Fund's total
return over periods of one (1) year and longer will, on a
gross basis and before taking into account expenses
(incurred at either the Master Fund or the Fund level), be
within ten (10) basis points (a basis point is one
one-hundredth of one percent (0.01%)) of the total return
of the Samp;amp;P 500. There can be no assurance that this level
of correlation will be achieved. In the event that this
correlation is not achieved over time, the Trustees of the
Fund will consider alternative strategies for the Fund.
Information regarding correlation of the Fund's performance
to that of the Samp;amp;P 500 will be reflected in the Fund's
annual report.
Other Investment Policies, Practices and Risk Factors
Cash Management. Generally, the Adviser will employ
futures and options on futures to provide liquidity
necessary to meet anticipated redemptions or for day-to-day
operating purposes. However, if considered appropriate in
the opinion of the Adviser, a portion of the Fund's assets
may be invested in certain types of instruments with
remaining maturities of three hundred ninety seven (397)
days or less for liquidity purposes. Such instruments would
consist of: (i) obligations of the U.S. Government, its
agencies, instrumentalities, authorities or political
subdivisions ("U.S. Government Securities"); (ii) other
fixed-income securities rated Aa or higher by Moody's
Investors Service Inc. ("Moody's) or AA or higher by
Standard amp;amp; Poor's Rating Service ("Samp;amp;P") or, if unrated, of
comparable quality in the opinion of the Adviser; (iii)
commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and
bankers' acceptances; and (v) repurchase agreements. At the
time the Fund invests in commercial paper, bank obligations
or repurchase agreements, the issuer or the issuer's parent
must have outstanding debt rated Aa or higher by Moody's or
AA or higher by Samp;amp;P or outstanding commercial paper, bank
obligations or other short-term obligations rated Prime-1
by Moody's or A-1 by Samp;amp;P; or, if no such ratings are
available, the instrument must be of comparable quality in
the opinion of the Adviser.
Short Sales. In connection with the use of certain
instruments based upon or consisting of one or more baskets
of securities, the Adviser may sell a security the Fund
does not own, or in an amount greater than the Fund owns
(i.e., make short sales). Such transactions will be used
only in an effort to adjust the weightings of particular
securities represented in the basket to reflect such
securities' weightings in the target index.
Cash Flows; Expenses. The ability of the Fund to
satisfy its investment objective depends to some extent on
the Adviser's ability to manage cash flow (primarily from
purchases and redemptions and distributions from the Fund's
investments). The Adviser will make investment changes to
the Fund's portfolio to accommodate cash flow while
continuing to seek to replicate the total return of the Samp;amp;P
500. Investors should also be aware that the investment
performance of the Samp;amp;P 500 is a hypothetical number which
does not take into account brokerage commissions and other
transaction costs, custody and other costs of investing,
and any incremental operating costs (e.g., transfer agency,
accounting) that will be borne by the Fund. Finally, since
the Fund seeks to replicate the total return of the Samp;amp;P
500, the Adviser generally will not attempt to judge the
merits of any particular security as an investment.
Additional Information Concerning the Index
Samp;amp;P 500. "Standard amp;amp; Poor's", "Samp;amp;P", "Samp;amp;P 500",
"Standard amp;amp; Poor's 500", and "500" are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use
by the Fund. The OSM - Mercury Advisors Samp;amp;P 500 Index Fund
and the Master Fund are not sponsored, endorsed, sold or
promoted by Samp;amp;P, a division of The McGraw-Hill Companies,
Inc. Samp;amp;P makes no representation regarding the advisability
of investing in the Fund. Samp;amp;P makes no representation or
warranty, express or implied, to the owners of shares of
the Fund or any member of the public regarding the
advisability of investing in securities generally or in the
Fund particularly or the ability of the Samp;amp;P 500 to track
general stock market performance. Samp;amp;P's only relationship
to the Fund is the licensing of certain trademarks and
trade names of Samp;amp;P and of the Samp;amp;P 500 which is determined,
composed and calculated by Samp;amp;P without regard to the Fund.
Samp;amp;P has no obligation to take the needs of the Fund and the
Master Fund or the owners of shares of the Fund and the
Master Fund into consideration in determining, composing or
calculating the Samp;amp;P 500. Samp;amp;P is not responsible for and has
not participated in the determination of the prices and
amount of the Fund and the Master Fund or the timing of the
issuance of sale of shares of the Fund and the Master Fund
or in the determination or calculation of the equation by
which the Fund and the Master Fund is to be converted into
cash. Samp;amp;P has no obligation or liability in connection with
the administration, marketing or trading of the Fund and
the Master Fund.
Samp;amp;P does not guarantee the accuracy and/or the
completeness of the Samp;amp;P 500 Index or any data included
therein, and Samp;amp;P shall have no liability for any errors,
omissions, or interruptions therein. Samp;amp;P makes no warranty,
express or implied, as to results to be obtained by the
Fund, the Master Fund, owners of shares of the Fund and the
Master Fund, or any other person or entity from the use of
the Samp;amp;P 500 or any data included therein. Samp;amp;P makes no
express or implied warranties and expressly disclaims all
warranties of merchantability or fitness for a particular
purpose or use with respect to the Samp;amp;P 500 or any data
included therein. Without limiting any of the foregoing, in
no event shall Samp;amp;P have any liability for any special,
punitive, indirect, or consequential damages (including
lost profits), even if notified of the possibility of such
damages.
Portfolio Turnover
Although the Fund will use a passive indexing
approach to investing, the Fund may engage in a substantial
number of portfolio transactions. The rate of portfolio
turnover will be a limiting factor when the Adviser
considers whether to purchase or sell securities for the
Fund only to the extent that the Adviser will consider the
impact of transaction costs on the Fund's tracking error.
Changes in the securities comprising the Samp;amp;P 500, will tend
to increase the Fund's portfolio turnover rate, as the
Investment Adviser restructures the Fund's holdings to
reflect the changes in the Samp;amp;P 500. The portfolio turnover
rate is, in summary, the percentage computed by dividing
the lesser of the Fund's purchases or sales of securities
by the average net asset value of the Fund. High portfolio
turnover involves correspondingly greater brokerage
commissions for the Fund investing in equity securities and
other transaction costs which are borne directly by the
Fund. A high portfolio turnover rate may also result in the
realization of taxable capital gains, including short-term
capital gains taxable at ordinary income rates.
Oppenheimer Select Managers - Mercury Advisors Samp;amp;P 500
Index Fund
Oppenheimer Select Managers - Mercury Advisors Focus Growth
Fund
Oppenheimer Select Managers - QM Active Balanced Fund
Oppenheimer Select Managers - Jennison Growth Fund
Oppenheimer Select Managers - Salomon Brothers All Cap Fund
Oppenheimer Select Managers - Gartmore Millennium Growth
Fund II
Policies. The composition of each Fund's portfolio and the
techniques and strategies that the respective Subadviser
(Adviser in the case of the OSM - Mercury Advisors Samp;amp;P 500
Index Fund and the OSM - Mercury Advisors Focus Growth
Fund) may use in selecting portfolio securities will vary
over time. The Funds are not required to use all of the
investment techniques and strategies described below at all
times in seeking their goals. The Funds may use some of the
special investment techniques and strategies at some times
or not at all.
|X| Cyclical Opportunities. (All Funds except OSM -
Mercury Advisors Samp;amp;P 500 Index Fund). The Fund's Adviser or
the Subadvisers might also seek to take advantage of
changes in the business cycle by investing in companies
that are sensitive to those changes if the Adviser or
Subadviser believes they have growth potential. For
example, when the economy is expanding, companies in the
consumer durables and technology sectors might benefit and
offer long-term growth opportunities. Other cyclical
industries include insurance, for example. Each Fund
focuses on seeking growth over the long term, but could
seek to take tactical advantage of short-term market
movements or events affecting particular issuers or
industries.
|X| Investments in Equity Securities. (All Funds
except OSM - Mercury Advisors Samp;amp;P 500 Index Fund). Each
Fund focuses its investments in equity securities, all but
the OSM - QM Active Balanced Fund focusing its investments
in the equity securities of growth companies. The equity
securities each Fund may invest in include common stocks,
preferred stocks, rights and warrants, and securities
convertible into common stock. The OSM - Mercury Advisors
Focus Growth Fund and the OSM - Jennison Growth Fund will
invest primarily in the common stocks of companies having a
market capitalization that excess $1 billion. The OSM - QM
Active Balanced Fund, the OSM - Salomon Brothers All Cap
Fund and the OSM - Gartmore Millennium Growth Fund II may
invest in the stocks of companies of every size - small,
medium and large capitalization. The Funds generally
measure a company's market capitalization at the time of
investment. However, a Fund is not required to sell
securities of an issuer it holds if the issuer's
capitalization exceeds the limits described above.
Each Fund can also invest a portion of its assets in
securities of issuers having a market capitalization
different from the limits described above. At times, in the
Adviser's or Subadviser's view, the market may favor or
disfavor securities of issuers of a particular
capitalization range. Therefore, although the Fund may
normally invest its assets in equity securities of a
certain market capitalization, the Fund may change the
proportion of its equity investments in securities of
different capitalization ranges, based upon the Adviser's
or Subadviser's judgment of where the best market
opportunities are to seek the Fund's objective.
Growth companies might be providing new products or
services that could enable them to capture a dominant or
important market position. They may have a special area of
expertise or the capability to take advantage of changes in
demographic factors in a more profitable way than larger,
more established companies.
Growth companies tend to retain a large part of their
earnings for research, development or investment in capital
assets. Therefore, they do not tend to emphasize paying
dividends, and may not pay any dividends for some time.
They are selected for a Fund's portfolio because the
Adviser or Subadviser for the particular Fund believes the
price of the stock will increase over the long term.
|_| Over-the-Counter Securities. (All Funds
except OSM - Mercury Advisors Samp;amp;P 500 Index Fund). Growth
companies may offer greater opportunities for capital
appreciation than securities of large, more established
companies. However, securities of small-cap and mid-cap
companies also involve greater risks than securities of
larger companies. Securities of small and medium
capitalization issuers may trade on securities exchanges or
in the over-the-counter market. The over-the-counter
markets, both in the U.S. and abroad, may have less
liquidity than securities exchanges. That lack of liquidity
can affect the price a Fund is able to obtain when it wants
to sell a security, because if there are fewer buyers and
less demand for a particular security, the Fund might not
be able to sell it at an acceptable price or might have to
reduce the price in order to dispose of the security.
In the U.S., the principal over-the-counter market is
the NASDAQ Stock Market, Inc., ("NASDAQ") which is
regulated by the National Association of Securities
Dealers, Inc. It consists of an electronic quotation system
for certain securities, and a security must have at least
two (2) market makers to be included in NASDAQ. Other
over-the-counter markets exist in the U.S., as well as
those abroad, wherever a dealer is willing to make a market
in a particular security.
|_| Convertible Securities. (All Funds except
OSM - Mercury Advisors Samp;amp;P 500 Index Fund). Convertible
securities are debt securities that are convertible into an
issuer's common stock. Convertible securities rank senior
to common stock in a corporation's capital structure and
therefore are subject to less risk than common stock in
case of the issuer's bankruptcy or liquidation. Synthetic
convertible securities may be either (i) a debt security or
preferred stock that may be convertible only under certain
contingent circumstances or that may pay the holder a cash
amount based on the value of shares of underlying common
stock partly or wholly in lieu of a conversion right (a
"Cash-Settled Convertible") or (ii) a combination of
separate securities chosen by the Adviser or Subadviser, as
the case may be, in order to create the economic
characteristics of a convertible security, i.e., a fixed
income security paired with a security with equity
conversion features, such as an option or warrant (a
"Manufactured Convertible").
The value of a convertible security is a
function of its "investment value" and its "conversion
value." If the investment value exceeds the conversion
value, the security will behave more like a debt security,
and the security's price will likely increase when interest
rates fall and decrease when interest rates rise. If the
conversion value exceeds the investment value, the security
will behave more like an equity security: it will likely
sell at a premium over its conversion value, and its price
will tend to fluctuate directly with the price of the
underlying security.
While convertible securities are a form of debt
security, in many cases their conversion feature (allowing
conversion into equity securities) causes them to be
regarded more as "equity equivalents." As a result, the
rating assigned to the security has less impact on an
Adviser's or Subadviser's investment decision with respect
to convertible securities than in the case of
non-convertible fixed income securities. To determine
whether convertible securities should be regarded as
"equity equivalents," the Adviser or Subadvisers examine
the following factors:
(1) whether, at the option of the investor, the
convertible security can be exchanged for a
fixed number of shares of common stock of
the issuer,
(2) whether the issuer of the convertible securities has
restated its earnings per share of common
stock on a fully diluted basis (considering
the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a
defensive "equity substitute," providing the
ability to participate in any appreciation
in the price of the issuer's common stock.
As indicated above, synthetic convertible
securities may include either Cash-Settled Convertibles or
Manufactured Convertibles. Cash-Settled Convertibles are
instruments that are created by the issuer and have the
economic characteristics of traditional convertible
securities but may not actually permit conversion into the
underlying equity securities in all circumstances. As an
example, a private company may issue a Cash-Settled
Convertible that is convertible into common stock only if
the company successfully completes a public offering of its
common stock prior to maturity and otherwise pays a cash
amount to reflect any equity appreciation. Manufactured
Convertibles are created by the Adviser or Subadviser, as
the case may be, by combining separate securities that
possess one of the two principal characteristics of a
convertible security, i.e., fixed income ("fixed income
component") or a right to acquire equity securities
("convertible component"). The fixed income component is
achieved by investing in non-convertible fixed income
securities, such as non-convertible bonds, preferred stocks
and money market instruments. The convertibility component
is achieved by investing in call options, warrants, LEAPS,
or other securities with equity conversion features
("equity features") granting the holder the right to
purchase a specified quantity of the underlying stocks
within a specified period of time at a specified price or,
in the case of a stock index option, the right to receive a
cash payment based on the value of the underlying stock
index.
A Manufactured Convertible differs from
traditional convertible securities in several respects.
Unlike a traditional convertible security, which is a
single security having a unitary market value, a
Manufactured Convertible is comprised of two or more
separate securities, each with its own market value.
Therefore, the total "market value" of such a Manufactured
Convertible is the sum of the values of its fixed-income
component and its convertibility component.
More flexibility is possible in the creation of
a Manufactured Convertible than in the purchase of a
traditional convertible security. Because many corporations
have not issued convertible securities, the Adviser or
Subadviser, as the case may be, may combine a fixed income
instrument and an equity feature with respect to the stock
of the issuer of the fixed income instrument to create a
synthetic convertible security otherwise unavailable in the
market. The Adviser or Subadviser, as the case may be, may
also combine a fixed income instrument of an issuer with an
equity feature with respect to the stock of a different
issuer when the Adviser or Subadviser, as the case may be,
believes such a Manufactured Convertible would better
promote the Fund's objective than alternative investments.
For example, the Adviser or Subadviser, as the case may be,
may combine an equity feature with respect to an issuer's
stock with a fixed income security of a different issuer in
the same industry to diversify the Fund's credit exposure,
or with a U.S. Treasury instrument to create a Manufactured
Convertible with a higher credit profile than a traditional
convertible security issued by that issuer. A Manufactured
Convertible also is a more flexible investment in that its
two components may be purchased separately and, upon
purchasing the separate securities, "combined" to create a
Manufactured Convertible. For example, the Fund may
purchase a warrant for eventual inclusion in a Manufactured
Convertible while postponing the purchase of a suitable
bond to pair with the warrant pending development of more
favorable market conditions.
The value of a Manufactured Convertible may
respond differently to certain market fluctuations than
would a traditional convertible security with similar
characteristics. For example, in the event the Fund created
a Manufactured Convertible by combining a short-term U.S.
Treasury instrument and a call option on a stock, the
Manufactured Convertible would likely outperform a
traditional convertible of similar maturity and which is
convertible into that stock during periods when Treasury
instruments outperform corporate fixed income securities
and underperform during periods when corporate fixed-income
securities outperform Treasury instruments.
|_| Preferred Stock (All Funds except OSM - Mercury
Advisors Samp;amp;P 500 Index Fund). Preferred stock, unlike
common stock, has a stated dividend rate payable from the
corporation's earnings. Preferred stock dividends may be
cumulative or non-cumulative. "Cumulative" dividend
provisions require all or a portion of prior unpaid
dividends to be paid before dividends can be paid on the
issuer's common stock. Preferred stock may be
"participating" stock, which means that it may be entitled
to a dividend exceeding the stated dividend in certain
cases.
If interest rates rise, the fixed dividend on
preferred stocks may be less attractive, causing the price
of preferred stocks to decline. Preferred stock may have
mandatory sinking fund provisions, as well as provisions
allowing calls or redemptions prior to maturity, which can
also have a negative impact on prices when interest rates
decline. Preferred stock generally has a preference over
common stock on the distribution of a corporation's assets
in the event of liquidation of the corporation. The rights
of preferred stock on distribution of a corporation's
assets in the event of a liquidation are generally
subordinate to the rights associated with a corporation's
debt securities.
|_| Credit Risk. (All Funds except OSM - Mercury
Advisors Samp;amp;P 500 Index Fund). Convertible securities and
debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they
become due. If the issuer fails to pay interest, a Fund's
income may be reduced and if the issuer fails to repay
principal, the value of that bond and of the Fund's shares
may be reduced. The Adviser or Subadvisers may rely to some
extent on credit ratings by nationally recognized ratings
agencies in evaluating the credit risk of securities
selected for a Fund's portfolio. It may also use its own
research and analysis. Many factors affect an issuer's
ability to make timely payments, and the credit risks of a
particular security may change over time. The OSM - QM
Active Balanced Fund and the OSM - Salomon Brothers All Cap
Fund may invest in higher-yielding lower-grade debt
securities (that is, securities below investment grade),
which have special risks. Those are securities rated below
the four highest rating categories of Samp;amp;P or Moody's or
equivalent ratings of other rating agencies or ratings
assigned to a security by the Adviser or Subadvisers. The
QM Active Balanced Fund can invest up to 20% of its total
assets in lower-grade debt securities and the OSM - Salomon
Brothers All Cap Fund can invest up to 20% of its assets in
non-convertible debt securities rated below investment
grade or, if unrated, of equivalent quality as determined
by the Subadviser.
|_| Special Risks of Lower-Grade Securities.
"Lower-grade" debt securities are those rated below
"investment grade" which means they have a rating lower
than "Baa" by Moody's or lower than "BBB" by Samp;amp;P or similar
ratings by other rating organizations. If they are unrated,
and are determined by the Adviser or Subadviser to be of
comparable quality to debt securities rated below
investment grade, they are included in the limitation on
the percentage of the Fund's assets that can be invested in
lower-grade securities.
Among the special credit risks of lower-grade
securities is the greater risk that the issuer may default
on its obligation to pay interest or to repay principal
than in the case of investment grade securities. The
issuer's low creditworthiness may increase the potential
for insolvency. An overall decline in values in the high
yield bond market is also more likely during a period of
general economic downturn. An economic downturn or an
increase in interest rates could severely disrupt the
market for high yield bonds, adversely affecting the values
of outstanding bonds as well as the ability of issuers to
pay interest or repay principal. In the case of foreign
high yield bonds, these risks are in addition to the
special risk of foreign investing discussed in the
Prospectus and in this Statement of Additional Information.
To the extent they can be converted into stock, convertible
securities may be less subject to some of these risks than
non-convertible high yield bonds, since stock may be more
liquid and less affected by some of these risk factors.
While securities rated "Baa" by Moody's or "BBB" by Samp;amp;P
are investment grade and are not regarded as junk bonds,
those securities may be subject to special risks, and have
some speculative characteristics.
|_| Interest Rate Risks. In addition to credit risks,
convertible debt securities in particular and debt
securities in general are subject to changes in value when
prevailing interest rates change. When interest rates fall,
the values of outstanding debt securities generally rise,
and the bonds may sell for more than their face amount.
When interest rates rise, the values of outstanding debt
securities generally decline, and the bonds may sell at a
discount from their face amount. The magnitude of these
price changes is generally greater for bonds with longer
maturities. Therefore, when the average maturity of a
Fund's debt securities is longer, its share price may
fluctuate more when interest rates change.
|_| Rights and Warrants. (All Funds except OSM -
Mercury Advisors Samp;amp;P 500 Index Fund). Each Fund can invest
in warrants or rights. Warrants basically are options to
purchase equity securities at specific prices valid for a
specific period of time. Their prices do not necessarily
move parallel to the prices of the underlying securities.
Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the
assets of the issuer.
|_| Investments in Debt Securities. (All Funds except
OSM - Mercury Advisors Samp;amp;P 500 Index Fund). The Funds may
invest in a variety of domestic and foreign debt
securities, including corporate bonds, debentures and other
debt securities, and foreign and U.S. government securities
including mortgage-related securities. The OSM - QM Active
Balanced Fund will invest in debt securities to seek
investment income as part of its investment objectives.
Each Fund might invest in them also to seek capital growth
or for liquidity or defensive purposes. Although the OSM -
QM Active Balanced Fund will invest at least 25% of its
total assets in investment grade debt securities, the Fund
currently emphasizes investments in equity securities.
Foreign debt securities are subject to the risks of foreign
investing described below. In general, domestic and foreign
debt securities are also subject to credit risk and
interest rate risk.
? Mortgage-Related Securities (OSM - QM Active
Balanced Fund, OSM - Salomon Brothers All Cap Fund and OSM
- - Jennison Growth Fund only). Mortgage-related securities
are a form of derivative investment collateralized by pools
of commercial or residential mortgages. Pools of mortgage
loans are assembled as securities for sale to investors by
government agencies or entities or by private issuers.
These securities include collateralized mortgage
obligations ("CMOs"), mortgage pass-through securities,
stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and
other real estate-related securities.
Mortgage-related securities that are issued or
guaranteed by agencies or instrumentalities of the U.S.
government have relatively little credit risk (depending on
the nature of the issuer) but are subject to interest rate
risks and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of
mortgage-related securities tend to move inversely to
changes in interest rates. The OSM - QM Active Balanced
Fund, OSM - Salomon Brothers All Cap Fund and the OSM -
Jennison Growth Fund can buy mortgage-related securities
that have interest rates that move inversely to changes in
general interest rates, based on a multiple of a specific
index. Although the value of a mortgage-related security
may decline when interest rates rise, the converse is not
always the case.
In periods of declining interest rates, mortgages are
more likely to be prepaid. Therefore, a mortgage-related
security's maturity can be shortened by unscheduled
prepayments on the underlying mortgages. Therefore, it is
not possible to predict accurately the security's yield.
The principal that is returned earlier than expected may
have to be reinvested in other investments having a lower
yield than the prepaid security. Therefore, these
securities may be less effective as a means of "locking in"
attractive long-term interest rates, and they may have less
potential for appreciation during periods of declining
interest rates, than conventional bonds with comparable
stated maturities.
Prepayment risks can lead to substantial fluctuations
in the value of a mortgage-related security. In turn, this
can affect the value of the Funds' shares. If a
mortgage-related security has been purchased at a premium,
all or part of the premium the Funds paid may be lost if
there is a decline in the market value of the security,
whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of
stripped mortgage-related securities, if they experience
greater rates of prepayment than were anticipated, the Fund
may fail to recoup its initial investment on the security.
If interest rates rise rapidly, prepayments may occur
at a slower rate than expected and the expected maturity of
long-term or medium-term securities could lengthen as a
result. That would cause their value and the prices of the
Fund's shares to fluctuate more widely in response to
changes in interest rates.
As with other debt securities, the values of
mortgage-related securities may be affected by changes in
the market's perception of the creditworthiness of the
entity issuing the securities or guaranteeing them. Their
values may also be affected by changes in government
regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are
multi-class bonds that are backed by pools of mortgage
loans or mortgage pass-through certificates. They may be
collateralized by:
(1) pass-through certificates issued or guaranteed by
Ginnie Mae, Fannie Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal
Housing Administration or guaranteed by the
Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.
Each class of CMO, referred to as a "tranche," is
issued at a specific coupon rate and has a stated maturity
or final distribution date. Principal prepayments on the
underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution
date. The principal and interest on the underlying
mortgages may be allocated among the several classes of a
series of a CMO in different ways. One or more tranches may
have coupon rates that reset periodically at a specified
increase over an index. These are floating rate CMOs, and
typically have a cap on the coupon rate. Inverse floating
rate CMOs have a coupon rate that moves in the reverse
direction to an applicable index. The coupon rate on these
CMOs will increase as general interest rates decrease.
These are usually much more volatile than fixed rate CMOs
or floating rate CMOs.
|_| U.S. Government Securities (All Funds except OSM
- - Mercury Advisors Samp;amp;P 500 Index Fund). These are
securities issued or guaranteed by the U.S. Treasury or
other U.S. government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The
obligations of U.S. government agencies or
instrumentalities in which the Funds may invest may or may
not be guaranteed or supported by the "full faith and
credit" of the United States. "Full faith and credit" means
generally that the taxing power of the U.S. government is
pledged to the payment of interest and repayment of
principal on a security. If a security is not backed by the
full faith and credit of the United States, the owner of
the security must look principally to the agency issuing
the obligation for repayment. The owner might be able to
assert a claim against the United States if the issuing
agency or instrumentality does not meet its commitment. The
Funds will invest in securities of U.S. government agencies
and instrumentalities only if the Adviser or Subadviser is
satisfied that the credit risk with respect to such
instrumentality is acceptable.
|_| U.S. Treasury Obligations. These include
Treasury bills (which have maturities of one year or less
when issued), Treasury notes (which have maturities of from
one to ten (10) years when issued), and Treasury bonds
(maturities of more than ten (10) years when issued).
Treasury securities are backed by the full faith and credit
of the United States as to timely payments of interest and
repayments of principal. They also can include U.S.
Treasury securities that have been "stripped" by a Federal
Reserve Bank, and zero-coupon U.S. Treasury securities.
|_| Obligations Issued or Guaranteed by U.S.
Government Agencies or Instrumentalities. These include
direct obligations and mortgage-related securities that
have different levels of credit support from the
government. Some are supported by the full faith and credit
of the U.S. government, such as Government National
Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of
the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage
Association bonds ("Fannie Maes"). Others are supported
only by the credit of the entity that issued them, such as
Federal Home Loan Mortgage Corporation obligations
("Freddie Macs").
|_| U.S. Government Mortgage-Related Securities
(All Funds except OSM - Mercury Advisors Samp;amp;P 500 Index
Fund). The Funds can invest in a variety of
mortgage-related securities that are issued by U.S.
government agencies or instrumentalities, some of which are
described below. Mortgage-backed securities are
"pass-through" securities, meaning that principal and
interest payments made by the borrower on the underlying
mortgages are passed through to the Fund. The value of
mortgage-backed securities, like that of traditional
fixed-income securities, typically increases when interest
rates fall and decreases when interest rates rise. However,
mortgage-backed securities differ from traditional
fixed-income securities because of their potential for
prepayment without penalty. The price paid by a Fund for
its mortgage-backed securities, the yield the Fund expects
to receive from such securities and the average life of the
securities are based on a number of factors, including the
anticipated rate of prepayment of the underlying mortgages.
In a period of declining interest rates, borrowers may
prepay the underlying mortgages more quickly than
anticipated, thereby reducing the yield to maturity and the
average life of the mortgage-backed securities. Moreover,
when a Fund reinvests the proceeds of a prepayment in these
circumstances, it will likely receive a rate of interest
that is lower than the rate on the security that was
prepaid. To the extent that a Fund purchases
mortgage-backed securities at a premium, mortgage
foreclosures and principal prepayments may result in a loss
to the extent of the premium paid. If a Fund buys such
securities at a discount, both scheduled payments of
principal and unscheduled prepayments will increase current
and total returns and will accelerate the recognition of
income which, when distributed to shareholders, will be
taxable as ordinary income. In a period of rising interest
rates, prepayments of the underlying mortgages may occur at
a slower than expected rate, resulting in maturity
extensions. This particular risk may effectively change a
security that was considered short or intermediate-term at
the time of purchase into a long-term security. Since
long-term securities generally fluctuate more widely in
response to changes in interest rates than shorter-term
securities, maturity extension risk could increase the
inherent volatility of a Fund.
|_| Zero-Coupon U.S. Government Securities (All Funds
except OSM - Mercury Advisors Samp;amp;P 500 Index Fund and OSM -
Gartmore Millennium Growth Fund II). The Funds may buy
zero-coupon U.S. government securities. These will
typically be U.S. Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those
stripped debt obligations and coupons.
Zero-coupon securities do not make periodic interest
payments and are sold at a deep discount from their face
value at maturity. The buyer recognizes a rate of return
determined by the gradual appreciation of the security,
which is redeemed at face value on a specified maturity
date. This discount depends on the time remaining until
maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the
issuer. The discount typically decreases as the maturity
date approaches.
Because zero-coupon securities pay no interest and
compound semi-annually at the rate fixed at the time of
their issuance, their value is generally more volatile than
the value of other debt securities that pay interest. Their
value may fall more dramatically than the value of
interest-bearing securities when interest rates rise. When
prevailing interest rates fall, zero-coupon securities tend
to rise more rapidly in value because they have a fixed
rate of return.
A Fund's investment in zero-coupon securities may
cause the Fund to recognize income and make distributions
to shareholders before it receives any cash payments on the
zero-coupon investment. To generate cash to satisfy those
distribution requirements, a Fund may have to sell
portfolio securities that it otherwise might have continued
to hold or to use cash flows from other sources such as the
sale of the Fund's shares.
|X| Money Market Instruments (All Funds except OSM -
Mercury Advisors Samp;amp;P 500 Index Fund). The following is a
brief description of the types of money market securities
the Funds (other than the OSM - Mercury Advisors Samp;amp;P 500
Index Fund) can invest in. Those money market securities
are high-quality, short-term debt instruments that are
issued by the U.S. government, corporations, banks or other
entities. They may have fixed, variable or floating
interest rates.
|_| U.S. Government Securities. These include
obligations issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities.
|_| Bank Obligations. These include time
deposits, certificates of deposit and bankers' acceptances.
Time deposits, other than overnight deposits, may be
subject to withdrawal penalties and, if so, they are deemed
"illiquid" investments.
The Funds can purchase bank obligations that are
fully insured by the Federal Deposit Insurance Corporation
("FDIC"). The FDIC insures the deposits of member banks up
to $100,000 per account. Insured bank obligations may have
a limited market and a particular investment of this type
may be deemed "illiquid" unless the Adviser or Subadviser,
as the case may be, determines that a readily-available
market exists for that particular obligation, or unless the
obligation is payable at principal amount plus accrued
interest on demand or within seven (7) days after demand.
? |_| Commercial Paper. Each Fund can invest in
commercial paper if it is rated within the top two (2)
rating categories of Samp;amp;P and Moody's. If the paper is not
rated, it may be purchased if issued by a company having a
credit rating of at least "AA" by Samp;amp;P or "Aa" by Moody's.
The Funds can buy commercial paper, including U.S.
dollar-denominated securities of foreign branches of U.S.
banks, issued by other entities if the commercial paper is
guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or
commercial paper may otherwise be purchased by the Funds.
|_| Variable Amount Master Demand Notes. Master
demand notes are corporate obligations that permit the
investment of fluctuating amounts by each of the Funds
except the OSM - Mercury Advisors Samp;amp;P 500 Index Fund and
the OSM - Mercury Advisors Focus Growth Fund at varying
rates of interest under direct arrangements between the
Funds, as lender, and the borrower. They permit daily
changes in the amounts borrowed. The Funds have the right
to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease
the amount. The borrower may prepay up to the full amount
of the note without penalty. These notes may or may not be
backed by bank letters of credit.
Because these notes are direct lending arrangements
between the lender and borrower, it is not expected that
there will be a trading market for them. There is no
secondary market for these notes, although they are
redeemable (and thus are immediately repayable by the
borrower) at principal amount, plus accrued interest, at
any time. Accordingly, the Funds' right to redeem such
notes is dependent upon the ability of the borrower to pay
principal and interest on demand.
Each of the Funds has no limitations on the type of
issuer from whom these notes will be purchased. However, in
connection with such purchases and on an ongoing basis, the
Adviser or Subadviser will consider the earning power, cash
flow and other liquidity ratios of the issuer, and its
ability to pay principal and interest on demand, including
a situation in which all holders of such notes made demand
simultaneously. Investments in master demand notes are
subject to the limitation on investments by each of the
Funds in illiquid securities, described in the Prospectus.
|X| Portfolio Turnover. "Portfolio turnover"
describes the rate at which a Fund traded its portfolio
securities during its last fiscal year. For example, if a
Fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. Each Fund's
portfolio turnover rate will fluctuate from year to year.
Each of the Funds, except the OSM - Mercury Advisors Samp;amp;P
500 Index Fund, may have a portfolio turnover rate of more
than 100% annually.
Increased portfolio turnover creates higher brokerage
and transaction costs for a Fund, which can reduce its
overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result
in distributions of taxable long-term capital gains to
shareholders, since each Fund will normally distribute all
of its capital gains realized each year, to avoid excise
taxes under the Internal Revenue Code.
The portfolio turnover of the Master Fund of OSM -
Mercury Advisors Focus Growth Fund increased to 275.69% for
the fiscal year ended November 30, 2002, from 137.66% for
the period ended November 30, 2001. The portfolio turnover
was due in large part to the extraordinary volatility of
the markets during the year.
Other Investment Techniques and Strategies. In seeking its
objective, each Fund from time to time can use the types of
investment strategies and investments described below. They
are not required to use all of these strategies at all
times, and at times may not use them.
|X| Foreign Securities (All Funds except OSM -
Mercury Advisors Samp;amp;P 500 Index Fund). Each Fund can invest
in foreign securities. "Foreign securities" include equity
and debt securities of companies organized under the laws
of countries other than the United States and debt
securities of foreign governments that are traded on
foreign securities exchanges or in foreign over-the-counter
markets. Each Fund can purchase equity and debt securities
(which may be denominated in U.S. dollars or non-U.S.
currencies) issued by foreign corporations, or that are
issued or guaranteed by certain supranational entities
(described below), or foreign governments or their agencies
or instrumentalities. These include securities issued by
U.S. corporations denominated in non-U.S. currencies. In
normal market conditions the Funds do not expect to hold
significant amounts of foreign debt securities.
Securities of foreign issuers that are represented by
American Depository Receipts ("ADRs") or that are listed on
a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign
securities" for the purpose of each Fund's investment
allocations. That is because they are not subject to some
of the special considerations and risks, discussed below,
that apply to foreign securities traded and held abroad.
Investing in foreign securities offers potential
benefits not available from investing solely in securities
of domestic issuers. They include the opportunity to invest
in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of
foreign stock markets that do not move in a manner parallel
to U.S. markets. Each Fund will hold foreign currency only
in connection with the purchase or sale of foreign
securities.
The OSM - Mercury Advisors Focus Growth Fund and the
OSM - Jennison Growth Fund may invest in the securities of
foreign issuers in the form of ADRs, European Depository
Receipts ("EDRs") or other securities convertible into
securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are
receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued
in Europe which evidence a similar ownership arrangement.
Generally, ADRs, which are issued in registered form, are
designed for use in the United States securities markets,
and EDRs, which are issued in bearer form, are designed for
use in European securities markets. The OSM - Mercury
Advisors Focus Growth Fund may invest in unsponsored ADRs.
The issuers of unsponsored ADRs are not obligated to
disclose material information in the United States and,
therefore, there may not be a correlation between such
information and the market value of such ADRs.
ADR facilities may be either "sponsored" or
"un-sponsored." While sponsored and un-sponsored ADR
facilities are similar, distinctions exist between the
rights and duties of ADR holders and market practices.
Sponsored facilities have the backing or participation of
the underlying foreign issuers. Un-sponsored facilities do
not have the participation by or consent of the issuer of
the deposited shares. Un-sponsored facilities usually
request a letter of non-objection from the issuer. Holders
of un-sponsored ADRs generally bear all the costs of such
facility. The costs of the facility can include deposit and
withdrawal fees, currency conversion and other service
fees. The depository of an un-sponsored facility may not
have a duty to distribute shareholder communications from
the issuer or to pass through voting rights. Issuers of
un-sponsored ADRs do not have an obligation to disclose
material information about the foreign issuers in the U.S.
As a result, the value of the un-sponsored ADR may not
correlate with the value of the underlying security trading
abroad or any material information about the security or
the issuer disseminated abroad. Sponsored facilities enter
into an agreement with the issuer that sets out rights and
duties of the issuer, the depository and the ADR holder.
The sponsored agreement also allocates fees among the
parties. Most sponsored agreements provide that the
depository will distribute shareholder notices, voting
instructions and other communications.
|_| Risks of Foreign Investing. Investments in
foreign securities may offer special opportunities for
investing but also present special additional risks and
considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to
changes in currency rates or currency control
regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial
reporting standards in foreign countries
comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S.
exchanges;
o greater volatility and less liquidity on foreign
markets than in the U.S.;
o less governmental regulation of foreign issuers,
stock exchanges and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio
securities;
o possibilities in some countries of expropriation,
confiscatory taxation, political, financial or
social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and
foreign economies.
In the past, U.S. Government policies have
discouraged certain investments abroad by U.S. investors,
through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
|_| Special Risks of Emerging Markets. Emerging and
developing markets abroad may also offer special
opportunities for growth investing but have greater risks
than more developed foreign markets, such as those in
Europe, Canada, Australia, New Zealand and Japan. There may
be even less liquidity in their securities markets, and
settlements of purchases and sales of securities may be
subject to additional delays. They are subject to greater
risks of limitations on the repatriation of income and
profits because of currency restrictions imposed by local
governments. Those countries may also be subject to the
risk of greater political and economic instability, which
can greatly affect the volatility of prices of securities
in those countries.
|X| Passive Foreign Investment Companies. Each Fund
other than OSM - Mercury Advisors Samp;amp;P 500 Index Fund may
purchase the securities of certain foreign investment
corporations called passive foreign investment companies
("PFICs"). Such entities have been the only or primary way
to invest in certain countries because some foreign
countries limit, or prohibit, all direct foreign investment
in the securities of companies domiciled therein. However,
the governments of some countries have authorized the
organization of investment funds to permit indirect foreign
investment in such securities. For tax purposes, these
funds also may be PFICs.
Each Fund is subject to certain percentage
limitations under the 1940 Act relating to the purchase of
securities of investment companies, and, consequently, the
Funds may have to subject any of its investment in other
investment companies, including PFICs, to the limitation
that no more than 10% of the value of the Funds' total
assets may be invested in such securities. In addition to
bearing their proportionate share of a fund's expenses
(management fees and operating expenses), shareholders will
also indirectly bear similar expenses of such entities.
Like other foreign securities, interests in PFICs also
involve the risk of foreign securities, as described above.
|X| Investing in Small, Unseasoned Companies (All
Funds except OSM - Mercury Advisors Samp;amp;P 500 Index Fund).
Each Fund can invest in securities of small, unseasoned
companies. These are companies that have been in operation
for less than three (3) years, including the operations of
any predecessors. Securities of these companies may be
subject to volatility in their prices. They may have a
limited trading market, which may adversely affect the
Fund's ability to dispose of them and can reduce the price
a Fund might be able to obtain for them. Other investors
that own a security issued by a small, unseasoned issuer
for which there is limited liquidity might trade the
security when a Fund is attempting to dispose of its
holdings of that security. In that case the Fund might
receive a lower price for its holdings than might otherwise
be obtained. These are more speculative securities and can
increase the Funds' overall portfolio risks.
|X| Real Estate Investment Trusts (All Funds). Each
Fund may invest in equity Real Estate Investment Trusts
("REITs"). REITs are entities which either own properties
or make construction or mortgage loans. Equity REITs may
also include operating or financing companies. Equity REITs
own real estate directly and the value of, and income
earned by, the Fund depends upon the income of the
underlying properties and the rental income they earn.
Equity REITs can also realize capital gains by selling
properties that have appreciated in value. The value of
securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management
skill. They are also subject to heavy cash flow dependency,
defaults by borrowers or tenants, self-liquidation, the
possibility of failing to qualify for tax-free status under
the Internal Revenue Code, and failing to maintain
exemption from the 1940 Act. Because REITs normally pay on
advisory fee and other expenses, a shareholder in these
Funds may be subject to duplicative fees and expenses.
|X| Firm Commitments and When-Issued Securities (All
Funds). Each Fund may purchase securities on a firm
commitment basis, including when-issued securities.
Securities purchased on a firm commitment basis are
purchased for delivery beyond the normal settlement date at
a stated price and yield. No income accrues to the
purchaser of a security on a firm commitment basis prior to
delivery. Such securities are recorded as an asset and are
subject to changes in value based upon changes in the
general level of interest rates. Purchasing a security on a
firm commitment basis can involve a risk that the market
price at the time of delivery may be lower than the agreed
upon purchase price, in which case there could be an
individual loss at the time of delivery. The Fund will only
make commitments to purchase securities on a firm
commitment basis with the intention of actually acquiring
the securities, but may sell them before the settlement
date if it is deemed advisable. The Fund will identify on
its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund
pays for the investment.
|X| Repurchase Agreements and Purchase and Sale
Contracts (All Funds). Each Fund may invest in securities
pursuant to repurchase agreements and each Fund other than
the OSM - Mercury Advisors Samp;amp;P 500 Index Fund may invest in
purchase and sale contracts. Under a repurchase agreement
or a purchase and sale contract, the seller agrees, upon
entering into the contract with the Fund, to repurchase the
security at a mutually agreed-upon time and price in a
specified currency, thereby determining the yield during
the term of the agreement. This results in a fixed rate of
return insulated from market fluctuations during such
period although it may be affected by currency
fluctuations. In the case of repurchase agreements, the
price at which the trades are conducted do not reflect
accrued interest on the underlying obligation; whereas, in
the case of purchase and sale contracts, the prices take
into account accrued interest. Such agreements usually
cover short periods, such as under one week. Repurchase
agreements may be construed to be collateralized loans by
the purchaser to the seller secured by the securities
transferred to the purchaser. In the case of a repurchase
agreement, as a purchaser, the Fund will require the seller
to provide additional collateral if the market value of the
securities falls below the repurchase price at any time
during the term of the repurchase agreement; the Fund does
not have the right to seek additional collateral in the
case of purchase and sale contracts. In the event of
default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the
repurchase price. Therefore, the Fund may suffer time
delays and incur costs or possible losses in connection
with the disposition of the collateral. Approved vendors
include U.S. commercial banks, U.S. branches of foreign
banks, or broker-dealers that have been designated as
primary dealers in government securities. They must meet
credit requirements set by OppenheimerFunds, Inc. (the
"Manager") (or in the case of OSM - Mercury Advisors Samp;amp;P
500 Index Fund and OSM - Mercury Advisors Focus Growth
Fund, credit requirements set by the Advisor) from time to
time. A purchase and sale contract differs from a
repurchase agreement in that the contract arrangements
stipulate that the securities are owned by the Fund. In the
event of a default under such a repurchase agreement or
under a purchase and sale contract, instead of the
contractual fixed rate, the rate of return to the Fund
shall be dependent upon intervening fluctuations of the
market value of such securities and the accrued interest on
the securities. In such event, the Fund would have rights
against the seller for breach of contract with respect to
any losses arising from market fluctuations following the
failure of the seller to perform. While the substance of
purchase and sale contracts is similar to repurchase
agreements, because of the different treatment with respect
to accrued interest and additional collateral, Fund
management believes that purchase and sale contracts are
not repurchase agreements as such term is understood in the
banking and brokerage community. No Fund may invest more
than 15% of its net assets in repurchase agreements or
purchase and sale contracts maturing in more than seven (7)
days together with all other illiquid investments.
Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Funds, along with
other affiliated entities managed by the Manager, may
transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or
more repurchase agreements, secured by U.S. government
securities. Securities that are pledged as collateral for
repurchase agreements are held by a custodian bank until
the agreements mature. Each joint repurchase arrangement
requires that the market value of the collateral be
sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the
agreement, retention or sale of the collateral may be
subject to legal proceedings.
|X| Illiquid and Restricted Securities (All Funds).
Each Fund may purchase illiquid or restricted securities.
Under the policies and procedures established by the Funds'
Board of Trustees (or, in the case of OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and OSM - Mercury Advisors
Focus Growth Fund, the Board of Trustees of the applicable
Master Fund), the Adviser or Subadviser determines the
liquidity of certain of a Fund's investments. To enable a
Fund to sell its holdings of a restricted security not
registered under the Securities Act of 1933, as amended
(the "Securities Act") that Fund may have to cause those
securities to be registered. The expenses of registering
restricted securities may be negotiated by a Fund with the
issuer at the time a Fund buys the securities. When a Fund
must arrange registration because a Fund wishes to sell the
security, a considerable period may elapse between the time
the decision is made to sell the security and the time the
security is registered so that a Fund could sell it. A Fund
would bear the risks of any downward price fluctuation
during that period.
Each Fund can also acquire restricted securities
through private placements. Those securities have
contractual restrictions on their public resale. Those
restrictions might limit the Funds' ability to dispose of
the securities and might lower the amount a Fund could
realize upon the sale.
Each Fund has limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those
percentage restrictions are not fundamental policies and do
not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers
under Rule 144A of the Securities Act, if those securities
have been determined to be liquid by the Adviser or
Subadviser under Board-approved guidelines (or, in the case
of OSM - Mercury Advisors Samp;amp;P 500 Index Fund and OSM -
Mercury Advisors Focus Growth Fund, guidelines approved by
the Board of Trustees of the applicable Master Fund). Those
guidelines take into account the trading activity for such
securities and the availability of reliable pricing
information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, each
of a Fund's holdings of that security may be considered to
be illiquid. Illiquid securities include repurchase
agreements maturing in more than seven (7) days.
|X| 144A Securities (All Funds). Each Fund may
purchase restricted securities that can be offered and sold
to "qualified institutional buyers" under Rule 144A under
the Securities Act. The Board of Trustees (or, in the case
of OSM - Mercury Advisors Samp;amp;P 500 Index Fund and OSM -
Mercury Advisors Focus Growth Fund, the Board of Trustees
of the applicable Master Fund) has determined to treat as
liquid Rule 144A securities in accordance with the policies
and procedures adopted by the relevant Fund's Board of
Trustees. The Board of Trustees has adopted guidelines and
delegated to the Adviser or Subadviser, as the case may be,
the daily function of determining and monitoring liquidity
of restricted securities. The relevant Board of Trustees,
however, will retain sufficient oversight and be ultimately
responsible for the determinations. Since it is not
possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A
will continue to develop, the relevant Board of Trustees
will carefully monitor investments in these securities.
This investment practice could have the effect of
increasing the level of illiquidity in a Fund to the extent
that qualified institutional buyers become for a time
uninterested in purchasing these securities.
|X| Loans of Portfolio Securities (All Funds). To
raise cash for liquidity purposes, each Fund can lend its
portfolio securities to brokers, dealers and other types of
financial institutions approved by the Funds' Board of
Trustees. These loans are limited to not more than 25% of
the value of a Fund's total assets (33 1/3% for the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund). Each Fund except the OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund, currently does not intend to
engage in loans of securities, but if it does so, such
loans will not likely exceed 5% of each of the Fund's total
assets.
There are some risks in connection with securities
lending. A Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in
recovery of the loaned securities if the borrower defaults.
A Fund must receive collateral for a loan. Under current
applicable regulatory requirements (which are subject to
change), on each business day the loan collateral must be
at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit, securities of
the U.S. Government or its agencies or instrumentalities,
or other cash equivalents in which a Fund is permitted to
invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by a Fund if
the demand meets the terms of the letter. The terms of the
letter of credit and the issuing bank both must be
satisfactory to the Fund.
When it lends securities, a Fund receives amounts
equal to the dividends or interest on loaned securities. It
also receives one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, and (c) interest
on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the
borrower. A Fund may also pay reasonable finder's, lending
agent, custodian and administrative fees in connection with
these loans. The terms of each Fund's loans must meet
applicable tests under the Internal Revenue Code and must
permit each Fund to reacquire loaned securities on five (5)
days' notice or in time to vote on any important matter.
The Master Fund(s) have received an exemptive order
from the Securities and Exchange Commission (the
"Commission") permitting them to lend portfolio securities
to Merrill Lynch, Pierce, Fenner amp;amp; Smith Incorporated
("Merrill Lynch") or its affiliates, and to retain an
affiliate of the Master Funds as lending agent. See
"Brokerage Policies of the Funds," below.
|X| Short Sales (OSM - Gartmore Millennium Growth
Fund II, OSM - Mercury Advisors Samp;amp;P 500 Index Fund and OSM
- - Mercury Advisors Focus Growth Fund). Generally, to
complete a short sale transaction, the Fund will borrow the
security to make delivery to the buyer. The Fund is then
obligated to replace the security borrowed. If the price of
a security sold short goes up between the time of the short
sale and the time the Fund must deliver the security to the
lender, the Fund will incur a loss. The price at the time
of replacement may be more or less than the price at which
the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any
interest which accrues during the period of the loan. To
borrow the security, the Fund may be required to pay a
premium which would increase the cost of the security sold.
The proceeds of the short sale will be retained by the
broker to the extent necessary to meet margin requirements
until the short position is closed out. Until the Fund
replaces the borrowed security, it will (a) segregated on
its books of liquid assets cash or liquid securities at
such a level that the amount deposited in the account plus
the amount deposited with the broker as collateral will
equal the current market value of the security sold short
or (b) otherwise cover its short position.
|X| Borrowing for Leverage (All Funds). Each Fund has
the ability to borrow up to 33 1/3% of the value of its
total assets from banks on an unsecured basis to invest the
borrowed funds in portfolio securities. This speculative
technique is known as "leverage." A Fund may borrow only
from banks. Under current regulatory requirements,
borrowings can be made only to the extent that the value of
a Fund's assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings
(including the proposed borrowing). If the value of a
Fund's assets fails to meet this 300% asset coverage
requirement, a Fund will reduce its bank debt within three
(3) days to meet the requirement. To do so, a Fund might
have to sell a portion of its investments at a
disadvantageous time.
A Fund will pay interest on these loans, and that
interest expense will raise the overall expenses of that
Fund and reduce its returns. If it does borrow, its
expenses will be greater than comparable funds that do not
borrow for leverage. Additionally, a Fund's net asset value
per share might fluctuate more than that of funds that do
not borrow. Currently, each Fund does not contemplate using
this technique, but if it does so, it will not likely do so
to a substantial degree.
|X| Interfund Borrowing and Lending Arrangements.
Consistent with its fundamental policies and pursuant to an
exemptive order issued by the Securities and Exchange
Commission ("SEC"), each Fund other than the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund may engage in borrowing and lending
activities with other funds in the OppenheimerFunds
complex. Borrowing money from affiliated funds may afford
the Funds the flexibility to use the most cost-effective
alternative to satisfy its borrowing requirements. Lending
money to an affiliated fund may allow the Funds 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.
o Interfund Borrowing. A Fund will not borrow from
affiliated funds unless the terms of the borrowing
arrangement are at least as favorable as the terms a Fund
could otherwise negotiate with a third party. To assure
that a Fund will not be disadvantaged by borrowing from an
affiliated fund, certain safeguards may be implemented.
Examples of these safeguards include the following:
o a Fund will not borrow money from affiliated funds
unless the interest rate is more favorable than
available bank loan rates;
o a Fund's borrowing from affiliated funds must be
consistent with its investment objective and
investment policies;
o the loan rates will be the average of the overnight
repurchase agreement rate available through the
OppenheimerFunds joint repurchase agreement
account and a pre-established formula based on
quotations from independent banks to approximate
the lowest interest rate at which bank loans
would be available to a Fund;
o if a Fund has outstanding borrowings from all sources
greater than 10% of its total assets, then the
Fund must secure each additional outstanding
interfund loan by segregating liquid assets of
the Fund as collateral;
o a Fund cannot borrow from an affiliated fund in
excess of 125% of its total redemptions for the
preceding seven days;
o each interfund loan may be repaid on any day by a
Fund; and
o the Trustees will be provided with a report of all
interfund loans and the Trustees will monitor
all such borrowings to ensure that the Fund's
participation is appropriate.
There is a risk that a borrowing fund could have a
loan called on one day's notice. In that circumstance, a
Fund might have to borrow from a bank at a higher interest
cost if money to lend were not available from another
Oppenheimer fund.
o Interfund Lending. To assure that a Fund will not be
disadvantaged by making loans to affiliated funds, certain
safeguards will be implemented. Examples of these
safeguards include the following:
o a Fund will not lend money to affiliated funds unless
the interest rate on such loan is determined
under the terms of the exemptive order;
o a Fund may not make interfund loans in excess of 15%
of its net assets;
o an interfund loan to any one affiliated fund shall
not exceed 5% of a Fund's net assets;
o an interfund loan may not be outstanding for more
than seven days;
o each interfund loan may be called on one business
day's notice; and
o the Manager will provide the Trustees reports on all
interfund loans demonstrating that a Fund's
participation is appropriate and that the
loan is consistent with its investment
objectives and policies.
When a Fund lends assets to another affiliated fund,
the Fund is subject to the risk that the borrowing fund may
fail to repay the loan.
Non-Diversification. The OSM - Salomon Brothers All Cap
Fund, the OSM - Mercury Advisors Samp;amp;P 500 Index Fund and the
OSM - Mercury Advisors Focus Growth Fund are classified as
"non-diversified" funds under the 1940 Act, which means
that each such Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the
obligations of a single issuer. Each Fund, however, intends
to comply with the diversification requirements imposed by
the Internal Revenue Code in order to continue to qualify
as a regulated investment company. To the extent those
Funds invest a greater proportion of their assets in the
securities of a smaller number of issuers, those Funds may
be more susceptible to any single economic, political or
regulatory occurrence than a more widely diversified fund
and may be subject to greater risk of loss with respect to
its portfolio.
|X| Derivatives (All Funds). Each Fund can invest in
a variety of derivative investments to seek income for
liquidity needs or for bona fide hedging purposes,
including anticipatory hedging. Some derivative investments
a Fund can use are the hedging instruments described below
in this Statement of Additional Information. However, each
Fund except for the OSM - QM Active Balanced Fund and OSM -
Salomon Brothers All Cap Fund does not use, and does not
currently contemplate using, derivatives or hedging
instruments to a significant degree and each Fund is not
obligated to use them in seeking its objective.
Some of the derivative investments a Fund can use
include "debt exchangeable for common stock" of an issuer
or "equity-linked debt securities" of an issuer. At
maturity, the debt security is exchanged for common stock
of the issuer or it is payable in an amount based on the
price of the issuer's common stock at the time of maturity.
Both alternatives present a risk that the amount payable at
maturity will be less than the principal amount of the debt
because the price of the issuer's common stock might not be
as high as the Adviser or Subadviser expected.
|X| Investment in Other Investment Companies. Each
Fund except the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
and the OSM - Mercury Advisors Focus Growth Fund can invest
up to 10% of its total assets in shares of other investment
companies. They can invest up to 5% of their total assets
in any one investment company, but cannot own more than 3%
of the outstanding voting securities of that investment
company. These limitations do not apply to shares acquired
in a merger, consolidation, reorganization or acquisition.
The OSM - Mercury Advisors Samp;amp;P 500 Index Fund and the OSM -
Mercury Advisors Focus Growth Fund are feeder funds that
invest 100% of their assets in a corresponding Master Fund,
which is a registered investment company. The Master Funds
can also invest their assets in shares of investment
companies when permitted by applicable law.
Investment in another investment company may involve
the payment of substantial premiums above the value of such
investment company's portfolio securities and is subject to
limitations under the Investment Company Act of 1940 (the
"Investment Company Act"). Each Fund does not intend to
invest in other investment companies unless the Adviser or
Subadviser believes that the potential benefits of the
investment justify the payment of any premiums or sales
charges. As a shareholder in an investment company, a Fund
would be subject to its ratable share of that investment
company's expenses, including its advisory and
administration fees. At the same time, that Fund would bear
its own management fees and other expenses.
|X| Hedging (All Funds). Although each Fund does not
anticipate the extensive use of hedging instruments, each
Fund can use hedging instruments. They are not required to
do so in seeking their goal. To attempt to protect against
declines in the market value of a Fund's portfolio, to
permit a Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, each
Fund could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures.
Covered calls can also be used to seek income, but
the Adviser or Subadviser does not expect to
engage extensively in that practice.
A Fund can use hedging to establish a position in the
securities market as a temporary substitute for purchasing
particular securities. In that case a Fund would normally
seek to purchase the securities and then terminate that
hedging position. A Fund might also use this type of hedge
to attempt to protect against the possibility that its
portfolio securities would not be fully included in a rise
in value of the market. To do so a Fund could:
|_|?buy futures, or
|_|?buy calls on such futures or on securities.
Each Fund's strategy of hedging with futures and
options on futures will be incidental to each Fund's
activities in the underlying cash market. The particular
hedging instruments the Fund can use are described below. A
Fund may employ new hedging instruments and strategies when
they are developed, if those investment methods are
consistent with each Fund's investment objective and are
permissible under applicable regulations governing each
Fund. Each Fund will utilize segregated accounts in
connection with their purchase of hedging instruments in
appropriate cases.
|_| Futures. The Fund can buy and sell futures
contracts that relate to (1) broadly-based stock indices
(these are referred to as "stock index futures"), (2) an
individual stock ("single stock futures"), (3) other
broadly-based securities indices (these are referred to as
"financial futures"), (4) debt securities (these are
referred to as "interest rate futures") and (5) foreign
currencies (these are referred to as "forward contracts").
A broadly-based stock index is used as the basis for
trading stock index futures. They may in some cases be
based on stocks of issuers in a particular industry or
group of industries. A stock index assigns relative values
to the common stocks included in the index and its value
fluctuates in response to the changes in value of the
underlying stocks. A stock index cannot be purchased or
sold directly. Financial futures are similar contracts
based on the future value of the basket of securities that
comprise the index. These contracts obligate the seller to
deliver, and the purchaser to take, cash to settle the
futures transaction. There is no delivery made of the
underlying securities to settle the futures obligation.
Either party may also settle the transaction by entering
into an offsetting contract.
An interest rate future obligates the seller to
deliver (and the purchaser to take) cash or a specified
type of debt security to settle the futures transaction.
Either party could also enter into an offsetting contract
to close out the position. Similarly, a single stock future
obligates the seller to deliver (and the purchaser to take)
cash or a specified equity security to settle the futures
transaction. Either party could also enter into an
offsetting contract to close out the position. Single
stock futures trade on a very limited number of exchanges,
with contracts typically not fungible among the exchanges.
No payment is paid or received by a Fund on the
purchase or sale of a future. Upon entering into a futures
transaction, a Fund will be required to deposit an initial
margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be
deposited with the Fund's custodian bank in an account
registered in the futures broker's name. However, the
futures broker can gain access to that account only under
specified conditions. As the future is marked to market
(that is, its value on the Fund's books is changed) to
reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by
the futures broker daily.
At any time prior to expiration of the future, a Fund
may elect to close out its position by taking an opposite
position, at which time a final determination of variation
margin is made and any additional cash must be paid by or
released to the Fund. Any loss or gain on the future is
then realized by the Fund for tax purposes. All futures
transactions (except forward contracts) are effected
through a clearinghouse associated with the exchange on
which the contracts are traded.
|_| Put and Call Options. Each Fund can buy and
sell certain kinds of put options ("puts") and call options
("calls"). Each Fund can buy and sell exchange-traded and
over-the-counter put and call options, including options on
indices, securities, currencies, commodities and futures.
|_| Writing Covered Call Options. Each Fund can
write (that is, sell) covered calls. If a Fund sells a call
option, it must be covered, other than with respect to
closing transactions. That means a Fund must own the
security subject to the call while the call is outstanding,
or, for certain types of calls, the call may be covered by
segregating liquid assets to enable a Fund to satisfy its
obligations if the call is exercised.
When a Fund writes a call, it receives cash (a
premium). In the case of a call on a security, a Fund
agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call
period at a fixed exercise price regardless of market price
changes during the call period. The exercise price may
differ from the market price of the underlying security. A
Fund has the risk of loss that the price of the underlying
security may decline during the call period. That risk may
be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call
price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash
premium and the investment.
When a Fund writes a call on an index, it receives cash
(a premium). If the buyer of the call exercises it, the
Fund will pay an amount of cash equal to the difference
between the closing price of the call and the exercise
price, multiplied by a specified multiple that determines
the total value of the call for each point of difference.
If the value of the underlying investment does not rise
above the call price it is likely that the call will lapse
without being exercised. In that case, the Fund would keep
the cash premium.
With respect to the OSM - QM Active Balanced Fund,
OSM - Jennison Growth Fund, OSM - Salomon Brothers All Cap
Fund and OSM - Gartmore Millennium Growth Fund II, the
Custodian, or a securities depository acting for the
Custodian, will act as the escrow agent for OSM - QM Active
Balanced Fund, OSM - Jennison Growth Fund, OSM - Salomon
Brothers All Cap Fund and OSM - Gartmore Millennium Growth
Fund II, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which each
such Fund has written calls traded on exchanges or as to
other acceptable escrow securities. In that way, no margin
will be required for such transactions. OCC will release
the securities on the expiration of the option or when a
Fund enters into a closing transaction.
To terminate its obligation on a call it has written,
a Fund may purchase a corresponding call in a "closing
purchase transaction." The Fund will then realize a profit
or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on
the call the Fund wrote is more or less than the price of
the call the Fund purchases to close out the transaction. A
Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and
the premium it received when it wrote the call. Any such
profits are considered short-term capital gains for federal
income tax purposes, as are the premiums on lapsed calls.
When distributed by a Fund they are taxable as ordinary
income. If a Fund cannot effect a closing purchase
transaction due to the lack of a market, it will have to
hold the callable securities until the call expires or is
exercised.
Each Fund may also write calls on a futures contract
without owning the futures contract or securities
deliverable under the contract. To do so, at the time the
call is written, a Fund must cover the call by segregating
an equivalent dollar amount of liquid assets. A Fund will
segregate additional liquid assets if the value of the
segregated assets drops below 100% of the current value of
the future. Because of this segregation requirement, in no
circumstances would a Fund's receipt of an exercise notice
as to that future require the Fund to deliver a futures
contract. It would simply put the Fund in a short futures
position, which is permitted by each Fund's hedging
policies.
|_| Writing Put Options. Each Fund can sell put
options. A put option on a security gives the purchaser the
right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during the option
period.
If a Fund sells a put option, it must be covered by
segregated liquid assets, other than with respect to
closing transactions. The premium a Fund receives from
writing a put option represents a profit, as long as the
price of the underlying investment remains above the
exercise price of the put. However, a Fund also assumes the
obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price,
even if the value of the investment falls below the
exercise price. If a Fund writes a put that expires
unexercised, a Fund realizes a gain in the amount of the
premium less transaction costs. If the put is exercised, a
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price. That price will usually
exceed the market value of the investment at that time. In
that case, a Fund may incur a loss if it sells the
underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the
premium received minus the sum of the exercise price and
any transaction costs incurred.
When writing a put option on a security, to secure
its obligation to pay for the underlying security a Fund
will deposit in escrow liquid assets with a value equal to
or greater than the exercise price of the underlying
security. A Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against
those assets.
As long as a Fund's obligation as the put writer
continues, it may be assigned an exercise notice by the
exchange or broker-dealer through which the put was sold.
That notice will require a Fund to exchange currency (for a
put written on a currency) at the specified rate of
exchange or to take delivery of the underlying security and
pay the exercise price. A Fund has no control over when it
may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to
the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It
may also terminate if, before a Fund receives an exercise
notice, a Fund effects a closing purchase transaction by
purchasing a put of the same series as it sold. Once a Fund
has been assigned an exercise notice, it cannot effect a
closing purchase transaction.
Each Fund may decide to effect a closing purchase
transaction to realize a profit on an outstanding put
option it has written or to prevent the underlying security
from being put. Effecting a closing purchase transaction
will permit a Fund to write another put option on the
security or to sell the security and use the proceeds from
the sale for other investments. A Fund will realize a
profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or
more than the premium received from writing the put option.
Any profits from writing puts are considered short-term
capital gains for federal tax purposes, and when
distributed by a Fund, are taxable as ordinary income.
|_| Purchasing Calls and Puts. Each Fund can
purchase calls to protect against the possibility that the
Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund buys a call
(other than in a closing purchase transaction), it pays a
premium. The Fund then has the right to buy the underlying
investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise
price. A Fund benefits only if it sells the call at a
profit or if, during the call period, the market price of
the underlying investment is above the sum of the call
price plus the transaction costs and the premium paid for
the call and the Fund exercises the call. If a Fund does
not exercise the call or sell it (whether or not at a
profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but
lost the right to purchase the underlying investment.
Each Fund other than the OSM - Mercury Advisors Samp;amp;P
500 Index Fund can buy puts whether or not it holds the
underlying investment in its portfolio. The Mercury Samp;amp;P 500
Index Fund can buy put options on securities held in its
portfolio or securities indices the performance of which is
substantially replicated by securities held in its
portfolio. When a Fund purchases a put, it pays a premium
and, except as to puts on indices, has the right to sell
the underlying investment to a seller of a put on a
corresponding investment during the put period at a fixed
exercise price.
Buying a put on securities or futures a Fund owns
enables that Fund to attempt to protect itself during the
put period against a decline in the value of the underlying
investment below the exercise price by selling the
underlying investment at the exercise price to a seller of
a corresponding put. If the market price of the underlying
investment is equal to or above the exercise price and, as
a result, the put is not exercised or resold, the put will
become worthless at its expiration date. In that case the
Fund will have paid the premium but lost the right to sell
the underlying investment. However, the Fund may sell the
put prior to its expiration. That sale may or may not be at
a profit.
Buying a put on an investment a Fund does not own
permits that Fund either to resell the put or to buy the
underlying investment and sell it at the exercise price.
The resale price will vary inversely to the price of the
underlying investment. If the market price of the
underlying investment is above the exercise price and, as a
result, the put is not exercised, the put will become
worthless on its expiration date.
When a Fund purchases a call or put on an index or
future, it pays a premium, but settlement is in cash rather
than by delivery of the underlying investment to that Fund.
Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market
generally) rather than on price movements in individual
securities or futures contracts.
|_| Buying and Selling Options on Foreign
Currencies. Each Fund except the OSM - Mercury Advisors Samp;amp;P
500 Index Fund can buy and sell calls and puts on foreign
currencies. They include puts and calls that trade on a
securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized
dealers in such options. A Fund could use these calls and
puts to try to protect against declines in the dollar value
of foreign securities and increases in the dollar cost of
foreign securities a Fund wants to acquire.
If the Adviser or Subadviser anticipates a rise in
the dollar value of a foreign currency in which securities
to be acquired are denominated, the increased cost of those
securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If the Adviser or
Subadviser anticipates a decline in the dollar value of a
foreign currency, the decline in the dollar value of
portfolio securities denominated in that currency might be
partially offset by writing calls or purchasing puts on
that foreign currency. However, the currency rates could
fluctuate in a direction adverse to the Fund's position.
The Fund will then have incurred option premium payments
and transaction costs without a corresponding benefit.
A call a Fund writes on a foreign currency is
"covered" if that Fund owns the underlying foreign currency
covered by the call or has an absolute and immediate right
to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash
consideration identified on the books of the Fund) upon
conversion or exchange of other foreign currency held in
its portfolio.
A Fund could write a call on a foreign currency to
provide a hedge against a decline in the U.S. dollar value
of a security which it owns or has the right to acquire and
which is denominated in the currency underlying the option.
That decline might be one that occurs due to an expected
adverse change in the exchange rate. This is known as a
"cross-hedging" strategy. In those circumstances, the Fund
covers the option by identifying in the books of the Fund
cash, U.S. government securities or other liquid, high
grade debt securities in an amount equal to the exercise
price of the option.
|_| Risks of Hedging with Options and Futures. The
use of hedging instruments requires special skills and
knowledge of investment techniques that are different than
what is required for normal portfolio management. If the
Adviser or Subadviser uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging
strategies may reduce a Fund's return. A Fund could also
experience losses if the prices of its futures and options
positions were not correlated with its other investments.
A Fund's option activities could affect its portfolio
turnover rate and brokerage commissions. The exercise of
calls written by a Fund might cause it to sell related
portfolio securities, thus increasing its turnover rate.
The exercise by a Fund of puts on securities will cause the
sale of underlying investments, increasing portfolio
turnover. Although the decision whether to exercise a put
it holds is within a Fund's control, holding a put might
cause the Fund to sell the related investments for reasons
that would not exist in the absence of the put.
A Fund could pay a brokerage commission each time it
buys a call or put, sells a call, or buys or sells an
underlying investment in connection with the exercise of a
call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or
sales of the underlying investments. Premiums paid for
options are small in relation to the market value of the
underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by
trading in options could result in a Fund's net asset value
being more sensitive to changes in the value of the
underlying investment.
If a covered call written by a Fund is exercised on
an investment that has increased in value, the Fund will be
required to sell the investment at the call price. It will
not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market
that provides secondary trading for options of the same
series, and there is no assurance that a liquid secondary
market will exist for any particular option. A Fund might
experience losses if it could not close out a position
because of an illiquid market for the future or option.
There is a risk in using short hedging by selling
futures or purchasing puts on broadly-based indices or
futures to attempt to protect against declines in the value
of a Fund's portfolio securities. The risk is that the
prices of the futures or the applicable index will
correlate imperfectly with the behavior of the cash prices
of a Fund's securities. For example, it is possible that
while a Fund has used hedging instruments in a short hedge,
the market may advance and the value of the securities held
in that Fund's portfolio might decline. If that occurred,
the Fund would lose money on the hedging instruments and
also experience a decline in the value of its portfolio
securities. However, while this could occur for a very
brief period or to a very small degree, over time the value
of a diversified portfolio of securities will tend to move
in the same direction as the indices upon which the hedging
instruments are based.
The risk of imperfect correlation increases as the
composition of a Fund's portfolio diverges from the
securities included in the applicable index. To compensate
for the imperfect correlation of movements in the price of
the portfolio securities being hedged and movements in the
price of the hedging instruments, a Fund might use hedging
instruments in a greater dollar amount than the dollar
amount of portfolio securities being hedged. It might do so
if the historical volatility of the prices of the portfolio
securities being hedged is more than the historical
volatility of the applicable index.
The ordinary spreads between prices in the cash and
futures markets are subject to distortions, due to
differences in the nature of those markets. First, all
participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which
could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting
transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators
in the futures market may cause temporary price
distortions.
A Fund can use hedging instruments to establish a
position in the securities markets as a temporary
substitute for the purchase of individual securities (long
hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that
when a Fund does so the market might decline. If a Fund
then concludes not to invest in securities because of
concerns that the market might decline further or for other
reasons, the Fund will realize a loss on the hedging
instruments that is not offset by a reduction in the price
of the securities purchased.
|_| Forward Contracts. Forward contracts are foreign
currency exchange contracts. They are used to buy or sell
foreign currency for future delivery at a fixed price. A
Fund uses them to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that it has
bought or sold, or to protect against possible losses from
changes in the relative values of the U.S. dollar and a
foreign currency. Each Fund limits its exposure in foreign
currency exchange contracts in a particular foreign
currency to the amount of its assets denominated in that
currency or a closely-correlated currency. Each Fund may
also use "cross-hedging" where it hedges against changes in
currencies other than the currency in which a security it
holds is denominated.
Under a forward contract, one party agrees to
purchase, and another party agrees to sell, a specific
currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by
the parties. The transaction price is set at the time the
contract is entered into. These contracts are traded in the
inter-bank market conducted directly among currency traders
(usually large commercial banks) and their customers.
A Fund may use forward contracts to protect against
uncertainty in the level of future exchange rates. The use
of forward contracts does not eliminate the risk of
fluctuations in the prices of the underlying securities a
Fund owns or intends to acquire, but it does fix a rate of
exchange in advance. Although forward contracts may reduce
the risk of loss from a decline in the value of the hedged
currency, at the same time they limit any potential gain if
the value of the hedged currency increases.
When a Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or
when it anticipates receiving dividend payments in a
foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar
equivalent of the dividend payments. To do so, the Fund
could enter into a forward contract for the purchase or
sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars
per unit of the foreign currency. This is called a
"transaction hedge." The transaction hedge will protect
the Fund against a loss from an adverse change in the
currency exchange rates during the period between the date
on which the security is purchased or sold or on which the
payment is declared, and the date on which the payments are
made or received.
A Fund could also use forward contracts to lock in
the U.S. dollar value of portfolio positions. This is
called a "position hedge." When a Fund believes that
foreign currency might suffer a substantial decline against
the U.S. dollar, it could enter into a forward contract to
sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities
denominated in that foreign currency. When a Fund believes
that the U.S. dollar might suffer a substantial decline
against a foreign currency, it could enter into a forward
contract to buy that foreign currency for a fixed dollar
amount. Alternatively, a Fund could enter into a forward
contract to sell a different foreign currency for a fixed
U.S. dollar amount if the Fund believes that the U.S.
dollar value of the foreign currency to be sold pursuant to
its forward contract will fall whenever there is a decline
in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated. That is referred to
as a "cross hedge."
Each Fund will cover its short positions in these
cases by identifying to its Custodian bank assets having a
value equal to the aggregate amount of the Fund's
commitment under forward contracts. A Fund will not enter
into forward contracts or maintain a net exposure to such
contracts if the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities
or other assets denominated in that currency or another
currency that is the subject of the hedge.
However, to avoid excess transactions and transaction
costs, a Fund may maintain a net exposure to forward
contracts in excess of the value of the Fund's portfolio
securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid
securities denominated in any currency. The cover must be
at least equal at all times to the amount of that excess.
As one alternative, a Fund may purchase a call option
permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price
no higher than the forward contract price. As another
alternative, a Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to
a forward purchase contract at a price as high or higher
than the forward contact price.
The precise matching of the amounts under forward
contracts and the value of the securities involved
generally will not be possible because the future value of
securities denominated in foreign currencies will change as
a consequence of market movements between the date the
forward contract is entered into and the date it is sold.
In some cases the Adviser or Subadviser might decide to
sell the security and deliver foreign currency to settle
the original purchase obligation. If the market value of
the security is less than the amount of foreign currency a
Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that
is, cash) market to settle the security trade. If the
market value of the security instead exceeds the amount of
foreign currency the Fund is obligated to deliver to settle
the trade, the Fund might have to sell on the spot market
some of the foreign currency received upon the sale of the
security. There will be additional transaction costs on the
spot market in those cases.
The projection of short-term currency market
movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately
predicted, causing a Fund to sustain losses on these
contracts and to pay additional transactions costs. The use
of forward contracts in this manner might reduce a Fund's
performance if there are unanticipated changes in currency
prices to a greater degree than if the Fund had not entered
into such contracts.
At or before the maturity of a forward contract
requiring a Fund to sell a currency, it might sell a
portfolio security and use the sale proceeds to make
delivery of the currency. In the alternative a Fund might
retain the security and offset its contractual obligation
to deliver the currency by purchasing a second contract.
Under that contract the Fund will obtain, on the same
maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, a Fund might close out a
forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity
date of the first contract. A Fund would realize a gain or
loss as a result of entering into such an offsetting
forward contract under either circumstance. The gain or
loss will depend on the extent to which the exchange rate
or rates between the currencies involved moved between the
execution dates of the first contract and offsetting
contract.
The costs to a Fund of engaging in forward contracts
varies with factors such as the currencies involved, the
length of the contract period and the market conditions
then prevailing. Because forward contracts are usually
entered into on a principal basis, no brokerage fees or
commissions are involved. Because these contracts are not
traded on an exchange, a Fund must evaluate the credit and
performance risk of the counterparty under each forward
contract.
Although a Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. A
Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do
not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices
at which they buy and sell various currencies. Thus, a
dealer might offer to sell a foreign currency to a Fund at
one rate, while offering a lesser rate of exchange if the
Fund desires to resell that currency to the dealer.
? Swap Transactions. Each Fund (other than the
OSM - Mercury Advisors Samp;amp;P 500 Index Fund) can enter into
interest rate swap agreements. In an interest rate swap,
the Fund and another party exchange their right to receive
or their obligation to pay interest on a security. For
example, they might swap the right to receive floating rate
payments for fixed rate payments. A Fund can enter into
swaps only on securities that it owns. A Fund will not
enter into swaps with respect to more than 25% of its total
assets. Also, a Fund will segregate liquid assets (such as
cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily,
as needed.
Swap agreements entail both interest rate risk and
credit risk. There is a risk that, based on movements of
interest rates in the future, the payments made by a Fund
under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the
counterparty will default. If the counterparty defaults,
the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet
received. The Adviser or Subadviser will monitor the
creditworthiness of counterparties to a Fund's interest
rate swap transactions on an ongoing basis.
Each Fund can enter into swap transactions with
certain counterparties pursuant to master netting
agreements. A master netting agreement provides that all
swaps done between a Fund and that counterparty shall be
regarded as parts of an integral agreement. If amounts are
payable on a particular date in the same currency in
respect of one or more swap transactions, the amount
payable on that date in that currency shall be the net
amount. In addition, the master netting agreement may
provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with
that party. Under these agreements, if a default results in
a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a
replacement swap for each swap. It is measured by the
mark-to-market value at the time of the termination of each
swap. The gains and losses on all swaps are then netted,
and the result is the counterparty's gain or loss on
termination. The termination of all swaps and the netting
of gains and losses on termination is generally referred to
as "aggregation."
The OSM - Mercury Advisors Samp;amp;P 500 Index Fund and the
OSM - Salomon Brothers All Cap Fund are authorized to enter
into equity swap agreements, which are OTC contracts in
which one party agrees to make periodic payments based on
the change in market value of a specified equity security,
basket of equity securities or equity index in return for
periodic payments based on a fixed or variable interest
rate or the change in market value of a different equity
security, basket of securities or equity index. Swap
agreements may also be used to obtain exposure to a
security or market without owning or taking physical
custody of securities. The Fund will enter into an equity
swap transaction only if, immediately following the time
the Fund enters into the transaction, the aggregate
notional principal amount of equity swap transactions to
which the Fund is a party would not exceed 5% of the Fund's
net assets.
|_| Additional Risk Factors of OTC Transactions;
Limitations on the Use of OTC Derivatives. Certain
Derivatives traded in OTC markets, including indexed
securities, swaps and OTC options, involve substantial
liquidity risk. The absence of liquidity may make it
difficult or impossible for the Fund to sell such
instruments promptly at an acceptable price. The absence of
liquidity may also make it more difficult for the Fund to
ascertain a market value for such instruments. The Fund
will therefore acquire illiquid OTC instruments (i) if the
agreement pursuant to which the instrument is purchased
contains a formula price at which the instrument may be
terminated or sold, or (ii) for which the Adviser or
Subadviser anticipates the Fund can receive on each
business day at least two independent bids or offers,
unless a quotation from only one dealer is available, in
which case that dealer's quotation may be used.
Because Derivatives traded in OTC markets are not
guaranteed by an exchange or clearing corporation and
generally do not require payment of margin, to the extent
that the Fund has unrealized gains in such instruments or
has deposited collateral with its counterparty, the Fund is
at risk that its counterparty will become bankrupt or
otherwise fail to honor its obligations. The Fund will
attempt to minimize the risk that a counterparty will
become bankrupt or otherwise fail to honor its obligations
by engaging in transactions in derivatives traded in OTC
markets only with financial institutions which have
substantial capital or which have provided the Fund with a
third party guaranty or other credit enhancement.
|_| Regulatory Aspects of Hedging Instruments. When
using futures and options on futures, a Fund is required to
operate within certain guidelines and restrictions with
respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In
particular, a Fund is exempted from registration with the
CFTC as a "commodity pool operator" if it complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does
not limit the percentage of a Fund's assets that may be
used for futures margin and related options premiums for a
bona fide hedging position. However, under the Rule, a Fund
must limit its aggregate initial futures margin and related
options premiums to not more than 5% of its net assets for
hedging strategies that are not considered bona fide
hedging strategies under the Rule. Under the Rule, a Fund
must also use short futures and options on futures solely
for bona fide hedging purposes within the meaning and
intent of the applicable provisions of the Commodity
Exchange Act.
Transactions in options by a Fund are subject to
limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be
written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether
the options were written or purchased on the same or
different exchanges or are held in one or more accounts or
through one or more different exchanges or through one or
more brokers. Thus, the number of options that a Fund may
write or hold may be affected by options written or held by
other entities, including other investment companies having
the same adviser as a Fund (or an adviser that is an
affiliate of a Fund's adviser). The exchanges also impose
position limits on futures transactions. An exchange may
order the liquidation of positions found to be in violation
of those limits and may impose certain other sanctions.
Under the Investment Company Act, when a Fund
purchases a future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal
to the market value of the securities underlying the
future, less the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments.
Certain foreign currency exchange contracts in which a Fund
may invest are treated as "Section 1256 contracts" under
the Internal Revenue Code. In general, gains or losses
relating to Section 1256 contracts are characterized as 60%
long-term and 40% short-term capital gains or losses under
the Code. However, foreign currency gains or losses arising
from Section 1256 contracts that are forward contracts
generally are treated as ordinary income or loss. In
addition, Section 1256 contracts held by a Fund at the end
of each taxable year are "marked-to-market," and unrealized
gains or losses are treated as though they were realized.
These contracts also may be marked-to-market for purposes
of determining the excise tax applicable to investment
company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An
election can be made by a Fund to exempt those transactions
from this marked-to-market treatment.
Certain forward contracts a Fund enters into may
result in "straddles" for federal income tax purposes. The
straddle rules may affect the character and timing of gains
(or losses) recognized by a Fund on straddle positions.
Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent
that the loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, the following gains
or losses are treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in
exchange rates that occur between the time the
Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated
in a foreign currency and the time the Fund
actually collects such receivables or pays such
liabilities, and
(2) gains or losses attributable to fluctuations in the
value of a foreign currency between the date of
acquisition of a debt security denominated in a
foreign currency or foreign currency forward
contracts and the date of disposition.
Currency gains and losses are offset against market
gains and losses on each trade before determining a net
"Section 988" gain or loss under the Internal Revenue Code
for that trade, which may increase or decrease the amount
of a Fund's investment income available for distribution to
its shareholders.
|X| Temporary Defensive and Interim Investments. When
market conditions are unstable, or the Adviser or
Subadviser believes it is otherwise appropriate to reduce
holdings in stocks, a Fund (except for the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund) can invest in a variety of
debt securities for defensive purposes. A Fund can also
purchase these securities for liquidity purposes to meet
cash needs due to the redemption of Fund shares, or to hold
while waiting to reinvest cash received from the sale of
other portfolio securities. A Fund can buy:
|_| high-quality, short-term money market
instruments, including those issued by the U. S.
Treasury or other government agencies,
|_| commercial paper (short-term, unsecured, promissory
notes of domestic or foreign companies),
|_| short-term debt obligations of corporate issuers,
|_| certificates of deposit and bankers'
acceptances of domestic and foreign banks and
savings and loan associations, and
|_| repurchase agreements and purchase and sale
agreements.
Short-term debt securities would normally be selected
for defensive or cash management purposes because they can
normally be disposed of quickly, are not generally subject
to significant fluctuations in principal value and their
value will be less subject to interest rate risk than
longer-term debt securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental
policies are those policies that each Fund has adopted to
govern its investments that can be changed only by the vote
of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, a "majority"
vote is defined as the vote of the holders of the lesser of:
|_| 67% or more of the shares present or
represented by proxy at a shareholder meeting, if
the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The investment objectives of the OSM - Mercury
Advisors Focus Growth Fund, OSM - Jennison Growth Fund, OSM
- - QM Active Balanced Fund and the OSM - Salomon Brothers
All Cap Fund are fundamental policies. The investment
objectives of the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
and the OSM - Gartmore Millennium Growth Fund II are
non-fundamental policies. Other policies described in the
Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The
Funds' Board of Trustees can change non-fundamental
policies without shareholder approval. The Board of
Trustees of the Master Funds in which the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund invest can change non-fundamental
policies of the respective Master Fund without shareholder
approval. However, significant changes to investment
policies will be described in supplements or updates to the
Prospectus or this Statement of Additional Information, as
appropriate. Each Fund's most significant investment
policies are described in the Prospectus.
|X| Do the Funds Have Additional Fundamental
Policies?
OSM - Mercury Advisors Samp;amp;P 500 Index Fund - The
following investment restrictions are fundamental policies
of OSM - Mercury Advisors Samp;amp;P 500 Index Fund. Provided that
none of the following restrictions shall prevent the Fund
from investing all of its assets in shares of another
registered investment company with the same investment
objective (in a master/feeder structure), the Fund may not:
1. Make any investment inconsistent with the Fund's
classification as a non-diversified company under
the Investment Company Act.
2. Invest more than 25% of its total assets, taken at
market value, in the securities of issuers in any
particular industry (excluding the U.S. Government
and its agencies and instrumentalities); provided,
that in replicating the weighting of a particular
industry in its target index, the Fund may invest
more than 25% of its total assets in securities of
issuers in that industry when the assets of
companies included in the target index that are in
the industry represent more than 25% of the total
assets of all companies included in the index.
3. Make investments for the purpose of exercising
control or management.
4. Purchase or sell real estate, except that, to the
extent permitted by law, the Fund may invest in
securities directly or indirectly secured by real
estate or interests therein or issued by companies
which invest in real estate or interests therein.
5. Make loans to other persons, except that the
acquisition of bonds, debentures or other
corporate debt securities and investment in
government obligations, commercial paper,
pass-through instruments, certificates of deposit,
bankers' acceptances, repurchase agreements or any
similar instruments shall not be deemed to be the
making of a loan, and except further that the Fund
may lend its portfolio securities, provided that
the lending of portfolio securities may be made
only in accordance with applicable law and the
guidelines set forth in the Fund's Registration
Statement, as it may be amended from time to time.
6. Issue senior securities to the extent such issuance
would violate applicable law.
7. Borrow money, except that (i) the Fund may borrow
from banks (as defined in the Investment Company
Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Fund may
borrow up to an additional 5% of its total assets
for temporary purposes, (iii) the Fund may obtain
such short term credit as may be necessary for the
clearance of purchases and sales of portfolio
securities, and (iv) the Fund may purchase
securities on margin to the extent permitted by
applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the
extent permitted by the Fund's investment policies
as set forth in its Registration Statement, as it
may be amended from time to time, in connection
with hedging transactions, short sales, when
issued and forward commitment transactions and
similar investment strategies.
8. Underwrite securities of other issuers except insofar
as the Fund technically may be deemed an
underwriter under the Securities Act in selling
portfolio securities.
9. Purchase or sell commodities or contracts on
commodities, except to the extent that the Fund
may do so in accordance with applicable law and
the Fund's registration statement, as it may be
amended from time to time, and without registering
as a commodity pool operator under the Commodity
Exchange Act.
With respect to the Fund's fundamental restriction on
purchasing securities on margin, the Fund is currently
prohibited by law from purchasing securities on margin and
will not do so unless current law changes. In addition,
although the Fund is classified as a non-diversified fund
under the Investment Company Act and is not subject to the
diversification requirements of the Investment Company Act,
the Fund is required to comply with certain requirements
under the Internal Revenue Code of 1986, as amended (the
"Code"). These requirements include limiting its
investments so that at the close of each quarter of the
taxable year (i) not more than 25% of the market value of
the Fund's total assets are invested in the securities of a
single issuer, or any two (2) or more issuers which are
controlled by the Fund and engaged in the same, similar or
related businesses, and (ii) with respect to 50% of the
market value of its total assets, not more than 5% of the
market value of its total assets are invested in securities
of a single issuer, and the Fund does not own more than 10%
of the outstanding voting securities of a single issuer.
The U.S. Government, its agencies and instrumentalities and
other regulated investment companies are not included
within the definition of "issuer" for purposes of the
diversification requirements of the Code.
The applicable Master Fund has adopted investment
restrictions substantially identical to the foregoing,
which are fundamental policies of the Master Fund and may
not be changed without the approval of the holders of a
majority of the interests of the Master Fund.
In addition, the Fund has adopted non-fundamental
restrictions that may be changed by the Trustees without
shareholder approval. Like the fundamental restrictions,
none of the non-fundamental restrictions, including but not
limited to restriction (a) below, shall prevent the Fund
from investing all of its assets in shares of another
registered investment company with the same investment
objective (in a master/feeder structure). Under the
non-fundamental investment restrictions, the Fund may not:
(a) Change its investment policy to invest at least 80%
of its net assets (plus borrowings for investment
purposes) in securities or other financial
instruments in, or correlated with, its target
index without providing shareholders with at
least 60 days notice.
(b) Purchase securities of other investment companies,
except to the extent such purchases are permitted
by applicable law. As a matter of policy,
however, the Fund will not purchase shares of any
registered open-end investment company or
registered unit investment trust, in reliance on
Section 12(d)(1)(F) or (G) (the "fund of funds"
provisions) of the Investment Company Act, at any
time the Fund's shares are owned by another
investment company that is part of the same group
of investment companies as the Fund.
(c) Invest in securities that cannot be readily resold
because of legal or contractual restrictions or
that cannot otherwise be marketed, redeemed or
put to the issuer or a third party because of a
lack of an active trading market, if at the time
of acquisition more than 15% of its net assets
would be invested in such securities. This
restriction shall not apply to securities that
mature within seven (7) days or securities that
the Trustees have otherwise determined to be
liquid pursuant to applicable law. Securities
purchased in accordance with Rule 144A under the
Securities Act (which are restricted securities
that can be resold to qualified institutional
buyers, but not to the general public) and
determined to be liquid by the Trustees are not
subject to the limitations set forth in this
investment restriction.
(d) Make any additional investments if the amount of its
borrowings exceeds 5% of its total assets.
Borrowings do not include the use of investment
techniques that may be deemed to create leverage,
including, but not limited to, such techniques as
dollar rolls, when-issued securities, options and
futures.
In addition to the non-fundamental investment
restrictions listed above notwithstanding fundamental
restriction 9 listed above, as a non-fundamental investment
restriction the Fund will not change fundamental
restriction 9 without first obtaining shareholder approval.
If a percentage restriction on the investment or use of
assets set forth above is adhered to at the time a
transaction is effected, later changes in percentages
resulting from changing values will not be considered a
violation (except for the Fund's policies on borrowing and
illiquid securities).
The Master Fund has adopted non-fundamental
investment restrictions substantially identical to the
foregoing, which may be changed by the Trustees of the
Master Fund without shareholder approval.
The staff of the Commission has taken the position
that purchased OTC options and the assets used as cover for
written OTC options are illiquid securities. Therefore, the
Fund and Master Fund have adopted an investment policy
pursuant to which neither the Fund nor the Master Fund will
purchase or sell OTC options (including OTC options on
futures contracts) if, as a result of such transaction, the
sum of the market value of OTC options currently
outstanding which are held by the Fund or the Master Fund,
the market value of the underlying securities covered by
OTC call options currently outstanding which were sold by
the Fund or the Master Fund and margin deposits on the
Fund's or the Master Fund's existing OTC options on futures
contracts exceeds 15% of the net assets of the Fund or the
Master Fund taken at market value, together with all other
assets of such Fund or the Master Fund which are illiquid
or are not otherwise readily marketable. However, if the
OTC option is sold by the Fund or the Master Fund to a
primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and if the Fund or the
Master Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a
predetermined price, then the Fund or the Master Fund will
treat as illiquid such amount of the underlying securities
as is equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., current market
value of the underlying securities minus the option's
strike price). The repurchase price with the primary
dealers is typically a formula price which is generally
based on a multiple of the premium received for the option,
plus the amount by which the option is "in-the-money."
This policy as to OTC options is not a fundamental policy
of the Fund or the Master Fund and may be amended by the
Trustees or the Directors without the approval of the
shareholders. However, the Trustees will not change or
modify this policy prior to the change or modification by
the Commission staff of its position.
Rule 10f-3 under the Investment Company Act sets
forth the conditions under which the Master Fund may
purchase from an underwriting syndicate in which Merrill
Lynch is a member. Otherwise, the Fund and the Master Fund
are prohibited from engaging in portfolio transactions with
Merrill Lynch or its affiliates acting as principal without
an exemptive order. See "Portfolio Transactions and
Brokerage."
OSM - Mercury Advisors Focus Growth Fund - The
following investment restrictions are fundamental policies
of OSM - Mercury Advisors Focus Growth Fund. Unless
otherwise provided, all references to the Fund's assets
below are in terms of current market value. Provided that
none of the following restrictions shall prevent the Fund
from investing all of its assets in shares of another
registered investment company with the same investment
objective (in a master/feeder structure), the Fund may not:
1. Invest more than 25% of its total assets, taken at
market value at the time of each investment, in
the securities of issuers in any particular
industry (excluding the U.S. Government and its
agencies and instrumentalities).
2. Make investments for the purpose of exercising
control or management. Investments by the Fund in
wholly-owned investment entities created under the
laws of certain countries will not be deemed the
making of investments for the purpose of
exercising control or management.
3. Purchase or sell real estate, except that, to the
extent permitted by applicable law, the Fund may
invest in securities directly or indirectly
secured by real estate or interests therein or
issued by companies that invest in real estate or
interests therein.
4. Make loans to other persons, except that the
acquisition of bonds, debentures or other
corporate debt securities and investment in
governmental obligations, commercial paper,
pass-through instruments, certificates of deposit,
bankers' acceptances, repurchase agreements,
purchase and sale contracts or any similar
instruments shall not be deemed to be the making
of a loan, and except further that the Fund may
lend its portfolio securities, provided that the
lending of portfolio securities may be made only
in accordance with applicable law and the
guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may
be amended from time to time.
5. Issue senior securities to the extent such issuance
would violate applicable law.
6. Borrow money, except that (i) the Fund may borrow
from banks (as defined in the Investment Company
Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Fund may
borrow up to an additional 5% of its total assets
for temporary purposes, (iii) the Fund may obtain
such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio
securities and (iv) the Fund may purchase
securities on margin to the extent permitted by
applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the
extent permitted by the Fund's investment policies
as set forth in its Prospectus and Statement of
Additional Information, as they may be amended
from time to time, in connection with hedging
transactions, short sales, when-issued and forward
commitment transactions and similar investment
strategies.
7. Underwrite securities of other issuers except insofar
as the Fund technically may be deemed an
underwriter under the Securities Act of 1933 in
selling portfolio securities.
8. Purchase or sell commodities or contracts on
commodities, except to the extent that the Fund
may do so in accordance with applicable law and
the Fund's Prospectus and Statement of Additional
Information, as they may be amended from time to
time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
The applicable Master Fund in which the Fund invests
has adopted investment restrictions substantially identical
to the foregoing, which are fundamental policies of the
Master Fund and may not be changed with respect to the
Master Fund without the approval of the holders of a
majority of the interests of the Master Fund.
In addition, the Fund has adopted non-fundamental
restrictions that may be changed by the Board of Trustees
of the Fund without shareholder approval. Like the
fundamental restrictions, none of the non-fundamental
restrictions, including but not limited to restriction (1)
below, shall prevent the Fund from investing all of its
assets in shares of another registered investment company
with the same investment objective (in a master/feeder
structure). The applicable Master Fund has adopted
investment restrictions substantially identical to the
following, which are non-fundamental policies of the Master
Fund and may be changed by the Trustees of the Master Fund
without shareholder approval. Under the non-fundamental
investment restrictions, the Fund may not:
1. Purchase securities of other investment companies,
except to the extent such purchases are permitted
by applicable law. As a matter of policy, however,
the Fund will not purchase shares of any
registered open-end investment company or
registered unit investment trust, in reliance on
Section 12(d)(1)(F) or (G) (the "fund of funds"
provisions) of the Investment Company Act, at any
time its shares are owned by another investment
company that is part of the same group of
investment companies as the Fund.
2. Make short sales of securities or maintain a short
position, except to the extent permitted by
applicable law.
3. Invest in securities that cannot be readily resold
because of legal or contractual restrictions or
that cannot otherwise be marketed, redeemed or put
to the issuer or a third party, if at the time of
acquisition more than 15% of its net assets would
be invested in such securities. This restriction
shall not apply to securities that mature within
seven (7) days or securities that the Trustees of
the Fund have otherwise determined to be liquid
pursuant to applicable law. Securities purchased
in accordance with Rule 144A under the Securities
Act (which are restricted securities that can be
resold to qualified institutional buyers, but not
to the general public) and determined to be liquid
by the Board of Trustees of the Fund are not
subject to the limitations set forth in this
investment restriction.
4. Notwithstanding fundamental investment restriction
(6) above, borrow money or pledge its assets,
except that the Fund (a) may borrow from a bank as
a temporary measure for extraordinary or emergency
purposes or to meet redemption in amounts not
exceeding 33 1/3% (taken at market value) of its
total assets and pledge its assets to secure such
borrowing, (b) may obtain such short-term credit
as may be necessary for the clearance of purchases
and sales of portfolio securities and (c) may
purchase securities on margin to the extent
permitted by applicable law. However, at the
present time, applicable law prohibits the Fund
from purchasing securities on margin. The deposit
or payment by the Fund of initial or variation
margin in connection with financial futures
contracts or options transactions is not
considered to be the purchase of a security on
margin. The purchase of securities while a
borrowing is outstanding will have the effect of
leveraging the Fund. Such leveraging or borrowing
increases the Fund's exposure to capital risk and
borrowed funds are subject to interest costs which
will reduce net income. The Fund will not purchase
securities while borrowing exceeds 5% of its total
assets.
The staff of the Commission has taken the position
that purchased OTC options and the assets used as cover for
written OTC options are illiquid securities. Therefore, the
Fund and the Master Fund have adopted an investment policy
pursuant to which neither the Fund nor the Master Fund will
purchase or sell OTC options (including OTC options on
futures contracts) if, as a result of such transaction, the
sum of the market value of OTC options currently
outstanding that are held by the Fund or the Master Fund,
the market value of the underlying securities covered by
OTC call options currently outstanding that were sold by
the Fund or the Master Fund and margin deposits on the
Fund's or the Master Fund's existing OTC options on
financial futures contracts exceeds 15% of the net assets
of the Fund or the Master Fund, taken at market value,
together with all other assets of the Fund or the Master
Fund that are illiquid or are not otherwise readily
marketable. However, if the OTC option is sold by the Fund
or the Master Fund to a primary U.S. Government securities
dealer recognized by the Federal Reserve Bank of New York
and if the Fund or the Master Fund has the unconditional
contractual right to repurchase such OTC option from the
dealer at a predetermined price, then the Fund or the
Master Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price
less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying securities
minus the option's strike price). The repurchase price with
the primary dealers is typically a formula price that is
generally based on a multiple of the premium received for
the option, plus the amount by which the option is
"in-the-money." This policy as to OTC options is not a
fundamental policy of the Fund or the Master Fund and may
be amended by the Board of Trustees of the Fund or the
Board of Trustees of the Master Fund without the approval
of the Fund's shareholders. However, the Trustees will not
change or modify this policy prior to the change or
modification by the Commission staff of its position.
In addition, as a non-fundamental policy that may be
changed by the Board of Trustees and to the extent required
by the Commission or its staff, the Fund will, for purposes
of fundamental investment restrictions (1) and (2), treat
securities issued or guaranteed by the government of any
one foreign country as the obligations of a single issuer.
As another non-fundamental policy, the Fund will not
invest in securities that are (a) subject to material legal
restrictions on repatriation of assets or (b) cannot be
readily resold because of legal or contractual restrictions
or which are not otherwise readily marketable, including
repurchase agreements and purchase and sales contracts
maturing in more than seven (7) days, if, regarding all
such securities, more than 15% of its net assets, taken at
market value would be invested in such securities.
Because of the affiliation of Merrill Lynch with
Mercury Advisors, the Master Fund is prohibited from
engaging in certain transactions involving Merrill Lynch or
its affiliates except for brokerage transactions permitted
under the Investment Company Act involving only usual and
customary commissions or transactions pursuant to an
exemptive order under the Investment Company Act. See
"Portfolio Transactions and Brokerage." Without such an
exemptive order the Master Fund would be prohibited from
engaging in portfolio transactions with Merrill Lynch or
any of its affiliates acting as principal. Rule 10f-3 under
the Investment Company Act sets forth the conditions under
which the Master Fund may purchase from an underwriting
syndicate in which Merrill Lynch is a member.
OSM - QM Active Balanced Fund, OSM - Jennison Growth
Fund, OSM - Salomon Brothers All Cap Fund and OSM -
Gartmore Millennium Growth Fund II - The following
investment restrictions are fundamental policies of the OSM
- - QM Active Balanced Fund, OSM - Jennison Growth Fund, OSM
- - Salomon Brothers All Cap Fund and the OSM - Gartmore
Millennium Growth Fund II.
|_| The Fund cannot buy securities issued or
guaranteed by any one issuer if more than 5% of
its total assets would be invested in securities
of that issuer or if it would then own more than
10% of that issuer's voting securities. That
restriction applies to 75% of the Fund's total
assets (50% of the OSM - Salomon Brothers All Cap
Fund's total assets). The limit does not apply to
securities issued by the U.S. Government or any of
its agencies or instrumentalities or securities of
other investment companies.
|_| The Fund cannot invest in physical commodities
or physical commodity contracts. However, the Fund
can buy and sell hedging instruments to the extent
specified in its Prospectus and this Statement of
Additional Information from time to time. The Fund
can also buy and sell options, futures, securities
or other instruments backed by, or the investment
return from which, is linked to changes in the
price of, physical commodities.
|_| The Fund cannot make loans except (a) through lending
of securities, (b) through the purchase of debt
instruments, loan participations or similar
evidences of indebtedness, (c) through an
inter-fund lending program with other affiliated
funds, and (d) through repurchase agreements.
|_| The Fund cannot borrow money in excess of 33 1/3% of
the value of its total assets. The Fund may borrow
only from banks and/or affiliated investment
companies. With respect to this fundamental
policy, the Fund can borrow only if it maintains a
300% ratio of assets to borrowings at all times in
the manner set forth in the Investment Company Act.
|_| The Fund cannot concentrate investments. That means
it cannot invest 25% or more of its total assets
in companies in any one industry.
|_| The Fund cannot underwrite securities of other
companies. A permitted exception is in case it is
deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in
its own portfolio.
|_| The Fund cannot invest in real estate or in interests
in real estate. However, the Fund can purchase
readily-marketable securities of companies holding
real estate or interests in real estate.
|_| The Fund cannot issue "senior securities." However,
that restriction does not prohibit the Fund from
borrowing money subject to the provisions set
forth in this Statement of Additional Information,
or from entering into margin, collateral or escrow
arrangements permitted by its other investment
policies.
|X| Do the Funds Have Any Restrictions That Are Not
Fundamental? Each Fund has a number of other investment
restrictions that are not fundamental policies, which means
that they can be changed by vote of a majority of a Fund's
Board of Trustees without shareholder approval.
|_| A Fund cannot invest in companies for the purpose of
acquiring control or management of them.
|_| A Fund cannot pledge, mortgage or hypothecate any of
its assets. However, this does not prohibit the
escrow arrangements contemplated by writing
covered call options or other collateral or margin
arrangements in connection with any of the hedging
instruments permitted by any of its other
investment policies.
Unless the Prospectus or this Statement of Additional
Information states that a percentage restriction applies on
an ongoing basis, it applies only at the time the Fund
makes an investment. A Fund need not sell securities to
meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.
For purposes of a Fund's policy not to concentrate
its investments as described above, a Fund has adopted the
industry classifications set forth in Appendix B to this
Statement of Additional Information. That is not a
fundamental policy.
How the Funds are Managed
Organization and History. Oppenheimer Select Managers (the
"Trust") is an open-end management investment company with
an unlimited number of authorized shares of beneficial
interest. The Trust was organized as a Massachusetts
business trust on November 10, 2000.
Classes of Shares. The Trustees are authorized,
without shareholder approval, to create new series and
classes of shares. The Trustees may reclassify unissued
shares of a Fund into additional series or classes of
shares. The Trustees also may divide or combine the shares
of a class into a greater or lesser number of shares
without changing the proportionate beneficial interest of a
shareholder in the Fund. Shares do not have cumulative
voting rights or preemptive or subscription rights. Shares
may be voted in person or by proxy at shareholder meetings.
Each Fund currently has five classes of shares: Class
A, Class B, Class C, Class N and Class Y. All classes
invest in the same investment portfolio. Only retirement
plans may purchase Class N shares. Only certain
institutional investors may elect to purchase Class Y
shares. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the
different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which
interests of one class are different from
interests of another class, and
o votes as a class on matters that affect that class
alone.
Shares are freely transferable, and each share of
each class has one vote at shareholder meetings, with
fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of a Fund
represents an interest in the Fund proportionately equal to
the interest of each other share of the same class.
Meetings of Shareholders. As a Massachusetts business
trust, the Trust is not required to hold, and does not plan
to hold, regular annual meetings of shareholders. The Trust
will hold meetings when required to do so by the Investment
Company Act or other applicable law. It will also do so
when a shareholder meeting is called by the Trustees or
upon proper request of the shareholders.
Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of
the Trust, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of
its outstanding shares. If the Trustees receive a request
from at least 10 shareholders stating that they wish to
communicate with other shareholders to request a meeting to
remove a Trustee, the Trustees will then either make the
Trust's shareholder list available to the applicants or
mail their communication to all other shareholders at the
applicants' expense. The shareholders making the request
must have been shareholders for at least six months and
must hold shares of a Fund valued at $25,000 or more or
constituting at least 1% of a Fund's outstanding shares.
The Trustees may also take other action as permitted by the
Investment Company Act.
Shareholder and Trustee Liability. The Trust's
Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's
obligations. It also provides for indemnification and
reimbursement of expenses out of the Trust's property for
any shareholder held personally liable for its obligations.
The Declaration of Trust also states that upon request, the
Trust shall assume the defense of any claim made against a
shareholder for any act or obligation of a Fund and shall
satisfy any judgment on that claim. Massachusetts law
permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund
shareholder will incur financial loss from being held
liable as a "partner" of the Trust is limited to the
relatively remote circumstances in which the Trust would be
unable to meet its obligations.
The Trust's contractual arrangements state that any
person doing business with the Trust and each Fund (and
each shareholder of a Fund) agrees under its Declaration of
Trust to look solely to the assets of each series for
satisfaction of any claim or demand that may arise out of
any dealings with that series. Additionally, the Trustees
shall have no personal liability to any such person, to the
extent permitted by law.
Board of Trustees and Oversight Committees. The Trust and
each series of the Trust is governed by a Board of
Trustees, which is responsible for protecting the interests
of shareholders under Massachusetts law. The Trustees meet
periodically throughout the year to oversee each Fund's
activities, review its performance, and review the actions
of the Adviser and Subadvisers. Although the Trust will not
normally hold annual meetings of its shareholders, it may
hold shareholder meetings from time to time on important
matters, and shareholders have certain rights to call a
meeting to remove a Trustee or to take other action as
described in the Trust's Declaration of Trust.
The Board of Trustees has an Audit Committee and a
Review Committee. The Audit Committee is comprised solely
of Independent Trustees. The members of the Audit Committee
are Edward L. Cameron (Chairman), William L. Armstrong,
George C. Bowen and Robert J. Malone. The Audit Committee
held 7 meetings during the fiscal years ended November 30,
2002 and December 3, 2002. The Audit Committee furnishes
the Board with recommendations regarding the selection of
the Trust's independent auditors. Other main functions of
the Audit Committee include, but are not limited to: (i)
reviewing the scope and results of audits and the audit
fees charged; (ii) reviewing reports from the Trust's
independent auditors regarding the Fund's internal
accounting procedures and controls; and (iii) establishing
a separate line of communication between the Trust's
independent auditors and its independent Trustees.
The Audit Committee's functions include selecting and
nominating, to the full Board, nominees for election as
Trustees, and selecting and nominating Independent Trustees
for election. The Audit Committee may, but need not,
consider the advice and recommendation of the Manager and
its affiliates in selecting nominees. The full Board elects
new trustees except for those instances when a shareholder
vote is required.
To date, the Committee has been able to identify from
its own resources an ample number of qualified candidates.
Nonetheless, shareholders may submit names of individuals,
accompanied by complete and properly supported resumes, for
the Audit Committee's consideration by mailing such
information to the Committee in care of the Trust. The
Committee may consider such persons at such time as it
meets to consider possible nominees. The Committee,
however, reserves sole discretion to determine the
candidates to present to the Board and/or shareholders when
it meets for the purpose considering potential nominees.
The members of the Review Committee are Jon S. Fossel
(Chairman), Robert G. Avis, Sam Freedman, Beverly Hamilton
and F. William Marshall, Jr. The Review Committee held 7
meetings during the fiscal years ended November 30, 2002
and December 31, 2002. Among other functions, the Review
Committee reviews reports and makes recommendations to the
Board concerning the fees paid to the Trust's transfer
agent and the services provided to each Fund by the
transfer agent. The Review Committee also reviews each
Fund's investment performance and policies and procedures
adopted by the Trust to comply with Investment Company Act
and other applicable law.
Trustees and Officers of the Trust. Except for Mr. Murphy,
each of the Trustees is an "Independent Trustee," as
defined in the Investment Company Act. Mr. Murphy is an
"Interested Trustee," because he is affiliated with the
Manager by virtue of his positions as an officer and
director of the Manager, and as a shareholder of its parent
company. Mr. Murphy was elected as a Trustee of the Trust
with the understanding that in the event he ceases to be
the chief executive officer of the Manager, he will resign
as a trustee of the Trust and the other Board II Funds
(defined below) for which he is a trustee or director.
The Trust's Trustees and officers and their positions
held with the Trust and length of service in such
position(s) and their principal occupations and business
affiliations during the past five years are listed in the
chart below. The information for the Trustees also includes
the dollar range of shares of the Funds as well as the
aggregate dollar range of shares beneficially owned in any
of the Oppenheimer funds overseen by the Trustees. All of
the Trustees are also trustees or directors of the
following Oppenheimer funds (except for Ms. Hamilton and
Mr. Malone, who are not Trustees of Oppenheimer Senior
Floating Rate Fund and Mr. Murphy is not a Trustee or
Managing General Partner of any of the Centennial trusts)
(referred to as "Board II Funds"):
Oppenheimer Cash Reserves Oppenheimer Select Managers
Oppenheimer Champion Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund Centennial America Fund, L. P.
Oppenheimer Main Street Funds, Inc. Centennial California Tax Exempt Trust
Oppenheimer Main Street Opportunity
Fund Centennial Government Trust
Oppenheimer Main Street Small Cap Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust
Present or former officers, directors, trustees and
employees (and their immediate family members) of the
Trust, the Manager and its affiliates, and retirement plans
established by them for their employees are permitted to
purchase Class A shares of the Funds and the other
Oppenheimer funds at net asset value without sales charge.
The sales charges on Class A shares is waived for that
group because of the economies of sales efforts realized by
the Distributor.
Messrs. Murphy, Masterson, Molleur, Vottiero, Wixted
and Zack, and Mses. Bechtolt, Feld and Ives who are
officers of the Trust, respectively hold the same offices
with one or more of the other Board II Funds as with the
Trust. As of March 11 2003, the Trustees and officers of
the Trust, as a group, owned of record or beneficially less
than 1% of each class of shares of any Fund. The foregoing
statement does not reflect ownership of shares held of
record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under
that plan by the officers of the Trust listed above. In
addition, each Independent Trustee, and his family members,
do not own securities of either the Manager or Distributor
of the Board II Funds or any person directly or indirectly
controlling, controlled by or under common control with the
Manager or Distributor.
Trustees and Officers of the Merrill Lynch Maser
Funds. For information about the Trustees and Officers of
the Quantitative Master Series Trust (the Master Fund in
which the OSM - Mercury Advisors Samp;amp;P 500 Index Fund invests
all of its assets) you should refer to the Registration
Statement of the Quantitative Master Series Trust
(Investment Company Act File No. 811-7885). For information
about the Trustees and Officers of the Master Focus Twenty
Trust (the Master Fund in which the OSM - Mercury Advisors
Focus Growth Fund invests all of its assets) you should
refer to the Registration Statement of the Mast Focus
Twenty Trust (Investment Company Act File No. 811-08735).
You can review each Trust's Registration Statement at the
SEC's website at www.sec.gov.
Affiliated Transactions and Material Business
Relationships. In 2001, Mr. Swain surrendered for
cancellation 60,000 options of Oppenheimer Acquisition
Company ("OAC") (the Manager's parent holding company) to
MassMutual for a cash payment of $2,700,600.
Mr. Swain has reported that he sold a residential
property to Mr. Freedman on October 23, 2001 for $1.2
million. An independent appraisal of the property supported
the sale price.
The address of each Trustee in the chart below is
6803 S. Tucson Way, Centennial, CO 80112-3924. Each Trustee
serves for an indefinite term, until his or her
resignation, retirement, death or removal.
- -------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee each Fund by Trustee
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
As of December 31,
2002
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
James C. Swain, Formerly, Chief Executive Officer (until $0 Over
Chairman and August 27, 2002) of the Board II Funds, $100,000
Trustee since 2001 Vice Chairman (until January 2, 2002) of
Age: 69 the Manager and President and a director
(until 1997) of Centennial Asset
Management Corporation (a wholly-owned
investment advisory subsidiary of the
Manager). Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
William L. Chairman of the following private $0 $50,001-
Armstrong, mortgage banking companies: Cherry Creek $100,000
Trustee since 2001 Mortgage Company (since 1991),
Age: 66 Centennial State Mortgage Company (since
1994), The El Paso Mortgage Company
(since 1993), Transland Financial
Services, Inc. (since 1997); Chairman of
the following private companies: Great
Frontier Insurance (insurance agency)
(since 1995), Ambassador Media
Corporation and Broadway Ventures (since
1984); a director of the following
public companies: Helmerich amp;amp; Payne,
Inc. (oil and gas drilling/production
company) (since 1992) and UNUMProvident
(insurance company) (since 1991). Mr.
Armstrong is also a Director/Trustee of
Campus Crusade for Christ and the
Bradley Foundation. Formerly a director
of the following: Storage Technology
Corporation (a publicly-held computer
equipment company) (1991-February 2003),
International Family Entertainment
(television channel) (1992-1997) and
Natec Resources, Inc. (air pollution
control equipment and services company)
(1991-1995), Frontier Real Estate, Inc.
(residential real estate brokerage)
(1994-1999), and Frontier Title (title
insurance agency) (1995-June 1999); a
U.S. Senator (January 1979-January
1991). Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Avis, Formerly, Director and President of A.G. $0 $1-$10,000
Trustee since 2001 Edwards Capital, Inc. (General Partner
Age: 71 of private equity funds) (until February
2001); Chairman, President and Chief
Executive Officer of A.G. Edwards
Capital, Inc. (until March 2000); Vice
Chairman and Director of A.G. Edwards,
Inc. and Vice Chairman of A.G. Edwards amp;amp;
Sons, Inc. (its brokerage company
subsidiary) (until March 1999); Chairman
of A.G. Edwards Trust Company and A.G.E.
Asset Management (investment advisor)
(until March 1999); and a Director
(until March 2000) of A.G. Edwards amp;amp;
Sons and A.G. Edwards Trust Company.
Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
George C. Bowen, Formerly (until April 1999): Senior Vice $0 Over
Trustee since 2001 President (from September 1987) and $100,000
Age: 66 Treasurer (from March 1985) of the
Manager; Vice President (from June 1983)
and Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (a
subsidiary of the Manager); Senior Vice
President (since February 1992),
Treasurer (since July 1991) Assistant
Secretary and a director (since December
1991) of Centennial Asset Management
Corporation; Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView Asset Management
Corporation (an investment advisory
subsidiary of the Manager); President,
Treasurer and a director (June
1989-January 1990) of Centennial Capital
Corporation (an investment advisory
subsidiary of the Manager); Vice
President and Treasurer (since August
1978) and Secretary (since April 1981)
of Shareholder Services, Inc. (a
transfer agent subsidiary of the
Manager); Vice President, Treasurer and
Secretary (since November 1989) of
Shareholder Financial Services, Inc. (a
transfer agent subsidiary of the
Manager); Assistant Treasurer (since
March 1998) of Oppenheimer Acquisition
Corp. (the Manager's parent
corporation); Treasurer (since November
1989) of Oppenheimer Partnership
Holdings, Inc. (a holding company
subsidiary of the Manager); Vice
President and Treasurer (since July
1996) of Oppenheimer Real Asset
Management, Inc. (an investment advisory
subsidiary of the Manager); Chief
Executive Officer and director (since
March 1996) of MultiSource Services,
Inc. (a broker-dealer subsidiary of the
Manager); Treasurer (since October 1997)
of OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc
(offshore fund management subsidiaries
of the Manager). Oversees 42 portfolios
in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Edward L. Cameron, A member of The Life Guard of Mount $0 $50,001-
Trustee since 2001 Vernon, George Washington's home (since $100,000
Age: 64 June 2000). Formerly (March 2001 - May
2002) Director of Genetic ID, Inc. and
its subsidiaries (a privately held
biotech company); a partner with
PricewaterhouseCoopers LLP (from
1974-1999) (an accounting firm) and
Chairman (from 1994-1998), Price
Waterhouse LLP Global Investment
Management Industry Services Group.
Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Jon S. Fossel, Chairman and Director (since 1998) of $0 Over
Trustee since 2001 Rocky Mountain Elk Foundation (a $100,000
Age: 61 not-for-profit foundation); and a
director (since October 1999) of P.R.
Pharmaceuticals (a privately held
company) and UNUMProvident (an insurance
company) (since June 1, 2002). Formerly
Chairman and a director (until October
1996) and President and Chief Executive
Officer (until October 1995) of the
Manager; President, Chief Executive
Officer and a director of Oppenheimer
Acquisition Corp., Shareholders Services
Inc. and Shareholder Financials
Services, Inc. (until October 1995).
Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Sam Freedman, Director of Colorado Uplift (a $0 Over
Trustee since 2001 non-profit charity) (since September $100,000
Age: 62 1984). Formerly (until October 1994) Mr.
Freedman held several positions in
subsidiary or affiliated companies of
the Manager. Oversees 42 portfolios in
the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Beverly L. Trustee (since 1996) of MassMutual $0 $10,001-$50,000
Hamilton, Institutional Funds and of MML Series
Trustee since 2002 Investment Fund (open-end investment
Age: 56 companies); Director of MML Services
(since April 1987) and America Funds
Emerging Markets Growth Fund (since
October 1991) (both are investment
companies), The California Endowment (a
philanthropy organization) (since April
2002), and Community Hospital of
Monterey Peninsula, (since February
2002); a trustee (since February 2000)
of Monterey International Studies (an
educational organization), and an
advisor to Unilever (Holland)'s pension
fund and to Credit Suisse First Boston's
Sprout venture capital unit. Mrs.
Hamilton also is a member of the
investment committees of the Rockefeller
Foundation, the University of Michigan
and Hartford Hospital. Formerly,
President (February 1991-April 2000)
ARCO Investment Management Company.
Oversees 42 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert J. Malone, Director (since 2001) of Jones $0 Over
Trustee since 2002 Knowledge, Inc. (a privately held $100,000
Age: 58 company), U.S. Exploration, Inc., (since
1997), Colorado UpLIFT (a non-profit
organization) (since 1986) and a trustee
of the Gallagher Family Foundation
(non-profit organization) (since 2000).
Formerly, Chairman of U.S. Bank (a
subsidiary of U.S. Bancorp and formerly
Colorado National Bank,) (July
1996-April 1, 1999) and a director of
Commercial Assets, Inc. (a REIT)
(1993-2000). Oversees 42 portfolios in
the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
F. William Trustee (since 1996) of MassMutual $0 Over
Marshall, Jr., Institutional Funds and of MML Series $100,000
Trustee since 2001 Investment Fund (open-end investment
Age: 60 companies); Trustee (since 1987),
Chairman of the Board (since 2003) and
Chairman of the investment committee
(since 1994) for the Worcester Polytech
Institute; President and Treasurer
(since January 1999) of the SIS Fund (a
private not for profit charitable fund);
Trustee (since 1995) of the Springfield
Library and Museum Association; Trustee
(since 1996) of the Community Music
School of Springfield. Formerly, member
of the investment committee of the
Community Foundation of Western
Massachusetts (1998 - 2003); Chairman
(January 1999-July 1999) of SIS amp;amp; Family
Bank, F.S.B. (formerly SIS Bank);
President, Chief Executive Officer and
Director (May 1993-December 1998) of SIS
Bankcorp, Inc. and SIS Bank (formerly
Springfield Institution for Savings) and
Executive Vice President (January
1999-July 1999) of Peoples Heritage
Financial Group, Inc. Oversees 42
portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
The address of Mr. Murphy in the chart below is 498
Seventh Avenue, New York, NY 10018. Mr. Murphy serves for
an indefinite term, until his resignation, death or removal.
- -------------------------------------------------------------------------------------
Interested Trustee and Officer
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Years; Range of Beneficially
Position(s) Held Other Trusteeships/Directorships Held by Shares Owned in
with Fund, Trustee; BeneficiallAny of the
Length of Service, Number of Portfolios in Fund Complex Owned in Oppenheimer
Age Currently Overseen by Trustee each Fund Funds
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
As of December 31,
2002
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and $0 Over
President and director (since June 2001) and President $100,000
Trustee since 2001 (since September 2000) of the Manager;
Age: 53 President and a director or trustee of
other Oppenheimer funds; President and a
director (since July 2001) of Oppenheimer
Acquisition Corp. and of Oppenheimer
Partnership Holdings, Inc.; a director
(since November 2001) of OppenheimerFunds
Distributor, Inc.; Chairman and a
director (since July 2001) of Shareholder
Services, Inc. and of Shareholder
Financial Services, Inc.; President and a
director (since July 2001) of
OppenheimerFunds Legacy Program (a
charitable trust program established by
the Manager); a director of the following
investment advisory subsidiaries of
OppenheimerFunds, Inc.: OFI Institutional
Asset Management, Inc. and Centennial
Asset Management Corporation (since
November 2001), HarbourView Asset
Management Corporation and OFI Private
Investments, Inc. (since July 2001);
President (since November 1, 2001) and a
director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; a director
(since November 2001) of Trinity
Investment Management Corp. and Tremont
Advisers, Inc. (investment advisory
affiliates of the Manager); Executive
Vice President (since February 1997) of
Massachusetts Mutual Life Insurance
Company (the Manager's parent company); a
director (since June 1995) of DLB
Acquisition Corporation (a holding
company that owns shares of David L.
Babson amp;amp; Company, Inc.); formerly, Chief
Operating Officer (September 2000-June
2001) of the Manager; President and
trustee (November 1999-November 2001) of
MML Series Investment Fund and MassMutual
Institutional Funds (open-end investment
companies); a director (September
1999-August 2000) of C.M. Life Insurance
Company; President, Chief Executive
Officer and director (September
1999-August 2000) of MML Bay State Life
Insurance Company; a director (June
1989-June 1998) of Emerald Isle Bancorp
and Hibernia Savings Bank (a wholly-owned
subsidiary of Emerald Isle Bancorp).
Oversees 74 portfolios in the
OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
The address of the Officers in the chart below is as
follows: for Messrs. Molleur and Zack and Ms. Feld, 498
Seventh Avenue, New York, NY 10018, for Messrs. Masterson,
Vottiero and Wixted and Mses. Bechtolt and Ives, 6803 S.
Tucson Way, Centennial, CO 80112-3924. Each Officer serves
for an annual term or until his or her earlier resignation,
death or removal.
- -------------------------------------------------------------------------------------
Officers of the Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer, Principal the Manager; Treasurer (since March 1999) of HarbourView
Financial and Asset Management Corporation, Shareholder Services, Inc.,
Accounting Officer Oppenheimer Real Asset Management Corporation, Shareholder
since 2001 Financial Services, Inc., Oppenheimer Partnership Holdings,
Age: 43 Inc., OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000) and OFI Institutional
Asset Management, Inc. (since November 2000); Treasurer and
Chief Financial Officer (since May 2000) of Oppenheimer
Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer
Acquisition Corp. and OppenheimerFunds Legacy Program
(since April 2000); formerly Principal and Chief Operating
Officer (March 1995-March 1999), Bankers Trust
Company-Mutual Fund Services Division. An officer of 90
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Connie Bechtolt, Assistant Vice President of the Manager (since September
Assistant Treasurer 1998); formerly Manager/Fund Accounting (September
since 2002 1994-September 1998) of the Manager. An officer of 90
Age: 39 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer 2002; formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002) prior to which he was Chief
Age: 39 Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 90 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Zack, Senior Vice President (since May 1985) and General Counsel
Vice President amp;amp; (since February 2002) of the Manager; General Counsel and a
Secretary since 2001 director (since November 2001) of OppenheimerFunds
Age: 54 Distributor, Inc.; Senior Vice President and General
Counsel (since November 2001) of HarbourView Asset
Management Corporation; Vice President and a director
(since November 2000) of Oppenheimer Partnership Holdings,
Inc.; Senior Vice President, General Counsel and a director
(since November 2001) of Shareholder Services, Inc.,
Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.; General Counsel
(since November 2001) of Centennial Asset Management
Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant
Secretary and a director (since November 2001) of
OppenheimerFunds International Ltd.; Vice President (since
November 2001) of OppenheimerFunds Legacy Program;
Secretary (since November 2001) of Oppenheimer Acquisition
Corp.; formerly Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of
Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November
1989-November 2001); OppenheimerFunds International Ltd.
And Oppenheimer Millennium Funds plc (October 1997-November
2001). An officer of 90 portfolios in the OppenheimerFunds
complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the
Assistant Secretary Manager; Vice President (since June 1990) of
since 2001 OppenheimerFunds Distributor, Inc.; Director, Vice
Age: 44 President and Assistant Secretary (since June 1999) of
Centennial Asset Management Corporation; Vice President
(since 1997) of Oppenheimer Real Asset Management, Inc.;
formerly Vice President and Associate Counsel of the
Manager (June 1990-July 1999). An officer of 90 portfolios
in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of
Assistant Secretary the Manager; Vice President (since 1999) of
since 2001 OppenheimerFunds Distributor, Inc.; Vice President and
Age: 37 Assistant Secretary (since 1999) of Shareholder Services,
Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc.; formerly Assistant Vice President and
Assistant Counsel of the Manager (August 1997-June 1998);
Assistant Counsel of the Manager (August 1994-August 1997).
An officer of 90 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since
Assistant Secretary July 1998); formerly, an associate with Davis, Graham, amp;amp;
since 2002 Stubbs LLP (January 1997-June 1998). An officer of 90
Age: 39 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Denis R. Molleur, Vice President and Senior Counsel of the Manager (since
Assistant Secretary July 1999); formerly a Vice President and Associate Counsel
since 2001 of the Manager (September 1995-July 1999). An officer of 83
Age: 45 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
|X| Remuneration of Trustees. The officers of the
Trust and one Trustee, Mr. Murphy, are affiliated with the
Manager and receive no salary or fee from the Funds. The
remaining Trustees receive the compensation shown below.
The aggregate compensation from each Fund is for its fiscal
year ending November 31, 2002 (December 31, 2002 for the
OSM - Mercury Advisors Samp;amp;P 500 Index Fund). The
compensation from all of the Board II funds includes the
compensation from the Funds and represents compensation
received as a director, trustee, managing general partner
or member of a committee of the Board during the calendar
year 2002.
- ---------------------------------------------------------------------------------
Aggregate Compensation from Funds Total
Compensation
from
Funds and
Fund
Complex
Paid to
Trustees*
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Name of Trustee MercuryMercury Jennison
AdvisorAdvisors QM SalomonGartmore
Samp;amp;P Focus Active BrotherMillennium
500 Growth Balanced All Growth
Index Fund2 Fund2 Growth Cap Fund2
Fund1 Fund2 Fund2
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James C. Swain $726 $676 $663 $647 $691 $661 $177,996
Chairman of the Board
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William Armstrong
Audit Committee $375 $350 $343 $335 $357 $342 $92,076
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert G. Avis
Review Committee $376 $350 $344 $335 $358 $342 $92,199
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George C. Bowen
Audit Committee $372 $346 $340 $331 $354 $338 $91,124
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward Cameron
Audit Committee $407 $379 $372 $363 $387 $370 $99,743
Chairman
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John S. Fossel
Review Committee $386 $382 $375 $366 $391 $374 $100,723
Chairman
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Sam Freedman
Review Committee $376 $350 $344 $335 $358 $342 $92,199
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Beverly Hamilton5
Review Committee $2386 $2216 $2176 $2126 $2266 $2166 $58,3267
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert J. Malone5
Audit Committee $2388 $2218 $2178 $2128 $2268 $2168 $58,326
Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
F. William Marshall
Review Committee $372 $346 $340 $331 $354 $338 $91,1249
Member
- ---------------------------------------------------------------------------------
1. For the Fund's fiscal year ended December 31, 2002.
2. For the Fund's fiscal year ended November 30, 2002.
3. Effective July 1, 2002, C. Howard Kast and Robert M.
Kirchner retired as Trustees from the Board II Funds For
the fiscal years shown in the table, Mr. Kast received $946
and Mr. Kirchner received $867 aggregate compensation from
the Fund. For the calendar year ended December 31, 2002,
Mr. Kast received $41,451 and Mr. Kirchner received $38,001
total compensation from all of the Oppenheimer funds for
which they served as Trustees.
4. Aggregate Compensation From Fund includes fees and
deferred compensation, if any, for a Trustee.
5. Mrs. Hamilton and Mr. Malone were elected as Trustees of
the Board II Funds effective June 1, 2002. Compensation for
Mrs. Hamilton and Mr. Malone was paid by all the Board II
Funds, with the exception of Oppenheimer Senior Floating
Rate Fund for which they currently do not serve as Trustees
(total of 42 Oppenheimer funds).
6. Includes $660 deferred under Deferred Compensation Plan
described below.
7. Includes $55,333 compensation (of which 100% was
deferred under a deferred compensation plan) paid to Mrs.
Hamilton for serving as a trustee by two open-end
investment companies (MassMutual Institutional Funds and
MML Series Investment Fund) the investment adviser for
which is the indirect parent company of the Fund's Manager.
The Manager also serves as the Sub-Advisor to the
MassMutual International Equity Fund, a series of
MassMutual Institutional Funds.
8. Includes $1,130 deferred under Deferred Compensation
Plan described below.
9. Includes $47,000 of compensation paid to Mr. Marshall
for serving as a trustee by two open-end investment
companies (MassMutual Institutional Funds and MML Series
Investment Fund) the investment adviser for which is the
indirect parent company of the Fund's Manager. The Manager
also serves as the Sub-Advisor to the MassMutual
International Equity Fund, a series of MassMutual
Institutional Funds.
* For purposes of this section only, "Fund Complex"
includes the Oppenheimer funds, MassMutual Institutional
Funds and MML Series Investment Fund in accordance with the
instructions for Form N-1A. The Manager does not consider
MassMutual Institutional Funds and MML Series Investment
Fund to be part of the OppenheimerFunds "Fund Complex" as
that term may be otherwise interpreted.
|X| Deferred Compensation Plan for Trustees. The
Board of Trustees has adopted a Deferred Compensation Plan
for disinterested Trustees that enables them to elect to
defer receipt of all or a portion of the annual fees they
are entitled to receive from a Fund. Under the plan, the
compensation deferred by a Trustee is periodically adjusted
as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee.
The amount paid to the Trustee under the plan will be
determined based upon the performance of the selected
funds.
Deferral of Trustees' fees under the plan will not
materially affect the Funds' assets, liabilities and net
income per share. The plan will not obligate the Fund to
retain the services of any Trustee or to pay any particular
level of compensation to any Trustee. Pursuant to an Order
issued by the Commission, the Funds may invest in the funds
selected by the Trustee under the plan without shareholder
approval for the limited purpose of determining the value
of the Trustee's deferred fee account.
|X| Major Shareholders. As of March 11, 2003, the
only persons who owned of record or were known by the Funds
to own beneficially 5% or more of any class of the Funds'
outstanding securities were:
OSM - Mercury Advisors Samp;amp;P 500 Index Fund
RELIANCE TRUST CO CUST FBO PATHLORE , 401K PROF
SHARING PLAN, PO BOX 48529, ATLANTA GA 30362-1529,
which owned 69,200.816 Class A shares (6.72% of the
Class A shares then outstanding);
RPSS TR, TRIM SYSTEMS LLC, 401K PLAN, ATTN: HALLIE
BURKE, 5700 PERIMETER DR STE A, DUBLIN OH 43017-3253,
which owned 65,410.310 Class A shares (6.35% of the
Class A shares then outstanding);
RPSS TR, J KINGS FOOD SERVICE, PROFESSIONALS INC 401K
PLAN, ATTN: MELISSA SHULMAN. 700 FURROWS RD,
HOLTSVILLE NY 11742-2001, which owned 60,753.569
Class A shares (5.89% of the Class A shares then
outstanding);
RELIANCE TRUST COMPANY TR, CORNELL COMPANIES INC, PO
BOX 48529, ATLANTA GA 30362-1529, which owned
207,188.686 Class N shares (10.21% of the Class N
shares then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (81.16% of the Class Y shares
then outstanding);
RPSS TR ROLLOVER IRA, FBO DOUGLAS J SCHOENFELD, 503
ALPINE LN, HOLMEN WI 54636-9143, which owned 23.201
Class Y shares (18.83% of the Class Y shares then
outstanding).
OSM - Mercury Advisors Focus Growth Fund
RPSS TR ROLLOVER IRA, FBO JOHN R HAYES, 7026 SAN
ALTOS CIR, CITRUS HEIGHTS CA 95621-4362, which owned
22,677.685 Class B shares (7.19% of the Class B
shares then outstanding);
MARLENE CASTLE / DOUG CASTLE TR, EXCEL FABRICATING
INC, 2301 NEVADA AVE N, GOLDEN VALLEY MN 55427-3609,
which owned 17,252.852 Class C shares (6.59% of the
Class Y shares then outstanding);
G CANINO T WALSH amp;amp; J VAN SON TR, ISLAND RISK
MANAGEMENT ASSOC, 401K PLAN, 65 W HILLS RD, HUNTINGTN
STA NY 11746-2305, which owned 10,849.813 Class N
shares (34.52% of the Class N shares then
outstanding);
RPSS TR ROLLOVER IRA, FBO SUZANNE M OSTRANDER, 34
GARROW AVE, PEQUANNOCK NJ 07440-1603, which owned
4,119.850 Class N shares (13.10% of the Class N
shares than outstanding);
RPSS TR ROLLOVER IRA, FBO MOUSTAFA O NASR, 25525 VIA
PALADAR, VALENCIA CA 91355-3153, which owned
3,662.149 Class N shares (11.65% of the Class N
shares then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (100.00% of the Class Y shares
then outstanding).
OSM - QM Active Balanced Fund
OPPENHEIMERFUNDS, DISTRIBUTOR INC, ATTN: RAY OLSON,
6803 S TUCSON WAY, ENGLEWOOD CO 80112-3924, which
owned 500,000.000 Class A shares (84.87% of the Class
A shares then outstanding);
LAWRENCE T BLOCH, 365 W 28TH ST #18H, NEW YORK NY
10001-7917, which owned 5,292.000 Class B shares
(7.88% of the Class B shares then outstanding);
MLPFamp;amp;S CUST FBO, KENNETH GOTTLIEB IRA, FBO KENNETH
GOTTLIEB, 7715 SOUTHAMPTON TER #E411, TAMARAC FL
33321-9110, which owned 4,721.000 Class B shares
(7.03% of the Class B shares then outstanding);
RPSS CUST 403-B PLAN, ROME CITY SCHOOLS, FBO ANTHONY
J VINCI, 804 HICKORY ST, ROME NY 13440-2132, which
owned 7,157.194 Class B shares (10.65% of the Class B
shares then outstanding);
RPSS TR IRA, FBO GLENN R WHITNEY, PO BOX 27,
MOUNTAINVILLE NY 10953-0027, which owned 3,863.063
Class B shares (5.75%of the Class B shares then
outstanding);
RPSS TR, GAZETTEN CONTRACTING INC, 401(K) PLAN, ATTN:
WILLIAM A CYNE, 58 W 40TH ST, NEW YORK NY 10018-2658,
which owned 3,679.244 Class B shares (5.47% of the
Class B shares then outstanding);
RPSS TR ROLLOVER IRA, FBO MARTIN C SCHNEIDER, 7860
MISSION CENTER CT STE 205, SAN DIEGO CA 92108-1331,
which owned 6,476.275 Class C shares (8.79% of the
Class C shares then outstanding);
RPSS TR ROLLOVER IRA, FBO SALLY HENSLEY, 3812 MINERS
LOOP, COEUR D ALENE ID 83815-9691, which owned
4,394.186 Class C shares (5.96% of the Class C shares
then outstanding);
RPSS TR, MATHENY MOTOR TRUCK CO, 401(K) PLAN, ATTN
MARNI KEPPLE, PO BOX 1304, PARKERSBURG WV 26102-1304,
which owned 21,406.576 Class N shares (39.00% of the
Class N shares then outstanding);
RPSS TR, BLACHFORD INVESTMENTS INC, 401K PLAN, ATTN:
DORI WITT, 1400 NUCLEAR DR, WEST CHICAGO IL
60185-1636, which owned 20,939.496 Class N shares
(38.14% of the Class N shares then outstanding);
RPSS TR ROLLOVER IRA, FBO KENNETH T HARTMAN, 614
HANOVER LN, IRVING TX 75062-8918, which owned
3,272.463 Class N shares (5.96% of the Class N shares
then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (100.00% of the Class Y shares
then outstanding).
OSM - Jennison Growth Fund
OPPENHEIMERFUNDS, DISTRIBUTOR INC, ATTN: RAY OLSON,
803 S TUCSON WAY, ENGLEWOOD CO 80112-3924, which
owned 500,000.000 Class A shares (62.02% of the Class
A shares then outstanding);
RPSS TR, GREYSTAR MANAGEMENT SERVICES LP, 401K PLAN,
ATTN TONY WHEELER, 3411 RICHMOND AVE STE 200, HOUSTON
TX 77046-3412, which owned 41,115.372Class N shares
(16.27% of the Class N shares then outstanding);
RPSS TR, CAPITAL COMMUNICATIONS FEDERAL, 401(K) PLAN,
ATTN NANCY DURIVAGE, 18 COMPUTER DR E, ALBANY NY
12205-1111, which owned 34,817.417 Class N shares
(13.78% of the Class N shares then outstanding);
ROLLIN M DICK TR, HAVERSTICK CONSULTING INC, 401K
PLAN, 11405 N PENNSYLVANIA ST STE 210, CARMEL IN
46032-6905, which owned 31,919.001 Class N shares
(12.63% of the Class N shares then outstanding);
RPSS TR, COSMETIC ESSENCE INC, 401(K) PLAN, ATTN:
CAMILLE CALVONI, 2182 ROUTE 35, HOLMDEL NJ
07733-1125, which owned 27,676.000 Class N shares
(10.95% of the Class N shares then outstanding);
RPSS TR, FIDELITY DEPOSIT amp;amp; DISCOUNT BAN, 401(K)
PLAN, BLAKELY amp;amp; DRINKER STS, DUNMORE PA 18512, which
owned 15,118.713 Class N shares (5.98% of the Class N
shares then outstanding);
LYN H HAMMOND TR, PELHAM FAMILY PRACTICE 401K, 25
CREEKVIEW CT, GREENVILLE SC 29615-4800, which owned
12,785.683 Class N shares (5.06% of the Class N
shares then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (100.00% of the Class Y shares
then outstanding).
OSM - Salomon Brothers All Cap Fund
RPSS TR, UMG MANUFACTURING amp;amp; LOGISTICS INC 401K, ATTN
ANGELA M JONES, 700 S BATTLEGROUND AVE, GROVER NC
28073-9541, which owned 41,618.100 Class A shares
(5.74% of the Class A shares then outstanding);
SHELIA LITTLETON ET AL TR, LEGACY BANK OF TEXAS 401K,
5000 LEGACY DR, PLANO TX 75024-3100, which owned
83,321.069 Class N shares (10.18% of the Class N
shares then outstanding);
MCB TRUST SERVICES TTEE, LINDEN MOTOR FREIGHT CO INC,
NON UNION EMPLOYEE, 700 17TH ST STE 150, DENVER CO
80202-3507, which owned 75,784.126 Class N shares
(9.26% of the Class N shares then outstanding);
WEBB, BECK amp;amp; DAWSON TR, BECK,REDDEN amp;amp; SECREST PSP,
1221 MCKINNEY ST STE 4500, HOUSTON TX 77010-2029,
which owned 68,349.298 Class N shares (8.35% of the
Class N shares then outstanding);
RPSS TR, DOBBS BROTHERS MANAGEMENT SERVI, 401(K)
PLAN, ATTN: JOYCE HOWELL, 5170 SANDERLIN AVE STE 102,
MEMPHIS TN 38117-4359, which owned 47,431.106 Class N
shares (5.79% of the Class N shares then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (100.00% of the Class Y shares
then outstanding);
OSM - Gartmore Millennium Growth Fund II
OPPENHEIMERFUNDS, DISTRIBUTOR INC, ATTN: RAY OLSON,
6803 S TUCSON WAY, ENGLEWOOD CO 80112-3924, which
owned 500,000.000 Class A shares (92.28% of the Class
A shares then outstanding);
MARY S. GIRARDI - IRA, 397 WINDSOR PLACE, OCEANSIDE
NY 11572, which owned 6,685.620 Class B shares
(16.43% of the Class B shares then outstanding);
JOHN GARRABRANT - IRA, 173 SHERIDAN AVE, LONGWOOD FL
32750, which owned 6,173.718 Class B shares (15.17%
of the Class B shares then outstanding);
RPSS TR, CLAIMS CONFERENCE 401K PLAN, ATTN: CELESTE
LEVY, 15 E 26TH ST STE 906, NEW YORK NY 10010-1533,
which owned 2,314.341 Class B shares (5.68% of the
Class B shares then outstanding);
MARGARET HARWELL - IRA, 6712 NW 1st , MARGATE FL
33063, who owned 2,252.747 Class B shares (5.53% of
the Class B shares then outstanding);
MORGAN STANLEY DW INC CUST FOR MARY ELLEN MALLOY, PO
BOX 250 CHURCH STREET STATION, NEW YORK NY
10008-0250, which owned 2,834.994 Class C shares
(10.68% of the Class C shares then outstanding);
RPSS TR ROLLOVER IRA, FBO PATRICK J BARNETT, 122 N
PROVIDENCE RD, WALLINGFORD PA 19086-6135, which owned
1,826.445 Class C shares (6.88% of the Class C shares
then outstanding);
RPSS CUST 403-B PLAN, LEVITTOWN SCHOOLS, FBO LAURA A
DAMURO, 181 STEWART AVE, GARDEN CITY NY 11530-2507,
which owned 1,728.374 Class C shares (6.51% of the
Class C shares then outstanding);
ROBERT H LYNCH JR TR, ARISTEIA CAPITAL LLC, ATTN:
EDWARD P GOLDMAN, 381 5TH AVE FL 6, NEW YORK NY
10016-3322, which owned 1,524.927 Class C shares
(5.74% of the Class C shares then outstanding);
RPSS TR IRA, FBO PAUL J GIAMBALVO, 123 WALNUT ST,
MIDDLESEX NJ 08846-1031, which owned 1,486.773 Class
C shares (5.60% of the Class C shares then
outstanding);
RPSS TR IRA, FBO MONICA V WOJTYNIAK, 14 TERRACE PL,
HICKSVILLE NY 11801-4336, which owned 1,428.890 Class
C shares (5.38% of the Class C shares then
outstanding);
ALFRED P DOUGHERTY - IRA, 445 COVETOWER DR APT 601,
NAPLES FL 34110, who owned 1,336.761 Class C shares
(5.03% of the Class C shares then outstanding);
RPSS TR, FIDELITY DEPOSIT amp;amp; DISCOUNT BAN, 401(K)
PLAN, BLAKELY amp;amp; DRINKER STS, DUNMORE PA 18512, which
owned 6,184.927 Class N shares (47.45% of the Class N
shares then outstanding);
NGOC MINH PHAM TR, NGOC MINH PHAM MD amp;amp; SUONG MY,
TUONG MD APC DEF BENEFIT PLAN, 2363 ULRIC ST STE B,
SAN DIEGO CA 92111-6447, which owned 4,055.946 Class
N shares (31.12% of the Class N shares then
outstanding);
JOHN VAN DE WIELE TR, VAN DE WIELE ENGINEERING INC,
401K PSP, 2925 BRIARPARK DR STE 275, HOUSTON TX
77042-3725, which owned 2,097.265 Class N shares
(16.09% of the Class N shares then outstanding);
OPPENHEIMERFUNDS INC, C/O RAY OLSON BLDG 2, 6803 S
TUCSON WAY, CENTENNIAL CO 80112-3924, which owned
100.00 Class Y shares (100.00% of the Class Y shares
then outstanding).
The Manager. The Manager is wholly-owned by Oppenheimer
Acquisition Corp., a holding company controlled by
Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Funds, the Manager, the
Adviser and each Subadviser, and the Distributor each have
a Code of Ethics. Each Code is designed to detect and
prevent improper personal trading by certain employees that
would compete with or take advantage of the Fund's
portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions
of the Funds and other funds advised by the Manager. The
Codes of Ethics do permit personnel subject to the relevant
Code to invest in securities, including securities that may
be purchased or held by the Funds, subject to a number of
restrictions and controls. Compliance with the Code of
Ethics is carefully monitored and enforced by the Manager.
Each Fund's Code of Ethics is an exhibit to the
Funds' registration statement filed with the Securities and
Exchange Commission and can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. You can
obtain information about the hours of operation of the
Public Reference Room by calling the SEC at 1-202-942-8090.
The Code of Ethics can also be viewed as part of the Fund's
registration statement on the SEC's EDGAR database at the
SEC's Internet web site at http://www.sec.gov. Copies may
be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address:
publicinfo@sec.gov., or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
Management and Advisory Arrangements - OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and OSM - Mercury Advisors
Focus Growth Fund
Management Services and Management Fee. The OSM -
Mercury Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury
Advisors Focus Growth Fund each invests all of its assets
in shares of a Master Fund. Accordingly, these Funds do not
invest directly in portfolio securities and do not require
investment advisory services. All portfolio management
occurs at the level of the respective Master Fund. Each
Master Fund has entered into an investment management
agreement with Fund Asset Management, L.P., doing business
as Mercury Advisors, as Adviser (the "Management
Agreement"). The Adviser receives monthly compensation at
the annual rate of 0.60% of the average daily net assets of
the Master Fund in which the OSM - Mercury Advisors Focus
Growth Fund invests. The Adviser is entitled to receive a
monthly management fee at the annual contractual rate of
0.05% of the average daily net assets of the Master Fund in
which the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
invests. The Adviser has entered into a contractual
arrangement with this Master Fund to provide that the
management fee for the Master Fund, when combined with
administration fees of certain funds that invest in the
Master Fund (other than OSM - Mercury Advisors Samp;amp;P 500
Index Fund), will not exceed a specific amount. As a result
of this contractual arrangement, the Adviser currently
receives management fees of 0.005%. This arrangement has a
one-year term and is renewable.
Management
Fee
Fund Paid to the
---- ------------
Adviser
-------
OSM - Mercury Advisors Focus Growth Fund
For the period ended 11/30/01
$4,617,970
For the fiscal year ended 11/30/02
$1,718,971
OSM - Mercury Advisors Samp;amp;P 500 Index Fund
For the period ended 12/31/01 $91,454
For the fiscal year ended 12/31/02 $93,240
The Adviser has also entered into a subadvisory
agreement (the "Sub-Advisory Agreement") with Merrill Lynch
Asset Management U.K. Limited ("MLAM U.K.") pursuant to
which MLAM U.K. provides investment advisory services to
the Adviser with respect to the OSM - Mercury Advisors
Focus Growth Fund. The following entities may be considered
"controlling persons" of MLAM U.K.: Merrill Lynch Europe
PLC (MLAM U.K.'s parent), a subsidiary of Merrill Lynch
International Holdings, Inc., a subsidiary of Merrill Lynch
International, Inc., a subsidiary of ML amp;amp; Co. For the
fiscal period ended November 30, 2001 and for the fiscal
year ended November 30, 2002, the Adviser paid no fees to
MLAM U.K. pursuant to the Sub-Advisory Agreement.
Payment of Master Fund Expenses. The Management
Agreement obligates the Adviser to provide investment
advisory services and to pay, or cause an affiliate to pay,
for maintaining its staff and personnel and to provide
office space, facilities and necessary personnel for the
Master Fund. The Adviser is also obligated to pay, or cause
an affiliate to pay, the fees of all officers and Trustees
of the Master Fund who are affiliated persons of the
Adviser or any affiliate. The Master Fund pays, or causes
to be paid, all other expenses incurred in the operation of
the Master Fund (except to the extent paid by its placement
agent), including, among other things, taxes, expenses for
legal and auditing services, costs of printing proxies,
shareholder reports, copies of the Registration Statement,
charges of the custodian, any sub-custodian and the
transfer agent, expenses of portfolio transactions,
expenses of redemption of shares, Commission fees, expenses
of registering the shares under federal, state or non-U.S.
laws, fees and actual out-of-pocket expenses of Trustees
who are not affiliated persons of the Adviser or an
affiliate of the Adviser, accounting and pricing costs
(including the daily calculation of net asset value),
insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses
properly payable by the Master Fund. The Master Fund's
placement agent will pay certain of the expenses of the
Master Fund incurred in connection with the offering of its
shares of beneficial interest. Certain accounting services
are provided to the Master Fund by State Street Bank amp;amp;
Trust Company ("State Street") pursuant to an agreement
between State Street and the Master Fund. The Master Fund
pays a fee for these services. In addition, the Master Fund
will reimburse the Adviser for the cost of certain
additional accounting services.
Organization of the Adviser. Fund Asset Management,
L.P. is a limited partnership, the partners of which are
Merrill Lynch amp;amp; Co., Inc., a financial services holding
company and the parent of Merrill Lynch and Princeton
Services, Inc. Merrill Lynch amp;amp; Co., Inc. and Princeton
Services are "controlling persons" of the Adviser as
defined under the Investment Company Act because of their
ownership of its voting securities and their power to
exercise a controlling influence over its management or
policies.
Duration and Termination. Unless earlier terminated
as described below, each Management Agreement will remain
in effect for two (2) years from its effective date.
Thereafter, it will remain in effect from year to year if
approved annually (a) by the Board of Trustees of the
Master Fund or by a majority of the outstanding shares of
the Master Fund and (b) by a majority of the Trustees who
are not parties to such contract or interested persons (as
defined in the Investment Company Act) of any such party.
Each contract is not assignable, automatically terminates
in the event of its assignment, and may be terminated
without penalty on sixty (60) days' written notice at the
option of either party thereto or by the vote of the
majority of the outstanding voting securities of the
appropriate Master Fund.
Investment Advisory Agreement with OppenheimerFunds,
Inc. The OSM - Mercury Advisors Samp;amp;P 500 Index Fund and the
OSM - Mercury Advisors Focus Growth Fund have entered into
an Investment Advisory Agreement with OppenheimerFunds,
Inc. Those Advisory Agreements are substantially similar to
the Advisory Agreements entered into with OppenheimerFunds,
Inc. by the other series of the Trust, as further described
below. Those Agreements have been approved by the Trust's
Board of Trustees and OppenheimerFunds, Inc., as the sole
shareholder of each Fund, but will not become effective
unless and until the Master-Feeder Participation Agreement
between OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., the Trust and FAM Distributors, Inc. is
terminated. The fees payable under those Advisory
Agreements are discussed in the Prospectus.
At respective meetings of the Board of Trustees of
the Trust, the Board of Trustees of the Master Fund of the
OSM - Samp;amp;P 500 Index Fund and the Board of Trustees of
Master Fund of the OSM - Mercury Advisors Focus Growth
Fund, held on May 8, 2002 and March 13, 2002, respectively,
each Board approved the continuation of the applicable
Master Fund's Management Agreement with the Adviser for an
additional year. In connection with its consideration of
the applicable Management Agreement, each Board reviewed
information derived from a number of sources and covering a
range of issues. Each Board considered the services
provided to the Master Fund by the Adviser under the
applicable Management Agreement, as well as other services
provided by the Adviser and its affiliates under other
agreements, including the Subadministration Agreement, and
the personnel who provided these services. In addition to
investment advisory services, the Adviser and its
affiliates provide administrative services, oversight of
Master Fund accounting, assistance in meeting legal and
regulatory requirements, and other services necessary for
the operation of the Master Funds. Each Board also
considered the Adviser's costs of providing services, and
the direct and indirect benefits to the Adviser from its
relationship with the applicable Master Fund. The benefits
considered by each Board included not only the Adviser's
compensation for investment advisory services and the
Adviser's profitability under the applicable Management
Agreement, but also compensation paid to the Adviser or its
affiliates for other, non-advisory, services provided to
the Master Fund and the Funds. Each Board also considered
the Adviser's access to research services from brokers to
which the Adviser may have allocated Master Fund brokerage
in a "soft dollar" arrangement. In connection with its
consideration of the applicable Management Agreement, each
Board also compared the advisory fee rate, expense ratios
and historical performance of the Master Fund to those of
comparable funds. Based in part on this comparison, and
taking into account the various services provided to the
applicable Master Fund and Fund by the Adviser and its
affiliates, each Board concluded that the management fee
rate was reasonable. Each Board also considered whether
there should be changes in the advisory fee rate or
structure in order to enable the Master Fund to participate
in any economies of scale that the Adviser may experience
as a result of growth in the applicable Master Fund's
assets.
Based on the information reviewed and the
discussions, each Board concluded that it was satisfied
with the nature and quality of the services provided by the
Adviser to the Master Fund and that the management fee rate
was reasonable in relation to such services. The
non-interested Trustees of each Board were represented by
independent counsel who assisted them in their
deliberations.
|X| The Investment Advisory Agreement - OSM - QM
Active Balanced Fund, OSM - Jennison Growth Fund, OSM -
Salomon Brothers All Cap Fund and OSM - Gartmore Millennium
Growth Fund II. The Manager provides investment advisory
and management services to the OSM - QM Active Balanced
Fund, OSM - Jennison Growth Fund, OSM - Salomon Brothers
All Cap Fund and OSM - Gartmore Millennium Growth Fund II
under investment advisory agreements between the Manager
and the Trust on behalf of each such Fund. The Manager
handles those Funds' day-to-day administrative business,
and the agreements permit the Manager to enter into
Subadvisory agreements with other registered investment
advisers to obtain specialized services for the Funds, as
long as the Funds are not obligated to pay any additional
fees for those services. The Manager has retained the
Subadvisers pursuant to separate subadvisory agreements,
described below, under which each Subadviser buys and sells
portfolio securities for the respective Fund. The portfolio
manager of each of the Funds is employed by the Subadviser
and is the person who is principally responsible for the
day-to-day management of each of the Fund's portfolio, as
described below.
The investment advisory agreement between the Trust on
behalf of each Fund and the Manager requires the Manager,
at its expense, to provide the Fund with adequate office
space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all
administrative and clerical personnel required to provide
effective administration for the Fund. Those
responsibilities include the compilation and maintenance of
records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy
materials and registration statements for continuous public
sale of shares of the Fund.
Each of the Funds pays expenses not expressly assumed
by the Manager under the advisory agreement. Expenses for
the Trust's QM Active Balanced Fund, OSM - Jennison Growth
Fund, OSM - Salomon Brothers All Cap Fund and OSM -
Gartmore Millennium Growth Fund II are allocated to those
Funds in proportion to their net assets, unless allocations
of expenses can be made directly to a Fund. The advisory
agreements list examples of expenses paid by those Funds.
The major categories relate to calculation of each of the
Fund's net asset values per share, interest, taxes,
brokerage commissions, fees to certain Trustees, legal and
audit expenses, custodian and transfer agent expenses,
share issuance costs, certain printing and registration
costs and non-recurring expenses, including litigation
costs. The management fees paid by the Funds to the Manager
are calculated at the rates described in the Prospectus,
which are applied to the assets of the Funds as a whole.
The fees are allocated to each class of shares based upon
the relative proportion of each of the Fund's net assets
represented by that class. The management fees paid by the
Funds to the Manager during their last two fiscal years are
listed below.
- ----------------------------------------------------------------
Fund Management Fee Paid to
OppenheimerFunds, Inc.
- ----------------------------------------------------------------
- ----------------------------------------------------------------
For the For the
fiscal period fiscal
ended 11/30/01 year ended
11/30/02
- ----------------------------------------------------------------
- ----------------------------------------------------------------
QM Active Balanced Fund $36,322 $53,310
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Jennison Growth Fund $39,198 $76,321
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Salomon Brothers All Cap Fund $77,987 $238,043
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Gartmore Millennium Growth Fund $41,736 $46,707
- ----------------------------------------------------------------
The investment advisory agreement states that in the
absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties or reckless disregard of
its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting
from a good faith error or omission on its part with
respect to any of its duties under the agreement.
The agreement permits the Manager to act as investment
adviser for any other person, firm or corporation and to
use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Fund, the Manager
may withdraw the right of the Funds to use the name
"Oppenheimer" as part of its name.
|X| Advisory Agreement Approvals - OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and OSM - Mercury Advisors
Focus Growth Fund. The Trust and each Fund commenced the
public sale of its shares in February of 2001. As explained
in the Prospectus and in other parts of this Statement of
Additional Information, investment advisory and portfolio
management services for the OSM - Mercury Advisors Samp;amp;P 500
Index Fund and OSM - Mercury Advisors Focus Growth Fund are
provided by the Advisor and the investment advisory fees
for those services are paid by each Master Fund to the
Advisor. The OSM Mercury Advisers Samp;amp;P 500 Index Fund and
OSM - Mercury Advisors Focus Growth Fund do not pay an
investment advisory fee other than its proportionate share
of the amounts paid by the Master Fund to the Advisor. The
investment advisory agreements for these two Funds are
approved by the Board of Trustees of the respective Master
Fund.
|X| Annual Approval of Investment Advisory Agreement
- - OSM - QM Active Balanced Fund, OSM - Jennison Growth
Fund, OSM - Salomon Brothers All Cap Fund and OSM -
Gartmore Millennium Growth Fund II. Each year, the Board of
Trustees, including a majority of the Independent Trustees,
is required to approve the renewal of the investment
advisory agreement. The Investment Company Act requires
that the Board request and evaluate and the Manager provide
such information as may be reasonably necessary to evaluate
the terms of the investment advisory agreement. The Board
employs an independent consultant to prepare a report that
provides such information as the Board requests for this
purpose.
The Board also receives information about the 12b-1
distribution fees each Fund pays. These distribution fees
are reviewed and approved at a different time of the year.
The Board reviewed the foregoing information in
arriving at its decision to renew the investment advisory
agreements. Among other factors, the Board considered:
o The nature, cost, and quality of the services
provided to the Fund and its shareholders;
o The profitability of the Fund to the Manager;
o The investment performance of the Fund in comparison
to regular market indices
o Economies of scale that may be available to the Fund
from the Manager;
o Fees paid by other mutual funds for similar services;
o The value and quality of any other benefits or
services received by the Fund from its
relationship with the Manager, and
o The direct and indirect benefits the Manager received
from its relationship with the Fund. These
included services provided by the Distributor and
the Transfer Agent, and brokerage and soft dollar
arrangements permissible under Section 28(e) of
the Securities Exchange Act.
The Board considered that the Manager must be able to
pay and retain high quality personnel at competitive rates
to provide services to the Funds. The Board also considered
that maintaining the financial viability of the Manager is
important so that the Manager will be able to continue to
provide quality services to the Funds and its shareholders
in adverse times. The Board also considered the investment
performance of other mutual funds advised by the Manager.
The Board is aware that there are alternatives to the use
of the Manager.
These matters were also considered by the Independent
Trustees, meeting separately from the full Board with
experienced Counsel to the Independent Trustees who
assisted the Board in its deliberations. The Counsel to the
Independent Trustees is independent of the Manager within
the meaning and intent of the SEC Rules regarding the
independence of counsel.
After careful deliberation, the Board of concluded
that it was in the best interest of shareholders to
continue the investment advisory agreement for another
year. In arriving at a decision, the Board did not single
out any one factor or group of factors as being more
important than other factors, but considered all factors
together. The Board judged the terms and conditions of the
investment advisory agreement, including the investment
advisory fee, in light of all of the surrounding
circumstances.
|X| The Administration and Subadministration
Agreements - OSM - Mercury Advisors Samp;amp;P 500 Index Fund and
OSM - Mercury Advisors Focus Growth Fund. The Trust, on
behalf of the OSM - Mercury Advisors Samp;amp;P 500 Index Fund and
the OSM - Mercury Advisors Focus Growth Fund, has entered
into an Administration Agreement with the Manager. The
Agreement states that the Manager, at its own expense,
shall provide assistance in the supervision of all
administrative and clerical personnel as shall be required
to provide effective corporate administration for the
Trust, including the compilation and maintenance of such
records with respect to the Trust's operations as may be
reasonably required; the preparation and filing of such
reports as shall be required by the Securities and Exchange
Commission; composition of periodic reports with respect to
its operation of each Fund for the shareholders of the
Fund; composition of proxy materials for meetings of the
Fund's shareholders and the composition of such
registration statements as may be required by federal
securities laws and preparation of required filings in each
state for continuous public sale of the Fund; provide the
Trust and the Fund with adequate office space, facilities
and equipment; compensate all officers of the Trust and all
Trustees of the Trust who are affiliated persons of the
Manager; and compensate any Subadministrator that the
Manager might retain.
The Trust assumes and pays or causes to be paid all
other expenses of the Trust, on behalf of the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund under the Administration Agreement,
including, without limitation: (i) interest and taxes; (ii)
insurance premiums for fidelity and other coverage
requisite to its operations; (iii) compensation and
expenses of its trustees other than those associated or
affiliated with the Manager; (iv) legal and audit expenses;
(v) custodian and transfer agent fees and expenses; (vi)
expenses incident to the redemption of its shares; (vii)
expenses incident to the issuance of its shares against
payment therefor by or on behalf of the subscribers
thereto; (viii) fees and expenses, other than as described
above, incident to the registration under federal and state
securities laws of shares of each Fund for public sale;
(ix) expenses of printing and mailing reports,
prospectuses, notices and proxy materials to shareholders
of each Fund; (x) except as noted above, all other expenses
incidental to holding meetings of the Funds' shareholders;
and (xi) such extraordinary non-recurring expenses as may
arise, including litigation, affecting a Fund and any legal
obligation which the Trust may have on behalf of a Fund to
indemnify its officers and trustees with respect thereto.
The Administration Agreement states that in the
absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or reckless
disregard of its obligations and duties under the
Administration Agreement, the Manager shall not be liable
for any loss resulting from any error of judgement or
mistake of law or for any loss arising out of any act or
omission in the management and administration of the Trust
and any Fund.
Each Fund pays the Manager an annual Administration
fee of 0.50% of average daily net assets. That fee is
included in the "Annual Fund Operating Expenses" table in
the Prospectus under "Other Expenses." The Manager has
entered into a Subadministration Agreement with FAM whereby
FAM will maintain records of share purchases of the
applicable Master Fund by each feeder fund, maintain tax
records relating to the Master Funds, maintaining,
preparing or providing records relating to the operation of
the Master Funds that the Manager may reasonably request in
connection with reports to be made to the Board of Trustees
of the Trust, periodic information reporting regarding the
Master Fund to the Manager as the Manager may reasonably
require in order to provide information relating to the
performance or holdings of the Mercury Advisors Samp;amp;P 500
Index Fund or Mercury Advisors Focus Growth Fund, as
applicable, fund to shareholders of such fund, and
preparation of reports relating to the Master Fund that the
Manager may reasonably request be made to third-party
reporting services.
In consideration for providing these services, the
Manager pays FAM an annual subadministration fee of 0.045%
of average daily net assets of the Samp;amp;P 500 Master Fund and
0.0% of the average daily net assets of the Focus Master
Fund.
? The Subadvisory Agreement - OSM - QM Active
Balanced Fund, OSM - Jennison Growth Fund, OSM - Salomon
Brothers All Cap Fund and OSM - Gartmore Millennium Growth
Fund II. Under the Subadvisory Agreement between the
Manager and each Subadviser, the Subadviser shall regularly
provide investment advice with respect to the applicable
Fund and invest and reinvest cash, securities and the
property comprising the assets of the Fund. Under the
Subadvisory Agreement, the Subadviser agrees to provide
reasonable assistance in the distribution and marketing of
the Fund.
Under the subadvisory agreement, the Manager pays the
Subadviser an annual fee in monthly installments, based on
the average daily net assets of the Fund. The fee paid to
the Subadviser under the subadvisory agreement is paid by
the Manager, not by the Funds. The subadvisory fee paid by
the Manager to each Subadviser is as follows:
Subadvisory Fee
Fund Subadviser as % of
- ---- ---------- --------
average net assets
- ------------------
OSM - Jennison Growth Fund Jennison Associates LLC 0.45% of
the first $300 million of
average
annual net assets of the Fund,
and 0.40%
of average annual net assets
in
excess of $300 million.
OSM - QM Active Prudential 0.45% of
the first $300 million of
Balanced Fund Investment average
annual net assets of the Fund,
Management and
0.40% of average annual net
assets
in excess of $300 million.
OSM - Salomon Brothers Salomon Brothers Asset 0.60% of
the first $100 million of
All Cap Fund Management Inc. average
annual net assets of the Fund,
and
0.50% of average annual net
assets
in excess of $100 million.
OSM - Gartmore Millennium Gartmore Mutual 0.70% of
the first $400 million of
Growth Fund II Fund Capital Trust average
annual net assets of the Fund.
0.60% of
the next $400 million, and
0.50% of
average annual net assets
in
excess of $800 million.
The Subadvisory Agreement states that in the absence
of willful misfeasance, bad faith, negligence or reckless
disregard of its duties or obligations, the Subadviser
shall not be liable for any error of judgement or mistake
of law and shall not be subject to any expenses or
liability to the Manager, the Trust or the Fund or any of
the Fund's shareholders in connection with rendering
services under the Subadvisory Agreement.
Brokerage Policies of the Funds
Transactions in Portfolio Securities - OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and
Mercury Advisors Focus Growth Fund
Because each Fund will invest exclusively in
beneficial interests in a Master Fund, it is expected that
all transactions in portfolio securities will be entered
into by the Master Fund. Subject to policies established by
the Board of Trustees of the Master Fund, the Adviser is
primarily responsible for the execution of the Master
Fund's portfolio transactions and the allocation of
brokerage. The Master Fund does not execute transactions
through any particular broker or dealer, but seeks to
obtain the best net results for the Master Fund, taking
into account such factors as price (including the
applicable brokerage commissions or dealer spread), size of
order, difficulty of execution and operational facilities
of the firm and the firm's risk and skill in positioning
blocks of securities. While the Adviser generally seeks
reasonable trade execution costs, the Master Fund does not
necessarily pay the lowest spread or commission available.
Subject to applicable legal requirements, the Adviser may
select a broker based partly upon brokerage or research
services provided to the Adviser and its clients, including
the Master Fund. In return for such services the Adviser
may pay a higher commission that other brokers would charge
if the Adviser determines in good faith that the commission
is reasonable in relation to the services provided.
Section 28(e) of the Securities Exchange Act of 1934
("Section 28(e)") permits an investment adviser, such as
the Adviser, under certain circumstances, to cause an
account to pay a broker a commission for effecting a
transaction that exceeds the amount of commission another
broker would have charged for effecting the same
transaction in recognition of the value of brokerage and
research services provided by that broker. Brokerage and
research services include (1) furnishing advice as to the
value of securities, the advisability of investing in,
purchasing or selling securities, and the available of
securities or purchasers or sellers of securities; (2)
furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and
(3) effecting securities transactions and performing
functions incidental to securities transactions (such as
clearance, settlement, and custody). The Adviser believes
that access to independent investment research is
beneficial to its investment decision-making processes and,
therefore, to the Master Fund and the Fund.
To the extent research services may be a factor in
selecting brokers, such services may be in written form or
through direct contact with individuals and may include
information as to particular companies and securities as
well as market, economic, or institutional areas and
information that assists in the valuation of investments.
Examples of research-oriented services for which the
Adviser might use Master Fund commissions include research
reports and other information on the economy, industries,
groups of securities, individual companies, statistical
information, political developments, technical market
action, pricing and appraisal services, credit analysis,
risk measurement analysis, performance and other analysis.
Except as noted immediately below, research services
furnished by brokers may be used in servicing some or all
client accounts and not all services may be used in
connection with the account that paid commissions to the
broker providing such services. In some cases, research
information received from brokers by mutual fund management
personnel or personnel principally responsible for the
Advisor's individually managed portfolios is not
necessarily shared by and between such personnel. Any
investment advisory or other fees paid by the Master Fund
to the Adviser are not reduced as a result of the Adviser's
receipt of research services.
In some cases the Adviser may receive a service from
a broker that has both a "research" and a "non-research"
use. When this occurs the Adviser makes a good faith
allocation under all the circumstances between the research
and non-research uses of the service. The percentage of the
service that is used for research purposes may be paid for
with client commissions, while the Adviser will use its own
funds to pay for the percentage of the service that is used
for non-research purposes. In making this good faith
allocation, the Adviser faces a potential conflict of
interest, but the Adviser believes that its allocation
procedures are reasonably designed to ensure that it
appropriately allocates the anticipated use of such
services to their research and non-research uses.
From time to time, the Master Fund may purchase new
issues of securities in a fixed price offering. In these
situations, the broker may be a member of the selling group
that will, in addition to selling securities, provide the
Adviser with research services. The NASD has adopted rules
expressly permitting these types of arrangements under
certain circumstances. Generally, the broker will provide
research "credits" in these situations at a rate that is
higher than that which is available for typical secondary
market transactions. These arrangements may not fall within
the safe harbor of Section 28(e).
In addition, consistent with the Conduct Rules of the
NASD and policies established by the Boards of Trustees of
the Master Funds and subject to best execution, the Adviser
may consider sales of shares of feeder funds as a factor in
the selection of brokers and dealers to execute portfolio
transactions for the Master Fund, however, whether or not a
particular broker or dealer sells shares of a feeder fund
neither fund neither qualifies nor disqualifies such broker
or dealer to execute transactions for the Master Fund.
The Master Fund anticipates that its brokerage
transactions involving securities of issuers domiciled in
countries other than the United States generally will be
conducted primarily on the principal stock exchanges of
such countries. Brokerage commissions and other transaction
costs on foreign stock exchange transactions generally are
higher than in the United States, although the Master Fund
will endeavor to achieve the best net results in effecting
its portfolio transactions. There generally is less
governmental supervision and regulation of foreign stock
exchanges and brokers than in the United States.
Foreign equity securities may be held by the Master
Fund in the form of Depository Receipts, or other
securities convertible into foreign equity securities.
Depository Receipts may be listed on stock exchanges or
traded in over-the-counter markets in the United States or
Europe, as the case may be. American Depository Receipts,
like other securities traded in the United States, will be
subject to negotiated commission rates. Because the shares
of each feeder fund are redeemable on a daily basis in U.S.
dollars, the Master Fund intends to manage its portfolio so
as to give reasonable assurance that it will be able to
obtain U.S. dollars to the extent necessary to meet
anticipated redemptions. Under present conditions, it is
not believed that these considerations will have
significant effect on the Master Fund's portfolio
strategies.
Information about the brokerage commissions paid by
the Master Fund of OSM- Mercury Advisors Focus Growth Fund
including commissions paid to Merrill Lynch, is set forth
in the following table:
Aggregate Brokerage
Commissions Paid
Commissions Paid
----------------
To Merrill Lynch
- ----------------
Fiscal period ended November 30, 2001 $1,695,995
$75,819
Fiscal year ended November 30, 2002 $2,421,919
$161,190
For the fiscal period ended November 30, 2002 the
brokerage commissions paid to Merrill Lynch represented
6.66% of the aggregate brokerage commissions paid by the
Master Fund and involved 6.92% of the Master Fund's dollar
amount of transactions involving payment of commissions.
Information about the brokerage commissions paid by
the Master Fund of OSM- Mercury Advisors Samp;amp;P 500 Index Fund
including commissions paid to Merrill Lynch, is set forth
in the following table:
Aggregate Brokerage
Commissions Paid
Commissions Paid
----------------
To Merrill Lynch
- ----------------
Fiscal period ended December 31, 2001 $90,754
$0
Fiscal year ended December 31, 2002 $165,899
$862
For the fiscal period ended December 31, 2002 the
brokerage commissions paid to Merrill Lynch represented
0.52% of the aggregate brokerage commissions paid by the
Trust and involved 0.29% of the Trust's dollar amount of
transactions involving payment of commissions.
Because of the affiliation of Merrill Lynch with
Mercury Advisors, the Master Funds are prohibited from
engaging in certain transactions involving Merrill Lynch,
or its affiliates except for brokerage transactions
permitted under the Investment Company Act involving only
usual and customary commissions or transactions pursuant to
an exemptive order under the Investment Company Act. Each
Master Fund may invest in certain securities traded in the
OTC market and intends to deal directly with the dealers
who make a market in securities involved, except in those
circumstances in which better prices and execution are
available elsewhere. Under the Investment Company Act,
persons affiliated with the Master Fund and persons who are
affiliated with such affiliated persons are prohibited from
dealing with the Master Fund as principal in the purchase
and sale of securities unless a permissive order allowing
such transactions is obtained from the Commission. Since
transactions in the OTC market usually involve transactions
with the dealers acting as principal for their own
accounts, the Master Fund will not deal with affiliated
persons, including Merrill Lynch and its affiliates, in
connection with such transactions. However, an affiliated
person of the Master Fund may serve as its broker in OTC
transactions conducted on an agency basis provided that,
among other things, the fee or commission received by such
affiliated broker is reasonable and fair compared to the
fee or commission received by non-affiliated brokers in
connection with comparable transactions. In addition, the
Master Fund may not purchase securities during the
existence of any underwriting syndicate for such securities
of which Merrill Lynch is a member or in a private
placement in which Merrill Lynch serves as placement agent
except pursuant to procedures approved by the Board of
Trustees of the Master Fund that either comply with rules
adopted by the Commission or with interpretations of the
Commission staff. The Master Fund(s) have received an
exemptive order from the Commission permitting them to lend
portfolio securities to Merrill Lynch or its affiliates.
Pursuant to that order, the Master Funds also have retained
an affiliated entity of the Adviser as the securities
lending agent for a fee, including a fee based on a share
of the returns on investment of cash collateral. For the
fiscal period ended November 30, 2001 and for the fiscal
year ended November 30, 2002, that affiliated entity
received $1,260 and $44,826, respectively in securities
lending agent fees from the respective Master Fund. That
entity may, on behalf of a Master Fund, invest cash
collateral received by that Master Fund for such loans,
among other things, in a private investment company managed
by that entity or in registered money market funds advised
by the Adviser or its affiliates.
Section 11(a) of the Exchange Act generally prohibits
members of the U.S. national securities exchanges from
executing exchange transactions for their affiliates and
institutional accounts that they manage unless the member
(i) has obtained prior express authorization from the
account to effect such transactions, (ii) at least annually
furnishes the account with a statement setting forth the
aggregate compensation received by the member in effecting
such transactions, and (iii) complies with any rules the
Commission has prescribed with respect to the requirements
of clauses (i) and (ii). To the extent Section 11(a) would
apply to Merrill Lynch acting as a broker for the Master
Fund in any of its portfolio transactions executed on any
such securities exchange of which it is a member,
appropriate consents have been obtained from the Master
Fund and annual statements as to aggregate compensation
will be provided to the Master Fund. Securities may be held
by, or be appropriate investments for, the Master Fund as
well as other funds or investment advisory clients of the
Adviser or its affiliates.
The Board of Trustees of each Master Fund has
considered the possibility of seeking to recapture for the
benefit of the Master Fund brokerage commissions and other
expenses of possible portfolio transactions by conducting
portfolio transactions through affiliated entities. For
example, brokerage commissions received by affiliated
brokers could be offset against the advisory fee paid by
the Master Fund to the Adviser. After considering all
factors deemed relevant, the Board of Trustees of the
Master Fund made a determination not to seek such
recapture. The Board of Trustees of the Master Fund will
reconsider this matter from time to time.
Because of different objectives or other factors, a
particular security may be bought for one or more clients
of the Adviser or its affiliates when one or more clients
of the Adviser or its affiliates are selling the same
security. If purchases or sales of securities arise for
consideration at or about the same time that would involve
a Master Fund or other clients or funds for which the
Adviser or an affiliate act as investment adviser,
transactions in such securities will be made, insofar as
feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on
behalf of more than one client of the Adviser or its
affiliates during the same period may increase the demand
for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price.
Brokerage Provisions of the Investment Advisory Agreements
and the Subadvisory Agreements - OSM - Jennison Growth
Fund, OSM - QM Active Balanced Fund, OSM - Salomon Brothers
All Cap Fund and OSM - Gartmore Millennium Growth Fund II.
One of the duties of the Subadviser under the
Subadvisory Agreement is to arrange the portfolio
transactions for the Funds. Each Fund's investment advisory
agreement with the Manager and the Subadvisory Agreement
contain provisions relating to the selection of
broker-dealers to effect each Fund's portfolio
transactions. The Manager and the Subadviser are authorized
to select broker-dealers, including "affiliated" brokers,
as that term is defined in the Investment Company Act. They
may employ broker-dealers that the Manager or the
Subadviser thinks, in its best judgment based on all
relevant factors, will implement the policy of the Funds to
obtain, at reasonable expense, the "best execution" of each
of the Fund's portfolio transactions. "Best execution"
means prompt and reliable execution at the most favorable
price obtainable.
The Manager and the Subadviser need not seek
competitive commission bidding. However, they are expected
to be aware of the current rates of eligible brokers and to
minimize the commissions paid to the extent consistent with
the interests and policies of the Funds as established by
their Board of Trustees.
The Manager and the Subadviser may select brokers
(other than affiliates) that provide brokerage and/or
research services for the Funds and/or the other accounts
over which the Manager, the Subadviser or their respective
affiliates have investment discretion. The commissions paid
to such brokers may be higher than another qualified broker
would charge, if the Manager or Subadviser, as applicable,
makes a good faith determination that the commission is
fair and reasonable in relation to the services provided.
Subject to those considerations, as a factor in selecting
brokers for each of the Fund's portfolio transactions, the
Manager and the Subadviser may also consider sales of
shares of each of the Funds and other investment companies
for which the Manager or an affiliate serves as investment
adviser.
The Subadvisory Agreement permits the Subadviser to
enter into "soft-dollar" arrangements through the agency of
third parties to obtain services for the Funds. Pursuant to
these arrangements, the Subadviser will undertake to place
brokerage business with broker-dealers who pay third
parties that provide services. Any such "soft-dollar"
arrangements will be made in compliance with applicable law.
Brokerage Practices. Brokerage for the Funds is allocated
subject to the provisions of the Investment Advisory
Agreement and the Subadvisory Agreement and the procedures
and rules described above. Generally, the Subadviser's
portfolio traders allocate brokerage based upon
recommendations from the Fund's portfolio manager. In
certain instances, portfolio managers may directly place
trades and allocate brokerage. In either case, the
Subadviser's executive officers supervise the allocation of
brokerage.
Transactions in securities other than those for which
an exchange is the primary market are generally done with
principals or market makers. In transactions on foreign
exchanges, the Funds may be required to pay fixed brokerage
commissions and therefore would not have the benefit of
negotiated commissions available in U.S. markets. Brokerage
commissions are paid primarily for transactions in listed
securities or for certain fixed-income agency transactions
in the secondary market. Otherwise brokerage commissions
are paid only if it appears likely that a better price or
execution can be obtained by doing so.
Each Subadviser serves as investment manager to a
number of clients, including other investment companies,
and may in the future act as investment manager or advisor
to others. It is the practice of the Subadviser to allocate
purchase or sale transactions among the Fund it manages and
other clients whose assets it manages in a manner it deems
equitable. In making those allocations, the Subadviser
considers several main factors, including the respective
investment objectives, the relative size of portfolio
holdings of the same or comparable securities, the
availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and
each other client's accounts.
When orders to purchase or sell the same security on
identical terms are placed by more than one of the funds
and/or other advisory accounts managed by the Subadviser or
its affiliates, the transactions are generally executed as
received, although a fund or advisory account that does not
direct trades to a specific broker (these are called "free
trades") usually will have its order executed first. Orders
placed by accounts that direct trades to a specific broker
will generally be executed after the free trades. All
orders placed on behalf of a Fund are considered free
trades. However, having an order placed first in the market
does not necessarily guarantee the most favorable price.
Purchases are combined where possible for the purpose of
negotiating brokerage commissions. In some cases that
practice might have a detrimental effect on the price or
volume of the security in a particular transaction for the
Fund.
Most purchases of debt obligations are principal
transactions at net prices. Instead of using a broker for
those transactions, a Fund will normally deal directly with
the selling or purchasing principal or market maker unless
the Subadviser determines that a better price or execution
can be obtained by using the services of a broker.
Purchases of portfolio securities from underwriters include
a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Funds seek to obtain
prompt execution of these orders at the most favorable net
price.
The Investment Advisory Agreement and the Subadvisory
Agreement permit the Manager and the Subadviser to allocate
brokerage for research services. The research services
provided by a particular broker may be useful only to one
or more of the advisory accounts of the Subadviser and its
affiliates. The investment research received for the
commissions of those other accounts may be useful both to
the respective Fund and one or more of the Subadviser's
other accounts. Investment research may be supplied to the
Subadviser by a third party at the instance of a broker
through which trades are placed.
Investment research services include information and
analysis on particular companies and industries as well as
market or economic trends and portfolio strategy, market
quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a
research service also assists the Subadviser in a
non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or
component that provides assistance to the Subadviser in the
investment decision-making process may be paid in
commission dollars.
The research services provided by brokers broadens the
scope and supplements the research activities of the
Subadviser. That research provides additional views and
comparisons for consideration, and helps the Subadviser to
obtain market information for the valuation of securities
that are either held in the Fund's portfolio or are being
considered for purchase. The Subadviser provides
information to the Manager and the Board about the
commissions paid to brokers furnishing such services,
together with the Subadviser's representation that the
amount of such commissions was reasonably related to the
value or benefit of such services.
- --------------------------------------------------------------
Total Brokerage Commissions Paid by the Funds1
- --------------------------------------------------------------
- --------------------------------------------------------------
Fiscal Period Fiscal Year
Fund Ended 11/30/01 Ended
11/30/022
- --------------------------------------------------------------
- --------------------------------------------------------------
QM Active Balanced Fund $1,475 $5,454
- --------------------------------------------------------------
- --------------------------------------------------------------
Jennison Growth Fund $5,832 $22,425
- --------------------------------------------------------------
- --------------------------------------------------------------
Salomon Brothers All Cap Fund $19,495 $356,961
- --------------------------------------------------------------
- --------------------------------------------------------------
Gartmore Millennium Growth $11,810 $57,264
Fund II
- --------------------------------------------------------------
1. Amounts do not include spreads or commissions on
principal transactions on a net trade basis.
2. In the fiscal year ended 11/30/02, the amount of
transactions directed to brokers for research services and
the amount of the commissions paid to broker-dealers for
those services were as follows:
- ----------------------------------------------------
Amount of Amount of
Fund TransactionCommissions
- ----------------------------------------------------
- ----------------------------------------------------
QM Active Balanced Fund $0 $0
- ----------------------------------------------------
- ----------------------------------------------------
Jennison Growth Fund $120,448 $249
- ----------------------------------------------------
- ----------------------------------------------------
Salomon Brothers All Cap Fund $699,824 $1,594
- ----------------------------------------------------
- ----------------------------------------------------
Gartmore Millennium Growth $141,908 $293
Fund II
- ----------------------------------------------------
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement
with each of the Funds, the
Distributor acts as each Fund's principal underwriter in
the continuous public offering of
each Fund's different classes of shares. The Distributor
bears the expenses normally attributable
to sales, including advertising and the cost of printing
and mailing prospectuses, other than those
furnished to existing shareholders. The Distributor is not
obligated to sell a specific number of
shares. Expenses normally attributable to sales are borne
by the Distributor.
The sales charges and concessions paid to, or retained
by, the Distributor from the sale of shares during the
Funds' most recent fiscal year, and the contingent deferred
sales charges retained by the Distributor on the redemption
of shares for the most recent fiscal year are shown in the
tables below.
- --------------------------------------------------------------
Aggregate Class A
Fiscal Front-End Front-End
Year Sales Sales
Ended Charges Charges
Fund 11/30 on Class A Retained by
Shares Distributor*
- --------------------------------------------------------------
- --------------------------------------------------------------
Mercury Advisors Samp;amp;P 500 2002* $71,413 $23,220
Index Fund
- --------------------------------------------------------------
- --------------------------------------------------------------
Mercury Advisors Focus Growth 2002 $7,624 $4,188
Fund
- --------------------------------------------------------------
- --------------------------------------------------------------
QM Active Balanced Fund 2002 $6,890 $1,094
- --------------------------------------------------------------
- --------------------------------------------------------------
Jennison Growth Fund 2002 $34,373 $10,966
- --------------------------------------------------------------
- --------------------------------------------------------------
Salomon Brothers All Cap Fund 2002 $62,590 $21,424
- --------------------------------------------------------------
- --------------------------------------------------------------
Gartmore Millennium Growth 2002 $2,876 $1,899
Fund II
- --------------------------------------------------------------
Includes amounts retained by a broker-dealer that is an
affiliate or a parent of the distributor.
*For fiscal year ended 12/31.
- ---------------------------------------------------------------------------------
ConcessionsConcessionConcessions Concessions
Fiscal on Class A on Class on Class C on Class
Year Shares B Shares Shares N
Ended Advanced Advance Advance by Shares
Fund 11/30 by by Distributor1Advance
DistributorDistributor1 by
Distributor1
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mercury Advisors Samp;amp;P 500 2002* $11,364 $130,765 $48,663 $130,233
Index Fund
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mercury Advisors Focus Growth 2002 $93 $9,049 $5,678 $1,055
Fund
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
QM Active Balanced Fund 2002 $121 $14,392 $3,011 $2,750
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennison Growth Fund 2002 $1,016 $38,831 $15,462 $12,938
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Salomon Brothers All Cap Fund 2002 $7,615 $91,244 $48,537 $49,699
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gartmore Millennium Growth 2002 $7 $4,524 $926 $279
Fund II
- ---------------------------------------------------------------------------------
*For fiscal year ended 12/31.
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 ContingentContingent Contingent
Deferred Deferred Deferred Deferred
Fiscal Sales Sales Sales Sales
Year Charges Charges Charges Charges
Ended Retained Retained Retained by Retained
Fund 11/30 by by Distributor by
DistributorDistributor Distributor
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mercury Advisors Samp;amp;P 500 2002* $0 $4,358 $2,608 $27,006
Index Fund
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mercury Advisors Focus Growth 2002 $0 $2,930 $118 $3
Fund
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
QM Active Balanced Fund 2002 $0 $2,303 $168 $27
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennison Growth Fund 2002 $0 $3,447 $546 $530
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Salomon Brothers All Cap Fund 2002 $0 $8,641 $2,017 $3,541
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gartmore Millennium Growth 2002 $0 $2,142 $8 $4
Fund II
- ---------------------------------------------------------------------------------
*For fiscal year ended 12/31.
Distribution and Service Plans. Each Fund has adopted a
Service Plan for Class A shares and Distribution and
Service Plans for Class B, Class C and Class N shares under
Rule 12b-1 of the Investment Company Act. Under those plans
a Fund pays the Distributor for all or a portion of its
costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent
Trustees1, cast in person at a meeting called for the
purpose of voting on that plan. The shareholder votes for
the plans were cast by the Manager as the sole initial
holder of the shares of each class of shares of each Fund.
Under the plans, OppenheimerFunds, Inc. and the
Distributor may make payments to affiliates and in
their sole discretion, from time to time, may use their
own resources (at no direct cost to the Fund) to make
payments to brokers, dealers or other financial
institutions for distribution and administrative
services they perform. The Manager may use its profits
from the advisory fee it receives from each Fund. In
their sole discretion, the Distributor and the Manager
may increase or decrease the amount of payments they
make from their own resources to plan recipients.
Unless a plan is terminated as described below, the
plan continues in effect from year to year but only if each
Fund's Board of Trustees and its Independent Trustees
specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting
called for the purpose of voting on continuing the plan. A
plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the Investment
Company Act) of the outstanding shares of that class.
The Board of Trustees and the Independent Trustees
must approve all material amendments to a plan. An
amendment to increase materially the amount of payments to
be made under a plan must be approved by shareholders of
the class affected by the amendment. Because Class B shares
of each of the Funds automatically convert into Class A
shares 72 months after purchase, each Fund must obtain the
approval of both Class A and Class B shareholders for a
proposed material amendment to the Class A plan that would
materially increase payments under the plan. That approval
must be by a "majority" (as defined in the Investment
Company Act) of the shares of each Class, voting separately
by class.
While the plans are in effect, the Treasurer of each
Fund shall provide separate written reports on the plans to
the Board of Trustees at least quarterly for its review.
The Reports shall detail the amount of all payments made
under a plan and the purpose for which the payments were
made. Those reports are subject to the review and approval
of the Independent Trustees.
Each plan states that while it is in effect, the
selection and nomination of those Trustees of each Fund who
are not "interested persons" of a Fund is committed to the
discretion of the Independent Trustees. This does not
prevent the involvement of others in the selection and
nomination process as long as the final decision as to
selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made
to any recipient in any quarter in which the aggregate net
asset value of all Fund shares of that class held by the
recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time
by a majority of the Independent Trustees. The Board of
Trustees has set no minimum amount of assets to qualify for
payments under the plans.
|X| Class A Service Plan Fees. Under the Class A
service plan, the Distributor currently uses the fees it
receives from the Fund to pay brokers, dealers and other
financial institutions (they are referred to as
"recipients") for personal services and account maintenance
services they provide for their customers who hold Class A
shares. The services include, among others, answering
customer inquiries about the Funds, assisting in
establishing and maintaining accounts in the Funds, making
the Funds' investment plans available and providing other
services at the request of the Funds or the Distributor.
While the plan permits the Board to authorize payments to
the Distributor to reimburse itself for services under the
plan, the Board has not yet done so except in the case of
the special arrangement described below. The Distributor
makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets
consisting of Class A shares held in the accounts of the
recipients or their customers. With respect to purchases of
Class A shares subject to a contingent deferred sales
charge by certain retirement plans that purchased such
shares prior to March 1, 2001 ("grandfathered retirement
accounts"), the Distributor currently intends to pay the
service fee to Recipients in advance for the first year
after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments
to Recipients quarterly on those shares. The advance
payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance
service fee payment. If Class A shares purchased by
grandfathered retirement accounts are redeemed during the
first year after their purchase, the Recipient of the
service fees on those shares will be obligated to repay the
Distributor a pro rata portion of the advance payment of
the service fee made on those shares.
During the first year the shares are sold, the
Distributor retains the service fee to reimburse itself for
the cost of distributing the shares. For the fiscal year
ended November 30, 2002 (December 31, 2002 for the Mercury
Advisors Samp;amp;P 500 Index Fund), payments under the Class A
Plan paid by the Distributor to recipients and to an
affiliate of the Distributor were as follows:
- --------------------------------------------------------------------------
Payments Retained by Payments
Fund to Distributor to an
Recipients Affiliate
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Mercury Advisors Samp;amp;P 500 Index $12,489 $191 $540
Fund
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Mercury Advisors Focus Growth Fund $3,383 $0 $282
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
QM Active Balanced Fund $281 $0 $60
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Jennison Growth Fund $2,332 $2 $349
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Salomon Brothers All Cap Fund $12,376 $10 $814
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Gartmore Millennium Growth Fund II $593 $0 $167
- --------------------------------------------------------------------------
Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be
recovered in subsequent years. The Distributor may not use
payments received under the Class A Plan to pay any of its
interest expenses, carrying charges, or other financial
costs, or allocation of overhead.
|X| Class B, Class C and Class N Service and
Distribution Plan Fees. Under each plan, service fees and
distribution fees are computed on the average of the net
asset value of shares in the respective class, determined
as of the close of each regular business day during the
period. The Class B, Class C and Class N plans provide for
the Distributor to be compensated at a flat rate, whether
the Distributor's distribution expenses are more or less
than the amounts paid by the Funds under the plan during
the period for which the fee is paid. The types of services
that recipients provide are similar to the services
provided under the Class A service plan, described above.
The Class B, Class C and Class N Plans permit the
Distributor to retain both the asset-based sales charges
and the service fees or to pay recipients the service fee
on a quarterly basis, without payment in advance. However,
the Distributor currently intends to pay the service fee to
recipients in advance for the first year after the shares
are purchased. After the first year shares are outstanding,
the Distributor makes service fee payments quarterly on
those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If Class B,
Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service
fees on those shares will be obligated to repay the
Distributor a pro rata portion of the advance payment of
the service fee made on those shares.
The Distributor retains the asset-based sales charge
on Class B and Class N shares. The Distributor retains the
asset-based sales charge on Class C shares during the first
year the shares are outstanding. It pays the asset-based
sales charge as an ongoing concession to the recipient on
Class C shares outstanding for a year or more. If a dealer
has a special agreement with the Distributor, the
Distributor will pay the Class B, Class C and/or Class N
service fee and the asset-based sales charge to the dealer
quarterly in lieu of paying the sales concessions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B, Class C and
Class N shares allow investors to buy shares without a
front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. Each Fund pays
the asset-based sales charges to the Distributor for its
services rendered in distributing Class B, Class C and
Class N shares. The payments are made to the Distributor in
recognition that the Distributor:
o pays sales concessions to authorized brokers and
dealers at the time of sale and pays service fees
as described above,
o may finance payment of sales concessions and/or the
advance of the service fee payment to recipients
under the plans, or may provide such financing
from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of Class B,
Class C and Class N shares, and
o bears the costs of sales literature, advertising and
prospectuses (other than those furnished to
current shareholders) and state "blue sky"
registration fees and certain other distribution
expenses.
o may not be able to adequately compensate dealers that
sell Class B, Class C and Class N shares without
receiving payment under the plans and therefore
may not be able to offer such Classes for sale
absent the plans,
o receives payments under the plans consistent with the
service fees and asset-based sales charges paid by
other non-proprietary funds that charge 12b-1 fees,
o may use the payments under the plan to include the
Fund in various third-party distribution programs
that may increase sales of Fund shares,
o may experience increased difficulty selling the
Fund's shares if payments under the plan are
discontinued because most competitor funds have
plans that pay dealers for rendering distribution
services as much or more than the amounts
currently being paid by the Fund, and
o may not be able to continue providing, at the same or
at a lesser cost, the same quality distribution
sales efforts and services, or to obtain such
services from brokers and dealers, if the plan
payments were to be discontinued.
When Class B, Class C or Class N shares are sold without
the designation of a broker-dealer,
the Distributor is automatically designated as the
broker-dealer of record. In those cases, the
Distributor retains the service fee and asset-based sales
charge paid on Class B, Class C and
Class N shares.
All payments under the Class B, Class C and Class N
plans are subject to the limitations imposed by the Conduct
Rules of the National Association of Securities Dealers,
Inc. on payments of asset-based sales charges and service
fees.
- -------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 11/30/02*
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Distributor'sDistributor's
Total Amount Aggregate Unreimbursed
Payments Retained Unreimbursed Expenses as
Under By Expenses %
Fund Class Plan Plan DistributoUnder Plan of Net
Assets
of Class
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Mercury Advisors Samp;amp;P 500 Class B $29,212 $26,9021 $181,893 4.35%
Index Fund Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $35,829 $30,5782 $106,844 2.16%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $49,775 $48,1893 $392,192 3.00%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Mercury Advisors Focus Class B $8,635 $6,8844 $60,326 7.65%
Growth Fund Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $4,529 $3,156 $81,033 12.31%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $257 $230 $48,561 67.66%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
QM Active Balanced Fund Class B $2,536 $2,3345 $40,973 9.00%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $4,667 $3,858 $26,366 5.06%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $731 $561 $14,271 4.44%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Jennison Growth Fund Class B $6,176 $5,5966 $64,956 5.01%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $15,244 $12,2587 $315,521 14.38%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $5,143 $4,763 $111,848 8.52%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Salomon Brothers All Cap Class B $34,095 $30,7158 $163,386 3.78%
Fund Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $57,794 $38,4659 $121,309 1.77%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $15,207 $5,77010 $99,503 1.75%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Gartmore Millennium Growth Class B $1,479 $1,33911 $41,203 21.29%
Fund II Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class C $1,309 $1,025 $41,624 26.67%
Plan
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Class N $251 $23612 $5,037 7.40%
Plan
- -------------------------------------------------------------------------------------
*For Mercury Advisors Samp;amp;P 500 Index Fund this information
is for the fiscal year ended 12/31/02.
1. Includes $49 paid to an affiliate of the Distributor's
parent company.
2.: Includes$130 paid to an affiliate of the Distributor's
parent company.
3. Includes $35 paid to an affiliate of the Distributor's
parent company.
4. Includes $9 paid to an affiliate of the Distributor's
parent company.
5. Includes $4 paid to an affiliate of the Distributor's
parent company.
6. Includes $4 paid to an affiliate of the Distributor's
parent company.
7. Includes $170 paid to an affiliate of the Distributor's
parent company.
8. Includes $208 paid to an affiliate of the Distributor's
parent company.
9. Includes $120 paid to an affiliate of the Distributor's
parent company.
10. Includes $1 paid to an affiliate of the Distributor's
parent company.
11. Includes $2 paid to an affiliate of the Distributor's
parent company.
12. Includes $1 paid to an affiliate of the Distributor's
parent company.
Performance of the Funds
Explanation of Performance Terminology. Each Fund uses a
variety of terms to illustrate its investment performance.
Those terms include "cumulative total return," "average
annual total return," "average annual total return at net
asset value" and "total return at net asset value." An
explanation of how total returns are calculated is set
forth below. You can obtain current performance information
by calling the Funds' Transfer Agent at 1.800.525.7048 or
by visiting the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Each Fund's illustrations of its performance data in
advertisements must comply with rules of the Securities and
Exchange Commission. Those rules describe the types of
performance data that may be used and how it is to be
calculated. In general, any advertisement by a Fund of its
performance data must include the average annual total
returns for the advertised class of shares of the Fund.
Those returns must be shown for the 1-, 5- and 10-year
periods (or the life of the class, if less) ending as of
the most recently ended calendar quarter prior to the
publication of the advertisement (or its submission for
publication).
Use of standardized performance calculations enables
an investor to compare a Fund's performance to the
performance of other funds for the same periods. However, a
number of factors should be considered before using a
Fund's performance information as a basis for comparison
with other investments:
|_| Total returns measure the performance of a
hypothetical account in a Fund over various periods and do
not show the performance of each shareholder's account.
Your account's performance will vary from the model
performance data if your dividends are received in cash, or
you buy or sell shares during the period, or you bought
your shares at a different time and price than the shares
used in the model.
|_| A Fund's performance returns do no reflect the
effect of taxes on dividends and capital gains
distributions.
|_| An investment in a Fund is not insured by the
FDIC or any other government agency.
|_| The principal value of a Fund's shares and total
returns are not guaranteed and normally will fluctuate on a
daily basis.
|_| When an investor's shares are redeemed, they may
be worth more or less than their original cost.
|_| Total returns for any given past period represent
historical performance information and are not, and should
not be considered, a prediction of future returns.
The performance of each class of shares is shown
separately, because the performance of each class of shares
will usually be different. That is because of the different
kinds of expenses each class bears. The total returns of
each class of shares of a Fund are affected by market
conditions, the quality of the Fund's investments, the
maturity of debt investments, the types of investments the
Fund holds, and its operating expenses that are allocated
to the particular class.
|X| Total Return Information. There are different
types of "total returns" to measure a Fund's performance.
Total return is the change in value of a hypothetical
investment in a Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at
the end of the period. Because of differences in expenses
for each class of shares, the total returns for each class
are separately measured. The cumulative total return
measures the change in value over the entire period (for
example, ten (10) years). An average annual total return
shows the average rate of return for each year in a period
that would produce the cumulative total return over the
entire period. However, average annual total returns do not
show actual year-by-year performance. A Fund uses
standardized calculations for its total returns as
prescribed by the SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the
current maximum sales charge of 5.75% (as a percentage of
the offering price) is deducted from the initial investment
("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied,
depending on the period for which the return is shown: 5.0%
in the first year, 4.0% in the second year, 3.0% in the
third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter. For Class C shares, the 1%
contingent deferred sales charge is deducted for returns
for the 1-year period. For Class N shares, the 1%
contingent deferred sales charge is deducted for returns
for the one year period. Class N total returns may also be
calculated for the periods prior to 3/1/01 (the inception
of Class N shares), based on the Fund's Class A returns,
adjusted to reflect the higher Class N 12b-1 fees. There is
no sales charge on Class Y shares.
|_| Average Annual Total Return. The "average
annual total return" of each class is an average annual
compounded rate of return for each year in a specified
number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of
$1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an Ending Redeemable
Value ("ERV" in the formula) of that investment, according
to the following formula:
ERV - 1 = Average Annual Total Return
- ---
l/n
P
|_| Cumulative Total Return. The "cumulative
total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of
years. Its calculation uses some of the same factors as
average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return
is determined as follows:
ERV - P = Total Return
---------
P
|_| Average Annual Total Return (After Taxes on
Distributions). The "average annual total return (after
taxes on distributions)" of Class A shares is an average
annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of
federal taxes (calculated using the highest individual
marginal federal income tax rates in effect on any
reinvestment date) on any distributions made by the Fund
during the specified period. It is the rate of return based
on the change in value of a hypothetical initial investment
of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking
into account the effect of taxes on Fund distributions, but
not on the redemption of Fund shares, according to the
following formula:
ATVD - 1 = Average Annual Total Return (After Taxes on
- ----
/n Distributions)
P
|_| Average Annual Total Return (After Taxes on
Distributions and Redemptions). The "average annual total
return (after taxes on distributions and redemptions)" of
Class A shares is an average annual compounded rate of
return for each year in a specified number of years,
adjusted to show the effect of federal taxes (calculated
using the highest individual marginal federal income tax
rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period
and the effect of capital gains taxes or capital loss tax
benefits (each calculated using the highest federal
individual capital gains tax rate in effect on the
redemption date) resulting from the redemption of the
shares at the end of the period. It is the rate of return
based on the change in value of a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a
number of years ("n" in the formula) to achieve an ending
value ("ATVDR" in the formula) of that investment, after
taking into account the effect of taxes on fund
distributions and on the redemption of Fund shares,
according to the following formula:
ATVDR - 1= Average Annual Total Return (After Taxes on
- -----
1/n Distributions and Redemptions)
P
|_| Total Returns at Net Asset Value. From time
to time a Fund may also quote a cumulative or an average
annual total return "at net asset value" (without deducting
sales charges) for Class A, Class B, Class C or Class N
shares. There is no sales charge on Class Y shares. Each is
based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical
investment in that class of shares (without considering
front-end or contingent deferred sales charges) and takes
into consideration the reinvestment of dividends and
capital gains distributions.
- --------------------------------------------------------------------------------
The Funds' Total Returns for the Periods Ended 11/30/02*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Cumulative Average Annual Total Returns
of Total Returns
Shares (10 years or Life
Fund of Class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1-Year 5-Year
(or life-of-class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mercury Class A -35.95%1 -32.04%1 -27.62% -23.21% -21.15%1 -18.61%1
Advisors
Samp;amp;P 500 Index
Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -35.58%1 -32.90%1 -27.56% -23.75% -20.91%1 -19.17%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -33.00%1 -33.00%1 -24.54% -23.78% -19.23%1 -19.23%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -29.12%2 -29.12%2 -24.10% -23.33% -17.12%2 -17.12%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -31.52%1 -31.52%1 -23.06% -23.06% -18.29%1 -18.29%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mercury Class A -76.25%1 -74.80%1 -39.87% -36.20% -55.23%1 -53.72%1
Advisors
Focus Growth
Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -76.10%1 -75.10%1 -39.66% -36.48% -55.07%1 -54.03%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -75.10%1 -75.10%1 -37.12% -36.48% -54.03%1 -54.03%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -69.57%2 -69.57%2 -36.68% -36.04% -49.38%2 -49.38%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -74.70%1 -74.70%1 -36.11% -36.11% -53.62%1 -53.62%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
QM Active Class A -18.58%1 -13.61%1 -13.75% -8.49% -10.85%1 -7.85%1
Balanced
Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -18.21%1 -14.83%1 -13.61% -9.11% -10.63%1 -8.58%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -14.76%1 -14.76%1 -10.02% -9.12% -8.54%1 -8.54%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -11.79%2 -11.79%2 -9.51% -8.60% -6.93%2 -6.93%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -13.22%1 -13.22%1 -8.27% -8.27% -7.62%1 -7.62%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jennison Class A -38.83%1 -35.10%1 -28.54% -24.18% -24.03%1 -21.47%1
Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -38.56%1 -36.00%1 -28.47% -24.71% -23.84%1 -22.08%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -36.00%1 -36.00%1 -25.37% -24.62% -22.08% -22.08%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -31.75%2 -31.75%2 -25.05% -24.30% -19.64%2 -19.64%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -34.90%1 -34.90%1 -24.04% -24.04% -21.33%1 -21.33%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Salomon Class A -23.43%1 -18.75%1 -17.22% -12.17% -13.86%1 -10.96%1
Brothers
All Cap Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -23.08%1 -19.90%1 -17.08% -12.75% -13.65%1 -11.67%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -19.93%1 -19.93%1 -13.65% -12.78% -11.69%1 -11.69%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -17.91%2 -17.91%2 -13.17% -12.30% -10.68%2 -10.68%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -18.06%1 -18.06%1 -11.52% -11.52% -10.54%1 -10.54%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gartmore Class A -45.62%1 -42.30%1 -28.07% -23.68% -28.86%1 -26.46%1
Millennium
Growth Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B -45.38%1 -43.10%1 -28.02% -24.23% -28.68%1 -27.04%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C -43.10%1 -43.10%1 -24.99% -24.23% -27.04%1 -27.04%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N -36.76%2 -36.76%2 -24.67% -23.90% -23.07%2 -23.07%2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y -42.10%1 -42.10%1 -23.51% -23.51% -26.32%1 -26.32%1
- --------------------------------------------------------------------------------
*For Mercury Advisors Samp;amp;P 500 Index Fund, this is
information is for the periods ended 12/31/02.
1. Inception of Class A, Class B, Class C and Class Y
shares: 2/16/01
2. Inception of Class N shares: 3/1/01
- ----------------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge) For the
Periods Ended 11/30/02*
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Fund After Taxes on After Taxes on
Distributions and Sale
Distributions of Fund Shares
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
1 Year 5 Years 1 Year 5 Years
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Mercury Advisors Samp;amp;P Index Fund -27.73% -21.21%1 -16.82% -16.57%1
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Mercury Advisors Focus Growth Fund -39.87% -55.23%1 -24.28% -40.92%1
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
QM Active Balanced Fund -14.10% -11.05%1 -8.35% -8.69%1
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Jennison Growth Fund -28.54% -24.03%1 -17.38% -18.78%1
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Salomon Brothers All Cap Fund -17.51% -14.03%1 -10.46% -11.02%1
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Gartmore Millennium Growth Fund -28.07% -28.86%1 -17.09% -22.42%1
- ----------------------------------------------------------------------------------
*For Mercury Advisors Samp;amp;P 500 Index Fund, this is
information is for the periods ended 12/31/02.
1. Inception of Class A shares: 2/16/01
Other Performance Comparisons. Each Fund compares its
performance annually to that of an appropriate
broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting
the Transfer Agent at the addresses or telephone numbers
shown on the cover of this Statement of Additional
Information. Each Fund may also compare its performance to
that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking
entities. Examples of these performance comparisons are set
forth below.
|X| Lipper Rankings. From time to time a Fund may
publish the ranking of the performance of its classes of
shares by Lipper, Inc ("Lipper"). Lipper is a
widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated
investment companies, including the Funds, and ranks their
performance for various periods based on categories
relating to investment objectives. Lipper currently ranks
(i) the performance of the OSM - Jennison Growth Fund and
the OSM - Mercury Advisors Focus Growth Fund against all
other large cap growth funds, (ii) the performance of the
OSM - Mercury Advisors Samp;amp;P 500 Index Fund against all other
Samp;amp;P 500 Index objective funds, (iii) the performance of the
OSM - QM Active Balanced Fund against all other balanced
funds, (iv) the performance of the OSM - Salomon Brothers
All Cap Fund against all other multi-cap value funds, and
(v) the performance of the OSM - Gartmore Millennium Growth
Fund II against all other mid cap core funds. The Lipper
performance rankings are based on total returns that
include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group"
indices of the performance of all mutual funds in a
category that it monitors and averages of the performance
of the funds in particular categories.
|X| Morningstar Ratings. From time to time a Fund may
publish the star rating of the performance of its classes
of shares by Morningstar, Inc., an independent mutual fund
monitoring service. Morningstar rates mutual funds in their
specialized market sector. Each Fund is rated among
domestic stock funds.
Morningstar proprietary star ratings reflect
historical risk-adjusted total investment return. For each
fund with at least a three-year history, Morningstar
calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in
a fund's monthly performance (including the effects of
sales charges, loads, and redemption fees), placing more
emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category receive
5 stars, the next 22.5% receive 4 stars, the next 35%
receive 3 stars, the next 22.5% receive 2 stars, and the
bottom 10% receive 1 star. (Each share class is counted as
a fraction of one fund within this scale and rated
separately, which may cause slight variations in the
distribution percentages.) The Overall Morningstar Rating
for a fund is derived from a weighted average of the
performance figures associated with its three-, five-and
ten-year (if applicable) Morningstar Rating metrics.
|X| Performance Rankings and Comparisons by Other
Entities and Publications. From time to time a Fund may
include in its advertisements and sales literature
performance information about the Fund cited in newspapers
and other periodicals such as The New York Times, The Wall
Street Journal, Barron's, or similar publications. That
information may include performance quotations from other
sources, including Lipper and Morningstar. The performance
of a Fund's classes of shares may be compared in
publications to the performance of various market indices
or other investments, and averages, performance rankings or
other benchmarks prepared by recognized mutual fund
statistical services.
From time to time, a Fund may publish rankings or
ratings of the Manager or Transfer Agent, and of the
investor services provided by them to shareholders of the
Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of
shareholder and investor services by third parties may
include comparisons of their services to those provided by
other mutual fund families selected by the rating or
ranking services. They may be based upon the opinions of
the rating or ranking service itself, using its research or
judgment, or based upon surveys of investors, brokers,
shareholders or others.
From time to time the Fund may include in its
advertisements and sales literature the total return
performance of a hypothetical investment account that
includes shares of the fund and other Oppenheimer funds.
The combined account may be part of an illustration of an
asset allocation model or similar presentation. The account
performance may combine total return performance of the
fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to
time, the Fund's advertisements and sales literature may
include, for illustrative or comparative purposes,
statistical data or other information about general or
specific market and economic conditions. That may include,
for example,
o information about the performance of certain
securities or commodities markets or segments of
those markets,
o information about the performance of the economies of
particular countries or regions,
o the earnings of companies included in segments of
particular industries, sectors, securities
markets, countries or regions,
o the availability of different types of securities or
offerings of securities,
o information relating to the gross national or gross
domestic product of the United States or other
countries or regions,
o comparisons of various market sectors or indices to
demonstrate performance, risk, or other
characteristics of the Fund.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods
that can be used to buy shares of a Fund. Appendix C
contains more information about the special sales charge
arrangements offered by a Fund, and the circumstances in
which sales charges may be reduced or waived for certain
classes of investors.
AccountLink. When shares are purchased through AccountLink,
each purchase must be at least $50 and shareholders must
---
invest at least $500 before an Asset Builder Plan
(described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain
at $25 for additional purchases. Shares will be purchased
on the regular business day the Distributor is instructed
to initiate the Automated Clearing House ("ACH") transfer
to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the
business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of The New
York Stock Exchange ("the Exchange"). The Exchange normally
closes at 4:00 P.M., but may close earlier on certain days.
If Federal Funds are received on a business day after the
close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business
day. The proceeds of ACH transfers are normally received by
the Fund three days after the transfers are initiated. If
the proceeds of the ACH transfer are not received on a
timely basis, the Distributor reserves the right to cancel
the purchase order. The Distributor and the Funds are not
responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a
reduced sales charge rate may be obtained for Class A
shares under Right of Accumulation and Letters of Intent
because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain
other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor
or dealer or broker incurs little or no selling expenses.
|X| Right of Accumulation. To qualify for the lower
sales charge rates that apply to larger purchases of Class
A shares, you and your spouse can add together:
o Class A and Class B shares you purchase for your
individual accounts (including IRAs and 403(b)
plans), or for your joint accounts, or for
trust or custodial accounts on behalf of your
children who are minors, and
o Current purchases of Class A and Class B shares of
the Fund and other Oppenheimer funds to reduce
the sales charge rate that applies to current
purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or
contingent deferred sales charge to reduce the
sales charge rate for current purchases of
Class A shares, provided that you still hold
your investment in one of the Oppenheimer funds.
A fiduciary can count all shares purchased for a
trust, estate or other fiduciary account (including one or
more employee benefit plans of the same employer) that has
multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously
purchased and currently own to the value of current
purchases to determine the sales charge rate that applies.
The reduced sales charge will apply only to current
purchases. You must request it when you buy shares.
The Oppenheimer Funds. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the
distributor and currently include the following:
Oppenheimer AMT-Free New York Municipals Oppenheimer Multiple Strategies Fund
Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Capital Income Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Champion Income Fund Inc.
Oppenheimer Quest Opportunity Value
Oppenheimer Convertible Securities Fund Fund
Oppenheimer Developing Markets Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Real Asset Fund
Oppenheimer Rochester National
Oppenheimer Discovery Fund Municipals
Oppenheimer Emerging Growth Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Small Cap Value Fund
Oppenheimer Enterprise Fund Oppenheimer Strategic Income Fund
Oppenheimer Europe Fund Oppenheimer Total Return Bond Fund
Oppenheimer Global Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth amp;amp; Income Fund Oppenheimer Trinity Core Fund
Oppenheimer Trinity Large Cap Growth
Oppenheimer Gold amp;amp; Special Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Trinity Value Fund
Oppenheimer High Yield Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer Value Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Company
Fund Rochester Fund Municipals
OSM1- Gartmore Millennium Growth Fund
Oppenheimer Limited-Term Government Fund II
Oppenheimer Limited Term Municipal Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street Growth amp;amp; Income OSM1 - Mercury Advisors Samp;amp;P 500 Index
Fund Fund
OSM1 - Mercury Advisors Focus Growth
Oppenheimer Main Street Opportunity Fund Fund
Oppenheimer Main Street Small Cap Fund OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund OSM1 - Salomon Brothers All Cap Fund
And the following money market funds:
Oppenheimer Cash Reserves Centennial Government Trust
Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
1 - "OSM" stands for Oppenheimer Select Managers
There is an initial sales charge on the purchase of
Class A shares of each of the Oppenheimer funds described
above except the money market funds and Oppenheimer Senior
Floating Rate Fund. Under certain circumstances described
in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject
to a contingent deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you
purchase Class A shares or Class A and Class B shares of a
Fund and other Oppenheimer funds during a 13-month period,
you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A
shares purchased during that period. You can include
purchases made up to 90 days before the date of the Letter.
Letters of Intent do not consider Class C or Class N shares
you purchase or may have purchased.
A Letter of Intent is an investor's statement in
writing to the Distributor of the intention to purchase
Class A shares or Class A and Class B shares of a Fund (and
other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this
may include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention
to make the aggregate amount of purchases of shares which,
when added to the investor's holdings of shares of those
funds, will equal or exceed the amount specified in the
Letter. Purchases made by reinvestment of dividends or
distributions of capital gains and purchases made at net
asset value without sales charge do not count toward
satisfying the amount of the Letter.
A Letter enables an investor to count the Class A and
Class B shares purchased under the Letter to obtain the
reduced sales charge rate on purchases of Class A shares of
a Fund (and other Oppenheimer funds) that applies under the
Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter
will be made at the offering price (including the sales
charge) that applies to a single lump-sum purchase of
shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no
commitment to purchase shares. However, if the investor's
purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the
investor's holdings of shares on the last day of that
period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is
described in "Terms of Escrow," below (those terms may be
amended by the Distributor from time to time). The investor
agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer
Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this
Statement of Additional Information and the application
used for a Letter of Intent. If those terms are amended, as
they may be from time to time by a Fund, the investor
agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters of
Intent.
If the total eligible purchases made during the
Letter of Intent period do not equal or exceed the intended
purchase amount, the concessions previously paid to the
dealer of record for the account and the amount of sales
charge retained by the Distributor will be adjusted to the
rates applicable to actual total purchases. If total
eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount
needed to qualify for the next sales charge rate reduction
set forth in the Prospectus, the sales charges paid will be
adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the
excess of the amount of concessions allowed or paid to the
dealer over the amount of concessions that apply to the
actual amount of purchases. The excess concessions returned
to the Distributor will be used to purchase additional
shares for the investor's account at the net asset value
per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
The Transfer Agent will not hold shares in escrow for
purchases of shares of a Fund and other Oppenheimer funds
by OppenheimerFunds prototype 401(k) plans under a Letter
of Intent. If the intended purchase amount under a Letter
of Intent entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the
Letter of Intent period, there will be no adjustment of
concessions paid to the broker-dealer or financial
institution of record for accounts held in the name of that
plan.
In determining the total amount of purchases made
under a Letter, shares redeemed by the investor prior to
the termination of the Letter of Intent period will be
deducted. It is the responsibility of the dealer of record
and/or the investor to advise the Distributor about the
Letter in placing any purchase orders for the investor
during the Letter of Intent period. All of such purchases
must be made through the Distributor.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent
purchases if necessary) made pursuant to a Letter, shares
of a Fund equal in value up to 5% of the intended purchase
amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase
amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the offering price adjusted
for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to
the investor's account.
2. If the total minimum investment specified under
the Letter is completed within the 13-month Letter of
Intent period, the escrowed shares will be promptly
released to the investor.
3. If, at the end of the 13-month Letter of Intent
period the total purchases pursuant to the Letter are less
than the intended purchase amount specified in the Letter,
the investor must remit to the Distributor an amount equal
to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which
would have been paid if the total amount purchased had been
made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the
Letter. If the difference in sales charges is not paid
within twenty days after a request from the Distributor or
the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed
shares necessary to realize such difference in sales
charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is
received to redeem escrowed shares prior to the payment of
such additional sales charge, the sales charge will be
withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably
constitutes and appoints the Transfer Agent as
attorney-in-fact to surrender for redemption any or all
escrowed shares.
5. The shares eligible for purchase under the Letter (or
the holding of which may be counted toward completion of a
Letter) include:
(a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales
charge,
(b) Class B shares of other Oppenheimer funds acquired
subject to a contingent deferred sales charge,
and
(c) Class A or Class B shares acquired by exchange of
either (1) Class A shares of one of the other
Oppenheimer funds that were acquired subject to
a Class A initial or contingent deferred sales
charge or (2) Class B shares of one of the
other Oppenheimer funds that were acquired
subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically
be exchanged for shares of another fund to which an
exchange is requested, as described in the section of the
Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.
Asset Builder Plans. As explained in the Prospectus, you
must initially establish your account with $500.
Subsequently, you can establish an Asset Builder Plan to
automatically purchase additional shares directly from a
bank account for as little as $50. For those accounts
established prior to November 1, 2002 and which have
previously established Asset Builder Plans, additional
purchases will remain at $25. Shares purchased by Asset
Builder Plan payments from bank accounts are subject to the
redemption restrictions for recent purchases described in
the Prospectus. Asset Builder Plans are available only if
your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored
qualified retirement accounts. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of
shares of up to four other Oppenheimer funds.
If you make payments from your bank account to
purchase shares of a Fund, your bank account will be
debited automatically. Normally the debit will be made two
business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer
Agent nor the Fund shall be responsible for any delays in
purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you
should obtain a prospectus of the selected fund(s) from
your financial advisor (or the Distributor) and request an
application from the Distributor. Complete the application
and return it. You may change the amount of your Asset
Builder payment or you can terminate these automatic
investments at any time by writing to the Transfer Agent.
The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions
to implement them. A Fund reserves the right to amend,
suspend or discontinue offering Asset Builder plans at any
time without prior notice.
Retirement Plans. Certain types of retirement plans are
entitled to purchase shares of a Fund without sales charge
or at reduced sales charge rates, as described in Appendix
C to this Statement of Additional Information. Certain
special sales charge arrangements described in that
Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner amp;amp; Smith, Inc. ("Merrill Lynch") or an
independent record keeper that has a contract or special
arrangement with Merrill Lynch. If on the date the plan
sponsor signed the Merrill Lynch record keeping service
agreement the plan has less than $3 million in assets
(other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may
purchase only Class B shares of the Oppenheimer funds. Any
retirement plans in that category that currently invest in
Class B shares of a Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's
applicable investments reach $5 million. OppenheimerFunds
has entered into arrangements with certain record keepers
whereby the Transfer Agent compensates the record keeper
for its record keeping and account servicing functions that
it performs on behalf of the participant level accounts of
a retirement plan. While such compensation may act to
reduce the record keeping fees charged by the retirement
plan's record keeper, that compensation arrangement may be
terminated at any time, potentially affecting the record
keeping fees charged by the retirement plan's record keeper.
Cancellation of Purchase Orders. Cancellation of purchase
orders for a Fund's shares (for example, when a purchase
check is returned to a Fund unpaid) causes a loss to be
incurred when the net asset values of that Fund's shares on
the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net
asset value per share multiplied by the number of shares in
the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the
loss, the Distributor will do so. The Fund may reimburse
the Distributor for that amount by redeeming shares from
any account registered in that investor's name, or the Fund
or the Distributor may seek other redress.
Classes of Shares. Each class of shares of a Fund
represents an interest in the same portfolio of investments
of a Fund. However, each class has different shareholder
privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends
payable on Class B, Class C or Class N shares will be
reduced by incremental expenses borne solely by that class.
Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.
The availability of different classes of shares
permits an investor to choose the method of purchasing
shares that is more appropriate for the investor. That may
depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant
circumstances. Class A shares normally are sold subject to
an initial sales charge. While Class B, Class C and Class N
shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class
B, Class C and Class N shares is the same as that of the
initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions
that sell shares of a Fund. A salesperson who is entitled
to receive compensation from his or her firm for selling
Fund shares may receive different levels of compensation
for selling one class of shares rather than another. Class
Y shares have no sales charges.
The Distributor will not accept any order in the
amount of $500,000 or more for Class B shares or $1 million
or more for Class C shares on behalf of a single investor
(not including dealer "street name" or omnibus accounts).
That is because generally it will be more advantageous for
that investor to purchase Class A shares of a Fund.
|X| Class A Shares Subject to a Contingent Deferred
Sales Charge. For purchases of Class A shares at net asset
value whether or not subject to a contingent deferred sales
charge as described in the Prospectus, no sales concessions
will be paid to the broker-dealer of record, as described
in the Prospectus, on sales of Class A shares purchased
with the redemption proceeds of shares of another mutual
fund offered as an investment option in a retirement plan
in which Oppenheimer funds are also offered as investment
options under a special arrangement with the Distributor,
if the purchase occurs more than 30 days after the
Oppenheimer funds are added as an investment option under
that plan. Additionally, that concession will not be paid
on purchases of Class A shares by a retirement plan made
with the redemption proceeds of Class N shares of one or
more Oppenheimer funds held by the plan for more than 18
months.
|X| Class B Conversion. Under current interpretations
of applicable federal income tax law by the Internal
Revenue Service, the conversion of Class B shares to Class
A shares 72 months after purchase is not treated as a
taxable event for the shareholder. If those laws or the IRS
interpretation of those laws should change, the automatic
conversion feature may be suspended. In that event, no
further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could
constitute a taxable event for the shareholder, and absent
such exchange, Class B shares might continue to be subject
to the asset-based sales charge for longer than six years.
|X| Availability of Class N Shares. In addition to
the description of the types of retirement plans which may
purchase Class N shares contained in the prospectus, Class
N shares also are offered to the following:
o to all rollover IRAs (including SEP IRAs and SIMPLE
IRAs),
o to all rollover contributions made to Individual
401(k) plans, Profit-Sharing Plans and Money
Purchase Pension Plans,
o to all direct rollovers from
OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix C
to this Statement of Additional Information)
which have entered into a special agreement
with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a)
or 401(k) of the Internal Revenue Code, the
recordkeeper or the plan sponsor for which has
entered into a special agreement with the
Distributor,
o to Retirement Plans of a plan sponsor where the
aggregate assets of all such plans invested in
the Oppenheimer funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans
that pay for the purchase with the redemption
proceeds of Class A shares of one or more
Oppenheimer funds, and
o to certain customers of broker-dealers and financial
advisors that are identified in a special
agreement between the broker-dealer or
financial advisor and the Distributor for that
purpose.
The sales concession and the advance of the service
fee, as described in the Prospectus, will not be paid to
dealers of record on sales of Class N shares on:
o purchases of Class N shares in amounts of $500,000 or
more by a retirement plan that pays for the
purchase with the redemption proceeds of Class
A shares of one or more Oppenheimer funds
(other than rollovers from an
OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan to any IRA invested in the
Oppenheimer funds),
o purchases of Class N shares in amounts of $500,000 or
more by a retirement plan that pays for the
purchase with the redemption proceeds of Class
C shares of one or more Oppenheimer funds held
by the plan for more than one year (other than
rollovers from an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan to any IRA
invested in the Oppenheimer funds), and
o on purchases of Class N shares by an
OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan made with the redemption proceeds
of Class A shares of one or more Oppenheimer
funds.
No sales concessions will be paid to the
broker-dealer of record, as described in the Prospectus, on
sales of Class N shares purchased with the redemption
proceeds of shares of another mutual fund offered as an
investment option in a retirement plan in which Oppenheimer
funds are also offered as investment options under a
special arrangement with the Distributor, if the purchase
occurs more than 30 days after the Oppenheimer funds are
added as an investment option under that plan.
|X| Allocation of Expenses. A Fund pays expenses
related to its daily operations, such as custodian fees,
Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's
assets and are not paid directly by shareholders. However,
those expenses reduce the net asset values of shares, and
therefore are indirectly borne by shareholders through
their investment.
The methodology for calculating the net asset value,
dividends and distributions of each Fund's share classes
recognizes two types of expenses. General expenses that do
not pertain specifically to any one class are allocated pro
rata to the shares of all classes. The allocation is based
on the percentage of the Fund's total assets that is
represented by the assets of each class, and then equally
to each outstanding share within a given class. Such
general expenses include management fees, legal,
bookkeeping and audit fees, printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders,
fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest,
taxes and brokerage commissions, and non-recurring
expenses, such as litigation costs.
Other expenses that are directly attributable to a
particular class are allocated equally to each outstanding
share within that class. Examples of such expenses include
distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and
shareholder meeting expenses (to the extent that such
expenses pertain only to a specific class).
Account Fees. As stated in the Prospectus, a $12 annual fee
is assessed on any account valued at less than $500. This
fee will not be assessed on the following accounts:
o Accounts that have balances below $500 due to the
automatic conversion of shares from Class B to Class
A shares;
o Accounts with an active Asset Builder Plan, payroll
deduction plan or a military allotment plan;
o OppenheimerFunds-sponsored group retirement accounts
that are making continuing purchases;
o Certain accounts held by broker-dealers through the
National Securities Clearing Corporation; and
o Accounts that fall below the $500 threshold due
solely to market fluctuations within the 12-month
period preceding the date the fee is deducted.
The fee is automatically deducted from qualifying
accounts annually on or about the second to last business
day of September. This annual fee is waived for any
shareholders who elect to access their account documents
through electronic document delivery rather than in paper
copy and who elect to utilize the Internet or PhoneLink as
their primary source for their general servicing needs. To
sign up to access account documents electronically via
eDocs Direct, please visit the Service Center on our
website at WWW.OPPENHEIMERFUNDS.COM or call 1.888.470.0862
------------------------
for instructions.
Determination of Net Asset Values Per Share. The net asset
values per share of each class of shares of a Fund are
determined as of the close of business of the Exchange on
each day that the Exchange is open. The calculation is done
by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M.,
Eastern time, but may close earlier on some other days (for
example, in case of weather emergencies or on days falling
before a U.S. holiday). All references to time in this
Statement of Additional Information mean "Eastern time."
The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on
other days.
Dealers other than Exchange members may conduct
trading in certain securities on days on which the Exchange
is closed (including weekends and holidays) or after 4:00
P.M. on a regular business day. Because a Fund's net asset
values will not be calculated on those days, the Fund's net
asset values per share may be significantly affected on
such days when shareholders may not purchase or redeem
shares. Additionally, trading on European and Asian stock
exchanges and over-the-counter markets normally is
completed before the close of the Exchange.
Changes in the values of securities traded on foreign
exchanges or markets as a result of events that occur after
the prices of those securities are determined, but before
the close of the Exchange, will not be reflected in the
Fund's calculation of its net asset values that day unless
the Manager or the Adviser determines that the event is
likely to effect a material change in the value of the
security. For all of the Funds, except the OSM - Mercury
Advisors Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors
Focus Growth Fund, if such determination is made, the
Manager, or an internal valuation committee established by
the Manager, as applicable, may establish a valuation,
under procedures established by the Board and subject to
the approval, ratification and confirmation by the Board at
its next ensuing meeting. For the OSM - Mercury Advisors
Samp;amp;P 500 Index Fund and the OSM - Mercury Advisors Focus
Growth Fund, securities may be valued at their fair value
as determined in good faith by the Board of Trustees of the
applicable Master Fund or by the Adviser using procedures
approved by the Board of Trustees of that Master Fund.
|X| Securities Valuation. Each of the Fund's Board of
Trustees and theBoard of Trustees of the Master Fund (in
the case of the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
or the OSM - Mercury Advisors Focus Growth Fund) has
established procedures for the valuation of each Fund's
securities. In general those procedures are as follows:
o Equity securities traded on a U.S. securities
exchange or on Nasdaq(R)are valued as follows:
(1) if last sale information is regularly reported, they
are valued at the last reported sale price
on the principal exchange on which they are
traded or on Nasdaq, as applicable, on that
day, or
(2) if last sale information is not available on a
valuation date, they are valued at the last
reported sale price preceding the valuation
date if it is within the spread of the
closing "bid" and "asked" prices on the
valuation date or, if not, at the closing
"bid" price on the valuation date.
o Equity securities traded on a foreign securities
exchange generally are valued in one of the following ways:
(1) at the last sale price available to the pricing
service approved by the Board of Trustees,
or
(2) at the last sale price obtained by the Manager or
Adviser from the report of the principal
exchange on which the security is traded at
its last trading session on or immediately
before the valuation date, or
(3) at the mean between the "bid" and "asked" prices
obtained from the principal exchange on
which the security is traded or, on the
basis of reasonable inquiry, from two market
makers in the security.
o Long-term debt securities having a remaining maturity
in excess of 60 days are valued based on the mean between
the "bid" and "asked" prices determined by a portfolio
pricing service approved by each Fund's Board of Trustees
or the Board of Trustees of the Master Fund or obtained by
the Manager from two active market makers in the security
on the basis of reasonable inquiry.
o The following securities are valued at the mean
between the "bid" and "asked" prices determined by a
pricing service approved by each Fund's Board of Trustees
or the Board of Trustees of the Master Fund or obtained by
the Manager or Adviser, as the case may be, from two active
market makers in the security on the basis of reasonable
inquiry:
(1) debt instruments that have a maturity of more than
397 days when issued,
(2) debt instruments that had a maturity of 397 days or
less when issued and have a remaining
maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity
of 397 days or less when issued and which
have a remaining maturity of 60 days or less.
o The following securities are valued at cost, adjusted
for amortization of premiums and accretion of discounts:
(1) money market debt securities held by a non-money
market fund that had a maturity of less than
397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that
have a remaining maturity of 397 days or
less.
However, for the OSM - Mercury Advisors Samp;amp;P 500 Index
Fund and the OSM - Mercury Advisors Focus Growth Fund,
obligations with remaining maturities of 60 days or less
will not be valued at amortized cost if the Adviser
believes that the method no longer produces fair valuations.
|_| For the OSM - Mercury Advisors Samp;amp;P 500 Index Fund
and the OSM - Mercury Advisors Focus Growth Fund,
repurchase agreements will be valued at cost plus accrued
interest.
o Securities (including restricted securities) not
having readily-available market quotations are valued at
fair value determined under the Board's procedures. If the
Manager is unable to locate two market makers willing to
give quotes, a security may be priced at the mean between
the "bid" and "asked" prices provided by a single active
market maker (which in certain cases may be the "bid" price
if no "asked" price is available).
In the case of U.S. government securities,
mortgage-backed securities, corporate bonds and foreign
government securities, when last sale information is not
generally available, the Manager or Adviser, as the case
may be, may use pricing services approved by the applicable
Board of Trustees. The pricing service may use "matrix"
comparisons to the prices for comparable instruments on the
basis of quality, yield and maturity. Other special factors
may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager or
Adviser, as the case may be, will monitor the accuracy of
the pricing services. That monitoring may include comparing
prices used for portfolio valuation to actual sales prices
of selected securities.
The closing prices in the London foreign exchange
market on a particular business day that are provided to
the Manager or Adviser, as the case may be, by a bank,
dealer or pricing service that the Manager or Adviser has
determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to
U.S. dollars securities that are denominated in foreign
currency.
Puts, calls, and futures are valued at the last sale
price on the principal exchange on which they are traded or
on Nasdaq, as applicable, as determined by a pricing
service approved by the applicable Board of Trustees or by
the Manager or Adviser. If there were no sales that day,
they shall be valued at the last sale price on the
preceding trading day if it is within the spread of the
closing "bid" and "asked" prices on the principal exchange
or on Nasdaq on the valuation date. If not, the value shall
be the closing bid price on the principal exchange or on
Nasdaq on the valuation date. If the put, call or future is
not traded on an exchange or on Nasdaq, it shall be valued
by the mean between "bid" and "asked" prices obtained by
the Manager or Adviser from two active market makers. In
certain cases that may be at the "bid" price if no "asked"
price is available.
When the Fund writes an option, an amount equal to
the premium received is included in a Fund's Statement of
Assets and Liabilities as an asset. An equivalent credit is
included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of
the option. In determining a Fund's gain on investments, if
a call or put written by the Fund is exercised, the
proceeds are increased by the premium received. If a call
or put written by a Fund expires, the Fund has a gain in
the amount of the premium. If a Fund enters into a closing
purchase transaction, it will have a gain or loss,
depending on whether the premium received was more or less
than the cost of the closing transaction. If a Fund
exercises a put it holds, the amount the Fund receives on
its sale of the underlying investment is reduced by the
amount of premium paid by the Fund.
How to Sell Shares
The information below supplements the terms and conditions
for redeeming shares set forth in the Prospectus.
Sending Redemption Proceeds by Federal Funds Wire. The
Federal Funds wire of redemption proceeds may be delayed if
each Fund's custodian bank is not open for business on a
day when the Fund would normally authorize the wire to be
made, which is usually the Fund's next regular business day
following the redemption. In those circumstances, the wire
will not be transmitted until the next bank business day on
which the Fund is open for business. No dividends will be
paid on the proceeds of redeemed shares awaiting transfer
by Federal Funds wire.
Reinvestment Privilege. Within six months of a redemption,
a shareholder may reinvest all or part of the redemption
proceeds of:
o Class A shares purchased subject to an initial sales
charge or Class A shares on which a contingent
deferred sales charge was paid, or
o Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed.
The reinvestment may be made without sales charge
only in Class A shares of a Fund or any of the other
Oppenheimer funds into which shares of a Fund are
exchangeable as described in "How to Exchange Shares"
below. Reinvestment will be at the net asset value next
computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does
not apply to Class C, Class N or Class Y shares. A Fund may
amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date
of such amendment, suspension or cessation.
Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has
been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and
amount of the reinvestment. Under the Internal Revenue
Code, if the redemption proceeds of Fund shares on which a
sales charge was paid are reinvested in shares of a Fund or
another of the Oppenheimer funds within 90 days of payment
of the sales charge, the shareholder's basis in the shares
of a Fund that were redeemed may not include the amount of
the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However,
in that case the sales charge would be added to the basis
of the shares acquired by the reinvestment of the
redemption proceeds.
Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash.
However, under certain circumstances, the Board of Trustees
of a Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of that Fund
to make payment of a redemption order wholly or partly in
cash. In that case, the Fund may pay the redemption
proceeds in whole or in part by a distribution "in kind" of
liquid securities from the portfolio of a Fund, in lieu of
cash.
Each Fund has elected to be governed by Rule 18f-1
under the Investment Company Act. Under that rule, each
Fund is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur
brokerage or other costs in selling the securities for
cash. Each Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to
value its portfolio securities described above under
"Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price
is determined.
Involuntary Redemptions. Each Fund's Board of Trustees has
the right to cause the involuntary redemption of the shares
held in any account if the aggregate net asset value of
those shares is less than $500 or such lesser amount as the
Board may fix. The Board will not cause the involuntary
redemption of shares in an account if the aggregate net
asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. If the
Board exercises this right, it may also fix the
requirements for any notice to be given to the shareholders
in question (not less than 30 days). The Board may
alternatively set requirements for the shareholder to
increase the investment, or set other terms and conditions
so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different
registration is not an event that triggers the payment of
sales charges. Therefore, shares are not subject to the
payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or
entity. It does not matter whether the transfer occurs by
absolute assignment, gift or bequest, as long as it does
not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales
charge are transferred, the transferred shares will remain
subject to the contingent deferred sales charge. It will be
calculated as if the transferee shareholder had acquired
the transferred shares in the same manner and at the same
time as the transferring shareholder.
If less than all shares held in an account are
transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described
in the Prospectus under "How to Buy Shares" for the
imposition of the Class B, Class C and Class N contingent
deferred sales charge will be followed in determining the
order in which shares are transferred.
Distributions From Retirement Plans. Requests for
distributions from OppenheimerFunds-sponsored IRAs,
SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial plans, 401(k)
plans or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans,"
c/o the Transfer Agent at its address listed in "How To
Sell Shares" in the Prospectus or on the back cover of this
Statement of Additional Information. The request must:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the
distribution is premature; and
(3) conform to the requirements of the plan and the
Fund's other redemption requirements.
Participants (other than self-employed plan sponsors)
in OppenheimerFunds-sponsored pension or profit-sharing
plans with shares of a Fund held in the name of the plan or
its fiduciary may not directly request redemption of their
accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans
are subject to special requirements under the Internal
Revenue Code and certain documents (available from the
Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made.
Distributions from retirement plans are subject to
withholding requirements under the Internal Revenue Code,
and IRS Form W-4P (available from the Transfer Agent) must
be submitted to the Transfer Agent with the distribution
request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a
certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution
even if the shareholder elects not to have tax withheld.
Each Fund, the Manager, the Distributor, and the Transfer
Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax
laws and will not be responsible for any tax penalties
assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers
and Brokers. The Distributor is each Fund's agent to
repurchase its shares from authorized dealers or brokers on
behalf of their customers. Shareholders should contact
their broker or dealer to arrange this type of redemption.
The repurchase price per share will be the net asset value
next computed after the Distributor receives an order
placed by the dealer or broker. However, if the Distributor
receives a repurchase order from a dealer or broker after
the close of The Exchange on a regular business day, it
will be processed at that day's net asset value if the
order was received by the dealer or broker from its
customers prior to the time the Exchange closes. Normally,
the Exchange closes at 4:00 P.M., but may do so earlier on
some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its
close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer
under this procedure, payment will be made within three
business days after the shares have been redeemed upon the
Distributor's receipt of the required redemption documents
in proper form. The signature(s) of the registered owners
on the redemption documents must be guaranteed as described
in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning
shares of a Fund valued at $5,000 or more can authorize the
Transfer Agent to redeem shares (having a value of at least
$50) automatically on a monthly, quarterly, semi-annual or
annual basis under an Automatic Withdrawal Plan. Shares
will be redeemed three business days prior to the date
requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check
payable to all shareholders of record. Payments must also
be sent to the address of record for the account and the
address must not have been changed within the prior 30
days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be
arranged on this basis.
Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may
arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the account
application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant
to an Automatic Withdrawal Plan three business days before
the payment transmittal date you select in the account
application. If a contingent deferred sales charge applies
to the redemption, the amount of the check or payment will
be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the
date requested. Each Fund reserves the right to amend,
suspend or discontinue offering these plans at any time
without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make
regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B,
Class C and Class N shareholders should not establish
automatic withdrawal plans, because of the potential
imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B, Class C or Class N
contingent deferred sales charge is waived as described in
Appendix C to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange
Plan, the shareholder agrees to the terms and conditions
that apply to such plans, as stated below. These provisions
may be amended from time to time by the Funds and/or the
Distributor. When adopted, any amendments will
automatically apply to existing Plans.
|X| Automatic Exchange Plans. Shareholders can
authorize the Transfer Agent to exchange a pre-determined
amount of shares of a Fund for shares (of the same class)
of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $50. Instructions should be
provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under
these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the
Prospectus and below in this Statement of Additional
Information.
|X| Automatic Withdrawal Plans. Fund shares will be
redeemed as necessary to meet withdrawal payments. Shares
acquired without a sales charge will be redeemed first.
Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares
acquired with a sales charge, to the extent necessary to
make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted.
Payments made under these plans should not be considered as
a yield or income on your investment.
The Transfer Agent will administer the investor's
Automatic Withdrawal Plan as agent for the shareholder(s)
(the "Planholder") who executed the Plan authorization and
application submitted to the Transfer Agent. Neither a Fund
nor the Transfer Agent shall incur any liability to the
Planholder for any action taken or not taken by the
Transfer Agent in good faith to administer the Plan. Share
certificates will not be issued for shares of a Fund
purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the
Planholder on the records of the Fund. Any share
certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the Plan application
so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans,
distributions of capital gains must be reinvested in shares
of a Fund, which will be done at net asset value without a
sales charge. Dividends on shares held in the account may
be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments
at the net asset value per share determined on the
redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally
be transmitted three business days prior to the date
selected for receipt of the payment, according to the
choice specified in writing by the Planholder. Receipt of
payment on the date selected cannot be guaranteed.
The amount and the interval of disbursement payments
and the address to which checks are to be mailed or
AccountLink payments are to be sent may be changed at any
time by the Planholder by writing to the Transfer Agent.
The Planholder should allow at least two weeks' time after
mailing such notification for the requested change to be
put in effect. The Planholder may, at any time, instruct
the Transfer Agent by written notice to redeem all, or any
part of, the shares held under the Plan. That notice must
be in proper form in accordance with the requirements of
the then-current Prospectus of the Funds. In that case, the
Transfer Agent will redeem the number of shares requested
at the net asset value per share in effect and will mail a
check for the proceeds to the Planholder.
The Planholder may terminate a Plan at any time by
writing to the Transfer Agent. A Fund may also give
directions to the Transfer Agent to terminate a Plan. The
Transfer Agent will also terminate a Plan upon its receipt
of evidence satisfactory to it that the Planholder has died
or is legally incapacitated. Upon termination of a Plan by
the Transfer Agent or a Fund, shares that have not been
redeemed will be held in uncertificated form in the name of
the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized
person.
To use shares held under the Plan as collateral for a
debt, the Planholder may request issuance of a portion of
the shares in certificated form. Upon written request from
the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued
without causing the withdrawal checks to stop. However,
should such uncertificated shares become exhausted, Plan
withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent
for a Fund, the Planholder will be deemed to have appointed
any successor transfer agent to act as agent in
administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class
of Oppenheimer funds having more than one class of shares
may be exchanged only for shares of the same class of other
Oppenheimer funds. Shares of Oppenheimer funds that have a
single class without a class designation are deemed "Class
A" shares for this purpose. You can obtain a current list
showing which funds offer which classes of shares by
calling the Distributor.
o All of the Oppenheimer funds currently offer Class A,
B, C, N and Y shares with the following exceptions:
The following funds only offer Class A shares:
Centennial America Fund, L.P. Centennial New York Tax Exempt
Trust
Centennial California Tax Exempt Centennial Tax Exempt Trust
Trust
Centennial Government Trust Oppenheimer Money Market Fund, Inc.
Centennial Money Market Trust
The following funds do not offer Class N shares:
Oppenheimer AMT-Free New York Oppenheimer Pennsylvania Municipal
Municipals Fund
Oppenheimer California Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer Limited Term Municipal Oppenheimer Senior Floating Rate
Fund Fund
Oppenheimer Municipal Bond Fund Limited Term New York Municipal Fund
Oppenheimer New Jersey Municipal Fund Rochester Fund Municipals
The following funds do not offer Class Y shares:
Oppenheimer AMT-Free New York Oppenheimer Limited Term Municipal
Municipals Fund
Oppenheimer California Municipal Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Cash Reserves Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value
Fund, Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Rochester National
Municipals
Oppenheimer Developing Markets Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold amp;amp; Special Minerals Oppenheimer Small Cap Value Fund
Fund
Oppenheimer International Bond Fund Oppenheimer Total Return Bond Fund
Oppenheimer International Growth Fund Limited Term New York Municipal Fund
Oppenheimer International Small
Company Fund
o Class Y shares of Oppenheimer Real Asset Fund may not
be exchanged for shares of any other fund.
o Class B, Class C and Class N shares of Oppenheimer
Cash Reserves are generally available only by
exchange from the same class of shares of other
Oppenheimer funds or through
OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities
Fund may be exchanged only for Class A shares of
other Oppenheimer funds. They may not be acquired by
exchange of shares of any class of any other
Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal
Fund may be exchanged only for Class B shares of
other Oppenheimer funds and no exchanges may be made
to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may
not be exchanged for shares of Oppenheimer Money
Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only
participants in certain retirement plans may purchase
shares of Oppenheimer Capital Preservation Fund, and
only those participants may exchange shares of other
Oppenheimer funds for shares of Oppenheimer Capital
Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate
Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury
Advisors Samp;amp;P 500 Index Fund and Oppenheimer Select
Managers QM Active Balanced Fund are only available
to retirement plans and are available only by
exchange from the same class of shares of other
Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged
at net asset value for shares of any money market
fund offered by the Distributor. Shares of any money
market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge.
They may also be used to purchase shares of
Oppenheimer funds subject to an early withdrawal
charge or contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc.
purchased with the redemption proceeds of shares of
other mutual funds (other than funds managed by the
Manager or its subsidiaries) redeemed within the 30
days prior to that purchase may subsequently be
exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or
contingent deferred sales charge. To qualify for that
privilege, the investor or the investor's dealer must
notify the Distributor of eligibility for this
privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of
dividends or distributions from any of the other
Oppenheimer funds or from any unit investment trust
for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset
value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund may impose these
changes at any time, it will provide you with notice of
those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days'
notice prior to materially amending or terminating the
exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales
Charges. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a
contingent deferred sales charge, with the following
exceptions:
o When Class A shares of any Oppenheimer fund (other
than Rochester National Municipals and Rochester Fund
Municipals) acquired by exchange of Class A shares of any
Oppenheimer fund purchased subject to a Class A contingent
deferred sales charge are redeemed within 18 months
measured from the beginning of the calendar month of the
initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the
redeemed shares.
o When Class A shares of Rochester National Municipals
and Rochester Fund Municipals acquired by exchange of Class
A shares of any Oppenheimer fund purchased subject to a
Class A contingent deferred sales charge are redeemed
within 24 months of the beginning of the calendar month of
the initial purchase of the exchanged Class A shares, the
Class A contingent deferred sales charge is imposed on the
redeemed shares.
o If any Class A shares of another Oppenheimer fund
that are exchanged for Class A shares of Oppenheimer Senior
Floating Rate Fund are subject to the Class A contingent
deferred sales charge of the other Oppenheimer fund at the
time of exchange, the holding period for that Class A
contingent deferred sales charge will carry over to the
Class A shares of Oppenheimer Senior Floating Rate Fund
acquired in the exchange. The Class A shares of Oppenheimer
Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of
Oppenheimer Senior Floating Rate Fund if they are
repurchased before the expiration of the holding period.
o When Class A shares of Oppenheimer Cash Reserves and
Oppenheimer Money Market Fund, Inc. acquired by exchange of
Class A shares of any Oppenheimer fund purchased subject to
a Class A contingent deferred sales charge are redeemed
within the Class A holding period of the fund from which
the shares were exchanged, the Class A contingent deferred
sales charge of the fund from which the shares were
exchanged is imposed on the redeemed shares.
o With respect to Class B shares, the Class B
contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six
years of the initial purchase of the exchanged Class B
shares.
o With respect to Class C shares, the Class C
contingent deferred sales charge is imposed on Class C
shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C
shares.
o With respect to Class N shares, a 1% contingent
deferred sales charge will be imposed if the retirement
plan (not including IRAs and 403(b) plans) is terminated or
Class N shares of all Oppenheimer funds are terminated as
an investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first purchase
of Class N shares of any Oppenheimer fund or with respect
to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first
purchase of Class N shares of any Oppenheimer fund.
o When Class B, Class C or Class N shares are redeemed
to effect an exchange, the priorities described in "How To
Buy Shares" in the Prospectus for the imposition of the
Class B, Class C or Class N contingent deferred sales
charge will be followed in determining the order in which
the shares are exchanged. Before exchanging shares,
shareholders should take into account how the exchange may
affect any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares.
Shareholders owning shares of more than one class
must specify which class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. Each Fund
reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than
one account. Each Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of
authorized dealers that qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging
shares by telephone, a shareholder must have an existing
account in the fund to which the exchange is to be made.
Otherwise, the investors must obtain a prospectus of that
fund before the exchange request may be submitted. If all
telephone lines are busy (which might occur, for example,
during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by
telephone and would have to submit written exchange
requests.
|X| Processing Exchange Requests. Shares to be
exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form
(the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such
purchases may be delayed by either fund up to five business
days if it determines that it would be disadvantaged by an
immediate transfer of the redemption proceeds. Each Fund
reserves the right, in its discretion, to refuse any
exchange request that may disadvantage it. For example, if
the receipt of multiple exchange requests from a dealer
might require the disposition of portfolio securities at a
time or at a price that might be disadvantageous to the
Fund, the Fund may refuse the request.
When you exchange some or all of your shares from one
fund to another, any special account feature such as an
Asset Builder Plan or Automatic Withdrawal Plan, will be
switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption
and exchange features such as Automatic Exchange Plans and
Automatic Withdrawal Plans cannot be switched to an account
in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number
of shares exchanged may be less than the number requested
if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information, or would include
shares covered by a share certificate that is not tendered
with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
The different Oppenheimer funds available for
exchange have different investment objectives, policies and
risks. A shareholder should assure that the fund selected
is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal
income tax purposes, an exchange transaction is treated as
a redemption of shares of one fund and a purchase of shares
of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption
proceeds in such cases. Each Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or
legal advice to a shareholder in connection with an
exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Each Fund has no fixed
dividend rate and there can be no assurance as to the
payment of any dividends or the realization of any capital
gains. The dividends and distributions paid by a class of
shares will vary from time to time depending on market
conditions, the composition of each Fund's portfolio, and
expenses borne by a Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same
time, and on the same day for each class of shares.
However, dividends on Class B, Class C and Class N shares
are expected to be lower than dividends on Class A and
Class Y shares. That is because of the effect of the
asset-based sales charge on Class B, Class C and Class N
shares. Those dividends will also differ in amount as a
consequence of any difference in the net asset values of
the different classes of shares.
Dividends, distributions and proceeds of the
redemption of each Fund shares represented by checks
returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc. Reinvestment will be made as
promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to
state escheatment laws, and each Fund and the Transfer
Agent will not be liable to shareholders or their
representatives for compliance with those laws in good
faith.
Tax Status of the Funds' Dividends, Distributions and
Redemptions of Shares. The federal tax treatment of the
Funds' dividends and capital gains distributions is briefly
highlighted in the Prospectus. The following is only a
summary of certain additional tax considerations generally
affecting each Fund and its shareholders.
The tax discussion in the Prospectus and this
Statement of Additional Information is based on tax law in
effect on the date of the Prospectus and this Statement of
Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action,
sometimes with retroactive effect. State and local tax
treatment of ordinary income dividends and capital gain
dividends from regulated investment companies may differ
from the treatment under the Internal Revenue Code
described below. Potential purchasers of shares of the Fund
are urged to consult their tax advisers with specific
reference to their own tax circumstances as well as the
consequences of federal, state and local tax rules
affecting an investment in the Fund.
|X| Qualification as a Regulated Investment Company.
Each Fund has elected to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a regulated investment company, the
Fund is not subject to federal income tax on the portion of
its net investment income (that is, taxable interest,
dividends, and other taxable ordinary income, net of
expenses) and capital gain net income (that is, the excess
of net long-term capital gains over net short-term capital
losses) that it distributes to shareholders. That
qualification enables the Fund to "pass through" its income
and realized capital gains to shareholders without having
to pay tax on them. This avoids a "double tax" on that
income and capital gains, since shareholders normally will
be taxed on the dividends and capital gains they receive
from a Fund (unless their Fund shares are held in a
retirement account or the shareholder is otherwise exempt
from tax).
The Internal Revenue Code contains a number of
complex tests relating to qualification that a Fund might
not meet in a particular year. If it did not qualify as a
regulated investment company, a Fund would be treated for
tax purposes as an ordinary corporation and would receive
no tax deduction for payments made to shareholders.
To qualify as a regulated investment company, a Fund
must distribute at least 90% of its investment company
taxable income (in brief, net investment income and the
excess of net short-term capital gain over net long-term
capital loss) for the taxable year. A Fund must also
satisfy certain other requirements of the Internal Revenue
Code, some of which are described below. Distributions by a
Fund made during the taxable year or, under specified
circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income
and gains for the taxable year and will therefore count
toward satisfaction of the above-mentioned requirement.
To qualify as a regulated investment company, a Fund
must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to
securities loans, gains from the sale or other disposition
of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated
investment company's principal business of investing in
stock or securities) and certain other income.
In addition to satisfying the requirements described
above, a Fund must satisfy an asset diversification test in
order to qualify as a regulated investment company. Under
that test, at the close of each quarter of a Fund's taxable
year, at least 50% of the value of a Fund's assets must
consist of cash and cash items (including receivables),
U.S. government securities, securities of other regulated
investment companies, and securities of other issuers. As
to each of those issuers, a Fund must not have invested
more than 5% of the value of a Fund's total assets in
securities of each such issuer and a Fund must not hold
more than 10% of the outstanding voting securities of each
such issuer. No more than 25% of the value of its total
assets may be invested in the securities of any one issuer
(other than U.S. government securities and securities of
other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in
the same or similar trades or businesses. For purposes of
this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are
treated as U.S. government securities.
|X| Excise Tax on Regulated Investment Companies.
Under the Internal Revenue Code, by December 31 each year,
a Fund must distribute 98% of its taxable investment income
earned from January 1 through December 31 of that year and
98% of its capital gains realized in the period from
November 1 of the prior year through October 31 of the
current year. If it does not, a Fund must pay an excise tax
on the amounts not distributed. It is presently anticipated
that the Funds will meet those requirements. To meet this
requirement, in certain circumstances a Fund might be
required to liquidate portfolio investments to make
sufficient distributions to avoid excise tax liability.
However, the Board of Trustees and the Manager might
determine in a particular year that it would be in the best
interests of shareholders for a Fund not to make such
distributions at the required levels and to pay the excise
tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for
distribution to shareholders.
|X| Taxation of Fund Distributions. A Fund
anticipates distributing substantially all of its
investment company taxable income for each taxable year.
Those distributions will be taxable to shareholders as
ordinary income and treated as dividends for federal income
tax purposes.
Special provisions of the Internal Revenue Code
govern the eligibility of a Fund's dividends for the
dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for
the deduction. The amount of dividends paid by a Fund that
may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that a Fund derives from
portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not
be eligible for the deduction on dividends paid on Fund
shares held for 45 days or less. To the extent a Fund's
dividends are derived from gross income from option
premiums, interest income or short-term gains from the sale
of securities or dividends from foreign corporations, those
dividends will not qualify for the deduction.
The Fund may either retain or distribute to
shareholders its net capital gain for each taxable year.
The Fund currently intends to distribute any such amounts.
If net long term capital gains are distributed and
designated as a capital gain distribution, it will be
taxable to shareholders as a long-term capital gain and
will be properly identified in reports sent to shareholders
in January of each year. Such treatment will apply no
matter how long the shareholder has held his or her shares
or whether that gain was recognized by the Fund before the
shareholder acquired his or her shares.
If the Fund elects to retain its net capital gain,
the Fund will be subject to tax on it at the 35% corporate
tax rate. If the Fund elects to retain its net capital
gain, the Fund will provide to shareholders of record on
the last day of its taxable year information regarding
their pro rata share of the gain and tax paid. As a result,
each shareholder will be required to report his or her pro
rata share of such gain on their tax return as long-term
capital gain, will receive a refundable tax credit for
his/her pro rata share of tax paid by the Fund on the gain,
and will increase the tax basis for his/her shares by an
amount equal to the deemed distribution less the tax credit.
Investment income that may be received by the Fund
from sources within foreign countries may be subject to
foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from,
taxes on such income.
Distributions by the Fund that do not constitute
ordinary income dividends or capital gain distributions
will be treated as a return of capital to the extent of the
shareholder's tax basis in their shares. Any excess will be
treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or
deemed made) during the year. If prior distributions made
by the Fund must be re-characterized as a non-taxable
return of capital at the end of the fiscal year as a result
of the effect of the Fund's investment policies, they will
be identified as such in notices sent to shareholders.
Distributions by the Fund will be treated in the
manner described above regardless of whether the
distributions are paid in cash or reinvested in additional
shares of the Fund (or of another fund). Shareholders
receiving a distribution in the form of additional shares
will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received,
determined as of the reinvestment date.
The Fund will be required in certain cases to
withhold 30% (29% for payments after December 31, 2003) of
ordinary income dividends, capital gains distributions and
the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct
-------
taxpayer identification number or to properly certify that
number when required, (2) who is subject to backup
withholding for failure to report the receipt of interest
or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to
backup withholding or is an "exempt recipient" (such as a
corporation). All income and any tax withheld by the Fund
is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of
each year.
|X| Tax Effects of Redemptions of Shares. If a
shareholder redeems all or a portion of his/her shares, the
shareholder will recognize a gain or loss on the redeemed
shares in an amount equal to the difference between the
proceeds of the redeemed shares and the shareholder's
adjusted tax basis in the shares. All or a portion of any
loss recognized in that manner may be disallowed if the
shareholder purchases other shares of the Fund within 30
days before or after the redemption.
In general, any gain or loss arising from the
redemption of shares of the Fund will be considered capital
gain or loss, if the shares were held as a capital asset.
It will be long-term capital gain or loss if the shares
were held for more than one year. However, any capital loss
arising from the redemption of shares held for six months
or less will be treated as a long-term capital loss to the
extent of the amount of capital gain dividends received on
those shares. Special holding period rules under the
Internal Revenue Code apply in this case to determine the
holding period of shares and there are limits on the
deductibility of capital losses in any year.
|X| Foreign Shareholders. Under U.S. tax law,
taxation of a shareholder who is a foreign person (to
include, but not limited to, a nonresident alien
individual, a foreign trust, a foreign estate, a foreign
corporation, or a foreign partnership) primarily depends on
whether the foreign person's income from the Fund is
effectively connected with the conduct of a U.S. trade or
business. Typically, ordinary income dividends paid from a
mutual fund are not considered "effectively connected"
income.
Ordinary income dividends that are paid by the Fund
(and are deemed not "effectively connected income") to
foreign persons will be subject to a U.S. tax withheld by
the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign
Status. The tax rate may be reduced if the foreign person's
country of residence has a tax treaty with the U.S.
allowing for a reduced tax rate on ordinary income
dividends paid by the Fund. All income and any tax withheld
by the Fund is remitted by the Fund to the U.S. Treasury
and is identified in reports mailed to shareholders in
March of each year.
If the ordinary income dividends from the Fund are
---
effectively connected with the conduct of a U.S. trade or
business, then the foreign person may claim an exemption
from the U.S. tax described above provided the Fund obtains
a properly completed and signed Certificate of Foreign
Status.
If the foreign person fails to provide a
certification of his/her foreign status, the Fund will be
required to withhold U.S. tax at a rate of 30% (29% for
payments after December 31, 2003) on ordinary income
dividends, capital gains distributions and the proceeds of
the redemption of shares, paid to any foreign person. All
income and any tax withheld (in this situation) by the Fund
is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of
each year.
The tax consequences to foreign persons entitled to
claim the benefits of an applicable tax treaty may be
different from those described herein. Foreign shareholders
are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax
consequences to them of an investment in the Funds,
including the applicability of the U.S. withholding taxes
described above.
Dividend Reinvestment in Another Fund. Shareholders of the
Fund may elect to reinvest all dividends and/or capital
gains distributions in shares of the same class of any of
the other Oppenheimer funds listed above. Reinvestment will
be made without sales charge at the net asset value per
share in effect at the close of business on the payable
date of the dividend or distribution. To elect this option,
the shareholder must notify the Transfer Agent in writing
and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a
prospectus for that fund and an application from the
Distributor to establish an account. Dividends and/or
distributions from shares of certain other Oppenheimer
funds (other than Oppenheimer Cash Reserves) may be
invested in shares of these Funds on the same basis.
Additional Information About the Fund
The Distributor. Each Fund's shares are sold through
dealers, brokers and other financial institutions that have
a sales agreement with OppenheimerFunds Distributor, Inc.,
a subsidiary of the Manager that acts as the Funds'
Distributor. The Distributor also distributes shares of the
other Oppenheimer funds and is sub-distributor for funds
managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Funds'
Transfer Agent, is a division of the Manager. It is
responsible for maintaining the Funds' shareholder registry
and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also
handles shareholder servicing and administrative functions.
It serves as the Transfer Agent for an annual per account
fee. It also acts as shareholder servicing agent for the
other Oppenheimer funds. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the
address and toll-free numbers shown on the back cover.
The Custodian. Citibank, N.A. is the custodian of each
Fund's assets. The custodian's responsibilities include
safeguarding and controlling each Fund's portfolio
securities and handling the delivery of such securities to
and from each Fund. It is the practice of each Fund to deal
with the custodian in a manner uninfluenced by any banking
relationship the custodian may have with the Manager and
its affiliates. Each Fund's cash balances with the
custodian in excess of $100,000 are not protected by
federal deposit insurance. Those uninsured balances at
times may be substantial.
Independent Auditors. Deloitte amp;amp; Touche, LLP are the
independent auditors of each Fund. They audit each Fund's
financial statements and perform other related audit
services. They also act as auditors for [the Manager and
for certain other funds advised by the Manager and its
affiliates.
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Board of Trustees and Shareholders of
Oppenheimer Select Managers Jennison Growth Fund:
We have audited the accompanying statement of assets and
liabilities of
Oppenheimer Select Managers Jennison Growth Fund, 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 Jennison Growth Fund 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 amp; Touche LLP
-------------------------
Deloitte amp; Touche LLP
Denver, Colorado
December 20, 2002
STATEMENT OF INVESTMENTS November 30, 2002
Market Value
Shares See Note 1
===============================================================================
Common Stocks--93.1%
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Consumer Discretionary--22.9%
- -------------------------------------------------------------------------------
Automobiles--1.5%
Harley-Davidson, Inc.
3,100 $ 150,474
- -------------------------------------------------------------------------------
Hotels, Restaurants amp; Leisure--2.6%
Marriott International, Inc., Cl. A
4,200 150,150
- -------------------------------------------------------------------------------
Starbucks Corp. 1
4,700 102,178
- ----------
252,328
- -------------------------------------------------------------------------------
Internet amp; Catalog Retail--0.7%
USA Interactive, Inc. 1
2,500 69,500
- -------------------------------------------------------------------------------
Media--6.4%
Clear Channel Communications, Inc.
1 300 13,038
- -------------------------------------------------------------------------------
New York Times Co., Cl. A
2,800 134,512
- -------------------------------------------------------------------------------
Omnicom Group,
Inc. 900
61,245
- -------------------------------------------------------------------------------
Univision Communications, Inc., Cl. A 1
4,800 154,272
- -------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1
5,700 267,957
- ----------
631,024
- -------------------------------------------------------------------------------
Multiline Retail--7.1%
Costco Wholesale Corp. 1
4,200 135,660
- -------------------------------------------------------------------------------
Kohl's Corp. 1
4,000 274,000
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc.
5,200 281,632
- ----------
691,292
- -------------------------------------------------------------------------------
Specialty Retail--4.6%
Bed Bath amp; Beyond, Inc. 1
4,900 169,981
- -------------------------------------------------------------------------------
Lowe's Cos., Inc.
3,700 153,550
- -------------------------------------------------------------------------------
Tiffany amp; Co.
4,500 127,710
- ----------
451,241
- -------------------------------------------------------------------------------
Consumer Staples--5.5%
- -------------------------------------------------------------------------------
Beverages--2.3%
Anheuser-Busch Cos., Inc.
2,300 112,976
- -------------------------------------------------------------------------------
Coca-Cola Co. (The)
2,500 114,100
- ----------
227,076
- -------------------------------------------------------------------------------
Food amp; Drug Retailing--1.1%
Walgreen Co.
3,600 103,644
- -------------------------------------------------------------------------------
Household Products--1.1%
Procter amp; Gamble Corp. (The)
1,300 109,200
- -------------------------------------------------------------------------------
Personal Products--1.0%
Gillette Co.
3,400 103,088
9 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
STATEMENT OF INVESTMENTS CONTINUED
Market Value
Shares See Note 1
- -------------------------------------------------------------------------------
ENERGY--4.1%
- -------------------------------------------------------------------------------
Energy Equipment amp; Services--2.3%
Schlumberger Ltd.
5,000 $ 221,250
- -------------------------------------------------------------------------------
Oil amp; Gas--1.8%
TotalFinaElf SA, Sponsored ADR
2,700 180,225
- -------------------------------------------------------------------------------
Financials--16.0%
- -------------------------------------------------------------------------------
Banks--1.6%
Bank One Corp.
3,900 154,011
- -------------------------------------------------------------------------------
Diversified Financials--8.8%
American Express Co.
5,800 225,794
- -------------------------------------------------------------------------------
Citigroup, Inc.
7,100 276,048
- -------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The)
2,500 197,175
- -------------------------------------------------------------------------------
Merrill Lynch amp; Co., Inc.
3,600 156,600
- ----------
855,617
- -------------------------------------------------------------------------------
Insurance--5.6%
American International Group, Inc.
4,500 293,175
- -------------------------------------------------------------------------------
Hartford Financial Services Group, Inc.
2,400 117,744
- -------------------------------------------------------------------------------
XL Capital Ltd., Cl. A
1,700 140,658
- ----------
551,577
- -------------------------------------------------------------------------------
Health Care--15.5%
- -------------------------------------------------------------------------------
Biotechnology--5.8%
Amgen, Inc. 1
4,800 226,560
- -------------------------------------------------------------------------------
Genentech, Inc. 1
3,200 105,600
- -------------------------------------------------------------------------------
Medimmune, Inc. 1
2,700 71,226
- -------------------------------------------------------------------------------
Wyeth
4,300 165,249
- ----------
568,635
- -------------------------------------------------------------------------------
Health Care Providers amp; Services--1.7%
- -------------------------------------------------------------------------------
AmerisourceBergen Corp.
1,500 87,030
- -------------------------------------------------------------------------------
UnitedHealth Group, Inc.
1,000 81,450
- ----------
168,480
- -------------------------------------------------------------------------------
Pharmaceuticals--8.0%
Abbott Laboratories
5,100 223,278
- -------------------------------------------------------------------------------
Johnson amp; Johnson
4,500 256,590
- -------------------------------------------------------------------------------
Pfizer, Inc.
3,300 104,082
- -------------------------------------------------------------------------------
Pharmacia Corp.
3,400 143,820
- -------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.,
ADR 600 47,436
- ----------
775,206
10 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
Market Value
Shares See Note 1
- -------------------------------------------------------------------------------
Industrials--5.1%
- -------------------------------------------------------------------------------
Aerospace amp; Defense--3.1%
Boeing Co.
1,400 $ 47,600
- -------------------------------------------------------------------------------
Lockheed Martin Corp.
2,100 109,620
- -------------------------------------------------------------------------------
Northrop Grumman Corp.
1,500 145,365
- ----------
302,585
- -------------------------------------------------------------------------------
Industrial Conglomerates--2.0%
3M Co.
1,500 194,775
- -------------------------------------------------------------------------------
Information Technology--21.1%
- -------------------------------------------------------------------------------
Communications Equipment--3.7%
Cisco Systems, Inc. 1
16,200 241,704
- -------------------------------------------------------------------------------
Nokia Corp., Sponsored ADR, A Shares
6,400 122,944
- ----------
364,648
- -------------------------------------------------------------------------------
Computers amp; Peripherals--5.7%
Dell Computer Corp. 1
7,400 211,640
- -------------------------------------------------------------------------------
Hewlett-Packard Co.
11,400 222,072
- -------------------------------------------------------------------------------
International Business Machines Corp.
1,400 121,940
- ----------
555,652
- -------------------------------------------------------------------------------
Semiconductor Equipment amp; Products--7.7%
Applied Materials, Inc. 1
5,900 100,595
- -------------------------------------------------------------------------------
Intel Corp.
11,500 240,120
- -------------------------------------------------------------------------------
Novellus Systems, Inc. 1
1,600 58,064
- -------------------------------------------------------------------------------
STMicroelectronics NV, NY Registered Shares
2,100 53,340
- -------------------------------------------------------------------------------
Texas Instruments, Inc.
8,400 168,924
- -------------------------------------------------------------------------------
Xilinx, Inc. 1
5,200 128,128
- ----------
749,171
- -------------------------------------------------------------------------------
Software--4.0%
Microsoft Corp. 1
6,800 392,224
- -------------------------------------------------------------------------------
Materials--2.9%
- -------------------------------------------------------------------------------
Paper amp; Forest Products--2.9%
International Paper Co.
4,400 172,700
- -------------------------------------------------------------------------------
Weyerhaeuser Co.
2,200 115,720
- ----------
288,420
- ----------
Total Common Stocks (Cost
$9,333,773) 9,111,343
11 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
STATEMENT OF INVESTMENTS CONTINUED
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
===============================================================================
JOINT REPURCHASE AGREEMENTS--6.8%
Undivided interest of 0.15% in joint repurchase
agreement (Market Value $453,323,000) with Banc
One Capital Markets, Inc., 1.29%, dated 11/29/02,
to be repurchased at $668,072 on 12/2/02,
collateralized by U.S. Treasury Nts.,
1.875%--7%, 3/31/03--8/15/11, with A value of
$408,234,710 and U.S. Treasury Bonds,
6.25%--10.625%, 8/15/15--8/15/23, with a
value of $55,304,803 (Cost $668,000)
$668,000 $668,000
- -------------------------------------------------------------------------------
Total Investments, at Value (Cost $10,001,773)
99.9% 9,779,343
- -------------------------------------------------------------------------------
Other Assets Net of Liabilities
0.1 5,435
- -------------------------
Net Assets
100.0% $9,784,778
=========================
Footnotes to Statement of Investments
1. Non-income producing security.
See accompanying Notes to Financial Statements.
12 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 2002
===============================================================================
ASSETS
Investments, at value (cost $10,001,773)
--see accompanying
statement $9,779,343
- -------------------------------------------------------------------------------
Cash
6,609
- -------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold
46,231
Shares of beneficial interest
sold 24,190
Interest and
dividends
10,446
Other
1,098
- ----------
Total
assets
9,867,917
===============================================================================
Liabilities
Payables and other liabilities:
Investments
purchased
58,629
Shareholder
reports
7,595
Legal, auditing and other professional
fees 7,660
Transfer and shareholder servicing agent
fees 4,774
Distribution and service plan
fees 1,719
Shares of beneficial interest
redeemed 796
Trustees'
compensation
338
Other
1,628
- ----------
Total
liabilities
83,139
===============================================================================
Net
Assets
$9,784,778
==========
===============================================================================
Composition of Net Assets
Paid-in
capital
$12,581,386
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment
transactions (2,574,178)
- -------------------------------------------------------------------------------
Net unrealized depreciation on
investments (222,430)
- ----------
Net
Assets
$9,784,778
==========
13 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH 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 $4,980,878 and 767,137 shares of beneficial
interest
outstanding)
$6.49
Maximum offering price per share (net asset
value plus sales charge of 5.75% of offering
price) $6.89
- -------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $1,296,032 and 202,489 shares
of beneficial interest
outstanding) $6.40
- -------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $2,194,281 and 343,031 shares
of beneficial interest
outstanding) $6.40
- -------------------------------------------------------------------------------
Class N Shares: Net asset value, redemption price
(excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $1,312,936
and 203,494 shares of beneficial interest
outstanding) $6.45
- -------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share
(based on net assets of $651 and 100 shares of beneficial
interest
outstanding)
$6.51
See accompanying Notes to Financial Statements.
14 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 2002
===============================================================================
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of
$375) $ 65,038
- -------------------------------------------------------------------------------
Interest
8,646
- -----------
Total investment
income
73,684
===============================================================================
Expenses
Management
fees
76,321
- -------------------------------------------------------------------------------
Distribution and service plan fees:
Class
A
2,332
Class
B
6,176
Class
C
15,244
Class
N
5,143
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class
A
21,939
Class
B
4,300
Class
C
7,131
Class
N
6,931
Class
Y
867
- -------------------------------------------------------------------------------
Shareholder
reports
18,192
- -------------------------------------------------------------------------------
Legal, auditing and other professional
fees 10,669
- -------------------------------------------------------------------------------
Trustees'
compensation
3,864
- -------------------------------------------------------------------------------
Custodian fees and
expenses 32
- -------------------------------------------------------------------------------
Other
2,689
- -----------
Total
expenses
181,830
Less voluntary reimbursement of
expenses (30,828)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Classes A, B, C and
N (10,920)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class
Y (863)
- -----------
Net
expenses
139,219
===============================================================================
Net Investment
Loss
(65,535)
===============================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
(1,916,063)
Closing and expiration of option contracts
written 754
- -----------
Net realized
loss
(1,915,309)
- -------------------------------------------------------------------------------
Net change in unrealized depreciation on
investments (167,888)
- -----------
Net realized and unrealized
loss (2,083,197)
===============================================================================
Net Decrease in Net Assets Resulting from
Operations $(2,148,732)
============
See accompanying Notes to Financial Statements.
15 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER
30, 2002 2001 1
==============================================================================
OPERATIONS
Net investment loss $
(65,535) $ (24,066)
- ------------------------------------------------------------------------------
Net realized loss
(1,915,309) (658,869)
- ------------------------------------------------------------------------------
Net change in unrealized depreciation
(167,888) (54,542)
- ----------------------
Net decrease in net assets resulting from operations
(2,148,732) (737,477)
==============================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial
interest transactions:
Class A
1,078,766 5,943,697
Class B
1,055,537 372,738
Class C
1,628,681 952,832
Class N
1,252,822 368,914
Class
Y
- -- --
==============================================================================
Net Assets
Total increase
2,867,074 6,900,704
Beginning of period
6,917,704 17,000 2
- ----------------------
End of period
$9,784,778 $6,917,704
======================
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.
16 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
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 $8.56
$10.00 $8.50 $10.00 $8.49 $10.00
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.04)
(.03) (.02) (.06) (.06) (.02)
Net realized and unrealized loss (2.03)
(1.41) (2.08) (1.44) (2.03) (1.49)
- --------------------------------------------------------
Total from investment operations (2.07)
(1.44) (2.10) (1.50) (2.09) (1.51)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period $6.49
$8.56 $6.40 $8.50 $6.40 $8.49
========================================================
=================================================================================================
Total Return, at Net Asset Value 2 (24.18)% (14.40)%
(24.71)% (15.00)% (24.62)% (15.10)%
=================================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $4,981 $5,234
$1,296 $354 $2,194 $968
- -------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,862 $4,683
$ 620 $221 $1,528 $232
- -------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.59)%
(0.50)% (1.29)% (1.37)% (1.32)% (1.31)%
Expenses 1.89%
1.44% 3.08% 2.45% 2.86% 2.46%
Expenses, net of voluntary reimbursement
of expenses and/or voluntary waiver of
transfer agent fees 1.39%
1.44% 2.51% 2.24% 2.31% 2.10%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 77%
56% 77% 56% 77% 56%
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.
17 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
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 $
8.52 $9.45 $ 8.57 $10.00
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss
(.05) (.02) (.03) (.03)
Net realized and unrealized loss
(2.02) (.91) (2.03) (1.40)
- -------------------------------------
Total from investment operations
(2.07) (.93) (2.06) (1.43)
- ----------------------------------------------------------------------------------------
Net asset value, end of period
$6.45 $8.52 $6.51 $ 8.57
=====================================
========================================================================================
Total Return, at Net Asset Value 3
(24.30)% (9.84)% (24.04)% (14.30)%
========================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)
$1,313 $361 $1 $1
- ----------------------------------------------------------------------------------------
Average net assets (in thousands)
$1,031 $122 $1 $1
- ----------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss
(0.82)% (0.90)% (0.41)% (0.38)%
Expenses
2.56% 1.98% 88.09% 501.48%
Expenses, net of voluntary reimbursement
of expenses and/or voluntary waiver of
transfer agent fees
2.01% 1.71% 1.43% 1.25%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate
77% 56% 77% 56%
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.
18 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Select Managers Jennison Growth Fund (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 growth of
capital. The Fund's
investment advisor is OppenheimerFunds, Inc. (the
Manager). The Manager has
entered into a sub-advisory agreement with Jennison
Associates LLC (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.
19 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
As of November 30, 2002, the Fund had available for
federal income tax purposes
unused capital loss carryforwards as follows:
Expiring
----------------------
2009 $ 637,074
2010 1,804,042
Total $2,441,116
==========
As of November 30, 2002, the Fund had approximately
$110,000 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 a
decrease in paid-in capital of $65,535. 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.
20 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
As of November 30, 2002, the components of distributable
earnings on a tax
basis were as follows:
Accumulated net realized loss
$(2,574,178)
Net unrealized depreciation
(222,430)
- ------------
Total
$(2,796,608)
============
- --------------------------------------------------------------------------------
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.
21 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
================================================================================
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 215,428 $1,516,617
618,231 $6,011,437
Redeemed (59,923) (437,851)
(7,999) (67,740)
- -------------------------------------------------------
Net increase 155,505 $1,078,766
610,232 $5,943,697
=======================================================
- --------------------------------------------------------------------------------
Class B
Sold 178,140 $1,172,929
53,558 $ 474,235
Redeemed (17,259) (117,392)
(12,050) (101,497)
- -------------------------------------------------------
Net increase 160,881 $1,055,537
41,508 $ 372,738
=======================================================
- --------------------------------------------------------------------------------
Class C
Sold 261,409 $1,843,044
117,610 $ 985,629
Redeemed (32,313) (214,363)
(3,775) (32,797)
- -------------------------------------------------------
Net increase 229,096 $1,628,681
113,835 $ 952,832
=======================================================
- --------------------------------------------------------------------------------
Class N
Sold 193,853 $1,476,441
43,880 $ 380,385
Redeemed (32,720) (223,619)
(1,519) (11,471)
- -------------------------------------------------------
Net increase 161,133 $1,252,822
42,361 $ 368,914
=======================================================
- --------------------------------------------------------------------------------
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
$10,389,327 and $5,857,931, respectively.
As of November 30, 2002, unrealized appreciation
(depreciation) based on cost of
securities for federal income tax purposes of $10,024,841
was composed of:
Gross unrealized appreciation $
266,294
Gross unrealized depreciation
(511,792)
- ----------
Net unrealized depreciation
$(245,498)
==========
22 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
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 which provides
for a fee at an
annual rate of 0.95% of the first $300 million of average
annual net assets of
the Fund and 0.90% of average annual net assets in excess
of $300 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 Jennison
Associates LLC 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 $35,059 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 $34,373 $10,966
$1,016 $38,831 $15,462 $12,938
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.
23 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
NOTES TO FINANCIAL STATEMENTS CONTINUED
4. Fees and Other Transactions with Affiliates CONTINUED
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
- -------------------------------------------------------------------------------
November 30, 2002 $-- $3,447
$546 $530
- --------------------------------------------------------------------------------
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 $2,332, all of which were paid by
the Distributor to
recipients, and included $349 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 November 30, 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 $ 6,176 $ 5,596 $
64,956 5.01%
Class C Plan 15,244 12,258
315,521 14.38
Class N Plan 5,143 4,763
111,848 8.52
================================================================================
5. Option Activity
The Fund may buy and sell put and call options, or write
put and covered call
options on portfolio securities in order to produce
incremental earnings or
protect against changes in the value of portfolio
securities.
The Fund generally purchases put options or writes
covered call options to
hedge against adverse movements in the value of portfolio
holdings. When an
option is written, the Fund receives a premium and becomes
obligated to sell or
purchase the underlying security at a fixed price, upon
exercise of the option.
24 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
Options are valued daily based upon the last sale price
on the principal
exchange on which the option is traded and unrealized
appreciation or
depreciation is recorded. The Fund will realize a gain or
loss upon the
expiration or closing of the option transaction. When an
option is exercised,
the proceeds on sales for a written call option, the
purchase cost for a written
put option, or the cost of the security for a purchased put
or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options
are noted in the
Statement of Investments where applicable. Shares subject
to call, expiration
date, exercise price, premium received and market value are
detailed in a note
to the Statement of Investments. Options written are
reported as a liability in
the Statement of Assets and Liabilities. Realized gains and
losses are reported
in the Statement of Operations.
The risk in writing a call option is that the Fund gives
up the opportunity
for profit if the market price of the security increases
and the option is
exercised. The risk in writing a put option is that the
Fund may incur a loss if
the market price of the security decreases and the option
is exercised. The risk
in buying an option is that the Fund pays a premium whether
or not the option is
exercised. The Fund also has the additional risk of not
being able to enter into
a closing transaction if a liquid secondary market does not
exist.
Written option activity for the year ended November 30,
2002 was as follows:
Call Options
------------------------
Number of Amount of
Contracts Premiums
- -----------------------------------------------------
Options outstanding as of
November 30, 2001 -- $ --
Options written 18 2,919
Options closed or expired (18) (2,919)
------------------------
Options outstanding as of
November 30, 2002 -- $ --
========================
================================================================================
6. 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.
25 | oppenheimer select managers
Jennison Growth Fund
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
6. Borrowing and Lending Arrangements Continued
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.
26 | OPPENHEIMER SELECT MANAGERS
JENNISON GROWTH FUND
License Agreement. Under a separate agreement, Merrill
Lynch affiliates have granted the Trust, on behalf of the
OSM - Mercury Advisors Samp;amp;P 500 Index Fund and the OSM -
Mercury Advisors Focus Growth Fund, the right to use the
"Mercury" name and has reserved the right to withdraw its
consent to the use of such name by either Fund under
certain circumstances or to grant the use of such name to
any other company.
Financial Statements. The audited financial statements for
the Master Focus Twenty Trust are incorporated in this
Statement of Additional Information by reference to the
2002 annual report to shareholders of Mercury Focus Twenty
Fund, Inc. You may request a copy of that annual report at
no charge by calling 888.763.2260 between 8:00 a.m. and
8:00 p.m. Eastern time on any business day. The audited
financial statements for the Quantitative Master Series
Trust - Master Samp;amp;P 500 Index Series are incorporated in
this Statement of Additional Information by reference to
the 2002 annual report to shareholders of the Quantitative
Master Series Trust - Master Samp;amp;P 500 Index Series, and the
unaudited financial statements for the Quantitative Master
Series Trust - Master Samp;amp;P 500 Index Series are incorporated
in this Statement of Additional Information by reference to
the June 30, 2002 semi-annual report to shareholders of the
Quantitative Master Series Trust - Master Samp;amp;P 500 Index
Series. You may request a copy of that annual and
semi-annual report at no charge by calling 888.763.2260
between 8:00 a.m. and 8:00 p.m. Eastern time on any
business day.
Appendix A
Ratings Definitions
Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those
ratings represent the opinion of the agency as to the
credit quality of issues that they rate. The summaries
below are based upon publicly-available information
provided by the rating organizations.
Moody's Investors Service, Inc. ("Moody's")
LONG-TERM (TAXABLE) BOND RATINGS
Aaa: Bonds rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, the changes that
can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise
what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as with "Aaa" securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than that of
"Aaa" securities.
A: Bonds rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some
time in the future.
Baa: Bonds rated "Baa" are considered medium-grade
obligations; that is, they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative
elements. Their future cannot be considered well-assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of
danger with respect to principal or interest.
Ca: Bonds rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C: Bonds rated "C" are the lowest class of rated bonds and
can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from "Aa" through "Caa." The
modifier "1" indicates that the obligation ranks in the
higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3"
indicates a ranking in the lower end of that generic rating
category. Advanced refunded issues that are secured by
certain assets are identified with a # symbol.
SHORT-TERM RATINGS - TAXABLE DEBT
These ratings apply to the ability of issuers to honor
senior debt obligations having an original maturity not
exceeding one year:
Prime-1: Issuer has a superior ability for repayment of
senior short-term debt obligations.
Prime-2: Issuer has a strong ability for repayment of
senior short-term debt obligations. Earnings trends and
coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of
senior short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating
category.
Standard amp;amp; Poor's Ratings Services ("Standard amp;amp; Poor's"), a
division of The McGraw-Hill Companies, Inc.
LONG-TERM ISSUE CREDIT RATINGS
AAA: Bonds rated "AAA" have the highest rating assigned by
Standard amp;amp; Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA: Bonds rated "AA" differ from the highest rated bonds
only in small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: Bonds rated "BBB" exhibit adequate protection
parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial
commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated `BB', `B', `CCC', `CC', and `C' are
regarded as having significant speculative characteristics.
`BB' indicates the least degree of speculation and `C' the
highest. While such obligations will likely have some
quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to
adverse conditions.
BB: Bonds rated "BB" are less vulnerable to nonpayment than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial,
or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.
B: Bonds rated "B" are more vulnerable to nonpayment than
bonds rated "BB", but the obligor currently has the
capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the
obligation.
CCC: Bonds rated "CCC" are currently vulnerable to
nonpayment, and are dependent upon favorable business,
financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its
financial commitment on the obligation.
CC: Bonds rated "CC" are currently highly vulnerable to
nonpayment.
C: Subordinated debt or preferred stock obligations rated
"C" are currently highly vulnerable to nonpayment. The "C"
rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but
payments on this obligation are being continued. A "C" also
will be assigned to a preferred stock issue in arrears on
dividends or sinking fund payments, but that is currently
paying.
D: Bonds rated "D" are in payment default. The "D" rating
category is used when payments on an obligation are not
made on the date due even if the applicable grace period
has not expired, unless Standard amp;amp; Poor's believes that
such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
The ratings from "AA" to "CCC" may be modified by the
addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. The "r" symbol
is attached to the ratings of instruments with significant
noncredit risks.
SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term bond rated "A-1" is rated in the highest
category by Standard amp;amp; Poor's. The obligor's capacity to
meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's
capacity to meet its financial commitment on these
obligations is extremely strong.
A-2: A short-term bond rated "A-2" is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity
to meet its financial commitment on the obligation is
satisfactory.
A-3: A short-term bond rated "A-3" exhibits adequate
protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial
commitment on the obligation.
B: A short-term bond rated "B" is regarded as having
significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment
on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
C: A short-term bond rated "C" is currently vulnerable to
nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D: A short-term bond rated "D" is in payment default. The
"D" rating category is used when payments on an obligation
are not made on the date due even if the applicable grace
period has not expired, unless Standard amp;amp; Poor's believes
that such payments will be made during such grace period.
The "D" rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Fitch, Inc.
INTERNATIONAL LONG-TERM CREDIT RATINGS
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the
lowest expectation of credit risk. They are assigned only
in the case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very
low expectation of credit risk. They indicate a very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.
A: High Credit Quality. "A" ratings denote a low
expectation of credit risk. The capacity for timely payment
of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes
in circumstances or in economic conditions than is the case
for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there
is currently a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a
possibility of credit risk developing, particularly as the
result of adverse economic change over time. However,
business or financial alternatives may be available to
allow financial commitments to be met. Securities rated in
this category are not investment grade.
B: Highly Speculative. "B" ratings indicate that
significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being
met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic
environment.
CCC, CC C: High Default Risk. Default is a real
possibility. Capacity for meeting financial commitments is
solely reliant upon sustained, favorable business or
economic developments. A "CC" rating indicates that default
of some kind appears probable. "C" ratings signal imminent
default.
DDD, DD, and D: Default. The ratings of obligations in this
category are based on their prospects for achieving partial
or full recovery in a reorganization or liquidation of the
obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the
following serve as general guidelines. "DDD" obligations
have the highest potential for recovery, around 90%-100% of
outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50%-90%, and "D" the
lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or
all of their obligations. Entities rated "DDD" have the
highest prospect for resumption of performance or continued
operation with or without a formal reorganization process.
Entities rated "DD" and "D" are generally undergoing a
formal reorganization or liquidation process; those rated
"DD" are likely to satisfy a higher portion of their
outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating
symbol to denote relative status within the major rating
categories. Plus and minus signs are not added to the "AAA"
category or to categories below "CCC," nor to short-term
ratings other than "F1" (see below).
INTERNATIONAL SHORT-TERM CREDIT RATINGS
F1: Highest credit quality. Strongest capacity for timely
payment of financial commitments. May have an added "+" to
denote any exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely
payment of financial commitments, but the margin of safety
is not as great as in the case of higher ratings.
F3: Fair credit quality. Capacity for timely payment of
financial commitments is adequate. However, near-term
adverse changes could result in a reduction to
non-investment grade.
B: Speculative. Minimal capacity for timely payment of
financial commitments, plus vulnerability to near-term
adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility.
Capacity for meeting financial commitments is solely
reliant upon a sustained, favorable business and economic
environment.
D: Default. Denotes actual or imminent payment default.
Appendix B
Industry Classifications
Aerospace amp;amp; Defense Household Products
Air Freight amp;amp; Couriers Industrial Conglomerates
Airlines Insurance
Auto Components Internet amp;amp; Catalog Retail
Automobiles Internet Software amp;amp; Services
Banks Information Technology Consulting amp;amp;
Services
Beverages Leisure Equipment amp;amp; Products
Biotechnology Machinery
Building Products Marine
Chemicals Media
Commercial Services amp;amp; Supplies Metals amp;amp; Mining
Communications Equipment Multiline Retail
Computers amp;amp; Peripherals Multi-Utilities
Construction amp;amp; Engineering Office Electronics
Construction Materials Oil amp;amp; Gas
Containers amp;amp; Packaging Paper amp;amp; Forest Products
Distributors Personal Products
Diversified Financials Pharmaceuticals
Diversified Telecommunication Services Real Estate
Electric Utilities Road amp;amp; Rail
Electrical Equipment Semiconductor Equipment amp;amp; Products
Electronic Equipment amp;amp; Instruments Software
Energy Equipment amp;amp; Services Specialty Retail
Food amp;amp; Drug Retailing Textiles amp;amp; Apparel
Food Products Tobacco
Gas Utilities Trading Companies amp;amp; Distributors
Health Care Equipment amp;amp; Supplies Transportation Infrastructure
Health Care Providers amp;amp; Services Water Utilities
Hotels Restaurants amp;amp; Leisure Wireless Telecommunication Services
Household Durables
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and
Waivers
In certain cases, the initial sales charge that applies to
purchases of Class A shares1 of the Oppenheimer funds or
the contingent deferred sales charge that may apply to
Class A, Class B or Class C shares may be waived.2 That is
because of the economies of sales efforts realized by
OppenheimerFunds Distributor, Inc., (referred to in this
document as the "Distributor"), or by dealers or other
financial institutions that offer those shares to certain
classes of investors.
Not all waivers apply to all funds. For example, waivers
relating to Retirement Plans do not apply to Oppenheimer
municipal funds, because shares of those funds are not
available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and
in the Prospectus and Statement of Additional Information
of the applicable Oppenheimer funds, the term "Retirement
Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k)
of the Internal Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans3
4) Group Retirement Plans4
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"),
including traditional IRAs, Roth IRAs,
SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the
applicability of a special arrangement or waiver in a
particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this
document as the "Transfer Agent") of the particular
Oppenheimer fund. These waivers and special arrangements
may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc.
(referred to in this document as the "Manager").
Waivers that apply at the time shares are redeemed must be
requested by the shareholder and/or dealer in the
redemption request.
I. Applicability of Class A Contingent Deferred Sales Charges
in Certain Cases
- ------------------------------------------------------------
Purchases of Class A Shares of Oppenheimer Funds That Are
Not Subject to Initial Sales Charge but May Be Subject to
the Class A Contingent Deferred Sales Charge (unless a
waiver applies).
There is no initial sales charge on purchases of
Class A shares of any of the Oppenheimer funds in the cases
listed below. However, these purchases may be subject to
the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer
Rochester National Municipals and Rochester Fund
Municipals) of the beginning of the calendar month of their
purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these
waivers that are subject to the Class A contingent deferred
sales charge, the Distributor will pay the applicable
concession described in the Prospectus under "Class A
Contingent Deferred Sales Charge."5 This waiver provision
applies to:
|_| Purchases of Class A shares aggregating $1 million or
more.
|_| Purchases of Class A shares by a Retirement Plan that
was permitted to purchase such shares at net asset
value but subject to a contingent deferred sales
charge prior to March 1, 2001. That included plans
(other than IRA or 403(b)(7) Custodial Plans)
that: 1) bought shares costing $500,000 or more,
2) had at the time of purchase 100 or more
eligible employees or total plan assets of
$500,000 or more, or 3) certified to the
Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover
IRA, if the purchases are made:
1) through a broker, dealer, bank or registered
investment adviser that has made special
arrangements with the Distributor for those
purchases, or
2) by a direct rollover of a distribution from a
qualified Retirement Plan if the administrator
of that Plan has made special arrangements with
the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that
have any of the following record-keeping
arrangements:
1) The record keeping is performed by Merrill
Lynch Pierce Fenner amp;amp; Smith, Inc. ("Merrill
Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor
signs the record-keeping service agreement with
Merrill Lynch, the Plan must have $3 million or
more of its assets invested in (a) mutual
funds, other than those advised or managed by
Merrill Lynch Investment Management, L.P.
("MLIM"), that are made available under a
Service Agreement between Merrill Lynch and the
mutual fund's principal underwriter or
distributor, and (b) funds advised or managed
by MLIM (the funds described in (a) and (b) are
referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is
performed on a daily valuation basis by a
record keeper whose services are provided under
a contract or arrangement between the
Retirement Plan and Merrill Lynch. On the date
the plan sponsor signs the record keeping
service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets
(excluding assets invested in money market
funds) invested in Applicable Investments.
3) The record keeping for a Retirement Plan is
handled under a service agreement with Merrill
Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more
eligible employees (as determined by the
Merrill Lynch plan conversion manager).
II. Waivers of Class A Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------
A. Waivers of Initial and Contingent Deferred Sales Charges
for Certain Purchasers.
Class A shares purchased by the following investors are not
subject to any Class A sales charges (and no concessions
are paid by the Distributor on such purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and
employees (and their "immediate families") of the
Fund, the Manager and its affiliates, and
retirement plans established by them for their
employees. The term "immediate family" refers to
one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers
and sisters, sons- and daughters-in-law, a
sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews; relatives by virtue of
a remarriage (step-children, step-parents, etc.)
are included.
|_| Registered management investment companies, or
separate accounts of insurance companies having an
agreement with the Manager or the Distributor for
that purpose.
|_| Dealers or brokers that have a sales agreement with
the Distributor, if they purchase shares for their
own accounts or for retirement plans for their
employees.
|_| Employees and registered representatives (and their
spouses) of dealers or brokers described above or
financial institutions that have entered into
sales arrangements with such dealers or brokers
(and which are identified as such to the
Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the
time of purchase that the purchase is for the
purchaser's own account (or for the benefit of
such employee's spouse or minor children).
|_| Dealers, brokers, banks or registered investment
advisors that have entered into an agreement with
the Distributor providing specifically for the use
of shares of the Fund in particular investment
products made available to their clients. Those
clients may be charged a transaction fee by their
dealer, broker, bank or advisor for the purchase
or sale of Fund shares.
|_| Investment advisors and financial planners who have
entered into an agreement for this purpose with
the Distributor and who charge an advisory,
consulting or other fee for their services and buy
shares for their own accounts or the accounts of
their clients.
|_| "Rabbi trusts" that buy shares for their own
accounts, if the purchases are made through a
broker or agent or other financial intermediary
that has made special arrangements with the
Distributor for those purchases.
|_| Clients of investment advisors or financial planners
(that have entered into an agreement for this
purpose with the Distributor) who buy shares for
their own accounts may also purchase shares
without sales charge but only if their accounts
are linked to a master account of their investment
advisor or financial planner on the books and
records of the broker, agent or financial
intermediary with which the Distributor has made
such special arrangements . Each of these
investors may be charged a fee by the broker,
agent or financial intermediary for purchasing
shares.
|_| Directors, trustees, officers or full-time employees
of OpCap Advisors or its affiliates, their
relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares
for those persons.
|_| Accounts for which Oppenheimer Capital (or its
successor) is the investment advisor (the
Distributor must be advised of this arrangement)
and persons who are directors or trustees of the
company or trust which is the beneficial owner of
such accounts.
|_| A unit investment trust that has entered into an
appropriate agreement with the Distributor.
|_| Dealers, brokers, banks, or registered investment
advisers that have entered into an agreement with
the Distributor to sell shares to defined
contribution employee retirement plans for which
the dealer, broker or investment adviser provides
administration services.
|_| Retirement Plans and deferred compensation plans and
trusts used to fund those plans (including, for
example, plans qualified or created under sections
401(a), 401(k), 403(b) or 457 of the Internal
Revenue Code), in each case if those purchases are
made through a broker, agent or other financial
intermediary that has made special arrangements
with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former
Quest for Value Advisors) whose Class B or Class C
shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to
the termination of the Class B and Class C
TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan that had agreed with the
former Quest for Value Advisors to purchase shares
of any of the Former Quest for Value Funds at net
asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund
clearinghouse, if that arrangement was consummated
and share purchases commenced by December 31, 1996.
B. Waivers of Initial and Contingent Deferred Sales Charges
in Certain Transactions.
Class A shares issued or purchased in the following
transactions are not subject to sales charges (and no
concessions are paid by the Distributor on such purchases):
|_| Shares issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers,
to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or
other distributions reinvested from the Fund or
other Oppenheimer funds (other than Oppenheimer
Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the
Distributor.
|_| Shares purchased through a broker-dealer that has
entered into a special agreement with the
Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds
using the proceeds of shares redeemed in the prior
30 days from a mutual fund (other than a fund
managed by the Manager or any of its subsidiaries)
on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also
applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were
purchased and paid for in this manner. This waiver
must be requested when the purchase order is
placed for shares of the Fund, and the Distributor
may require evidence of qualification for this
waiver.
|_| Shares purchased with the proceeds of maturing
principal units of any Qualified Unit Investment
Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan
repayments by a participant in a Retirement Plan
for which the Manager or an affiliate acts as
sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge
for Certain Redemptions.
The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent
deferred sales charge are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are
limited annually to no more than 12% of the
account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law
or involuntary redemptions of small accounts
(please refer to "Shareholder Account Rules and
Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans
for any of the following purposes:
1) Following the death or disability (as defined
in the Internal Revenue Code) of the
participant or beneficiary. The death or
disability must occur after the participant's
account was established.
2) To return excess contributions.
3) To return contributions made due to a mistake
of fact.
4) Hardship withdrawals, as defined in the plan.6
5) Under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code, or, in
the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the
Internal Revenue Code.
6) To meet the minimum distribution requirements
of the Internal Revenue Code.
7) To make "substantially equal periodic payments"
as described in Section 72(t) of the Internal
Revenue Code.
8) For loans to participants or beneficiaries.
9) Separation from service.7
10) Participant-directed redemptions to
purchase shares of a mutual fund (other than a
fund managed by the Manager or a subsidiary of
the Manager) if the plan has made special
arrangements with the Distributor.
11) Plan termination or "in-service
distributions," if the redemption proceeds are
rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special
agreement with the Distributor allowing this
waiver.
|_| For distributions from retirement plans that have $10
million or more in plan assets and that have
entered into a special agreement with the
Distributor.
|_| For distributions from retirement plans which are
part of a retirement plan product or platform
offered by certain banks, broker-dealers,
financial advisors, insurance companies or record
keepers which have entered into a special
agreement with the Distributor.
III. Waivers of Class B, Class C and Class N Sales Charges
of Oppenheimer Funds
- --------------------------------------------------------------
The Class B, Class C and Class N contingent deferred sales
charges will not be applied to shares purchased in certain
types of transactions or redeemed in certain circumstances
described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales
charges will be waived for redemptions of shares in the
following cases:
|_| Shares redeemed involuntarily, as described in
"Shareholder Account Rules and Policies," in the
applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans
following the death or disability of the last
surviving shareholder. The death or disability
must have occurred after the account was
established, and for disability you must provide
evidence of a determination of disability by the
Social Security Administration.
|_| The contingent deferred sales charges are generally
not waived following the death or disability of a
grantor or trustee for a trust account. The
contingent deferred sales charges will only be
waived in the limited case of the death of the
trustee of a grantor trust or revocable living
trust for which the trustee is also the sole
beneficiary. The death or disability must have
occurred after the account was established, and
for disability you must provide evidence of a
determination of disability by the Social Security
Administration.
|_| Distributions from accounts for which the
broker-dealer of record has entered into a special
agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement
Plans whose records are maintained on a daily
valuation basis by Merrill Lynch or an independent
record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S.
Government Trust from accounts of clients of
financial institutions that have entered into a
special arrangement with the Distributor for this
purpose.
|_| Redemptions requested in writing by a Retirement Plan
sponsor of Class C shares of an Oppenheimer fund
in amounts of $500,000 or more and made more than
12 months after the Retirement Plan's first
purchase of Class C shares, if the redemption
proceeds are invested in Class N shares of one or
more Oppenheimer funds.
|_| Distributions8 from Retirement Plans or other
employee benefit plans for any of the following
purposes:
1) Following the death or disability (as defined
in the Internal Revenue Code) of the
participant or beneficiary. The death or
disability must occur after the participant's
account was established in an Oppenheimer fund.
2) To return excess contributions made to a
participant's account.
3) To return contributions made due to a mistake
of fact.
4) To make hardship withdrawals, as defined in the
plan.9
5) To make distributions required under a
Qualified Domestic Relations Order or, in the
case of an IRA, a divorce or separation
agreement described in Section 71(b) of the
Internal Revenue Code.
6) To meet the minimum distribution requirements
of the Internal Revenue Code.
7) To make "substantially equal periodic payments"
as described in Section 72(t) of the Internal
Revenue Code.
8) For loans to participants or beneficiaries.10
9) On account of the participant's separation from
service.11
10) Participant-directed redemptions to
purchase shares of a mutual fund (other than a
fund managed by the Manager or a subsidiary of
the Manager) offered as an investment option in
a Retirement Plan if the plan has made special
arrangements with the Distributor.
11) Distributions made on account of a plan
termination or "in-service" distributions, if
the redemption proceeds are rolled over
directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's
account under an Automatic Withdrawal Plan
after the participant reaches age 59 1/2, as long
as the aggregate value of the distributions
does not exceed 10% of the account's value,
adjusted annually.
13) Redemptions of Class B shares under an
Automatic Withdrawal Plan for an account other
than a Retirement Plan, if the aggregate value
of the redeemed shares does not exceed 10% of
the account's value, adjusted annually.
14) For distributions from 401(k) plans
sponsored by broker-dealers that have entered
into a special arrangement with the Distributor
allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under
an Automatic Withdrawal Plan from an account other
than a Retirement Plan if the aggregate value of
the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain
Transactions.
The contingent deferred sales charge is also waived on
Class B and Class C shares sold or issued in the following
cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment
companies or separate accounts of insurance
companies having an agreement with the Manager or
the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the
Fund is a party.
|_| Shares sold to present or former officers, directors,
trustees or employees (and their "immediate
families" as defined above in Section I.A.) of the
Fund, the Manager and its affiliates and
retirement plans established by them for their
employees.
IV. Special Sales Charge Arrangements for Shareholders of
Certain Oppenheimer Funds Who Were Shareholders of
Former Quest for Value Funds
- ------------------------------------------------------------
The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares described
in the Prospectus or Statement of Additional Information of
the Oppenheimer funds are modified as described below for
certain persons who were shareholders of the former Quest
for Value Funds. To be eligible, those persons must have
been shareholders on November 24, 1995, when
OppenheimerFunds, Inc. became the investment advisor to
those former Quest for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer
Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer
Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
These arrangements also apply to shareholders of the
following funds when they merged (were reorganized) into
various Oppenheimer funds on November 24, 1995:
Quest for Value U.S. Government Income Fund Quest for
Value New York Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest
for Value National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value
California Tax-Exempt Fund
All of the funds listed above are referred to in this
Appendix as the "Former Quest for Value Funds." The
waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_| acquired by such shareholder pursuant to an exchange
of shares of an Oppenheimer fund that was one of
the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares
of another Oppenheimer fund that were acquired
pursuant to the merger of any of the Former Quest
for Value Funds into that other Oppenheimer fund
on November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for
Certain Former Quest for Value Funds Shareholders.
Purchases by Groups and Associations. The following table
sets forth the initial sales charge rates for Class A
shares purchased by members of "Associations" formed for
any purpose other than the purchase of securities. The
rates in the table apply if that Association purchased
shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC
Distributors prior to November 24, 1995.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales Charge Concession as
Number of Eligible Charge as a % of as a % of Net Amount % of Offering
Employees or Members Offering Price Invested Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
For purchases by Associations having 50 or more
eligible employees or members, there is no initial sales
charge on purchases of Class A shares, but those shares are
subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the
lower of either the sales charge rate in the table based on
the number of members of an Association, or the sales
charge rate that applies under the Right of Accumulation
described in the applicable fund's Prospectus and Statement
of Additional Information. Individuals who qualify under
this arrangement for reduced sales charge rates as members
of Associations also may purchase shares for their
individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.
|X| Waiver of Class A Sales Charges for Certain
Shareholders. Class A shares purchased by the following
investors are not subject to any Class A initial or
contingent deferred sales charges:
o Shareholders who were shareholders of the AMA Family
of Funds on February 28, 1991 and who acquired
shares of any of the Former Quest for Value
Funds by merger of a portfolio of the AMA
Family of Funds.
o Shareholders who acquired shares of any Former Quest
for Value Fund by merger of any of the
portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions. The Class A contingent deferred sales
charge will not apply to redemptions of Class A shares
purchased by the following investors who were shareholders
of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer
that is or was not permitted to receive a sales load or
redemption fee imposed on a shareholder with whom that
dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations
adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales
Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to
March 6, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of
Class A, Class B or Class C shares of an Oppenheimer fund.
The shares must have been acquired by the merger of a
Former Quest for Value Fund into the fund or by exchange
from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged. Those shares must have
been purchased prior to March 6, 1995 in connection with:
o withdrawals under an automatic withdrawal plan
holding only either Class B or Class C shares
if the annual withdrawal does not exceed 10% of
the initial value of the account value,
adjusted annually, and
o liquidation of a shareholder's account if the
aggregate net asset value of shares held in the
account is less than the required minimum value
of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or
After March 6, 1995 but Prior to November 24, 1995. In the
following cases, the contingent deferred sales charge will
be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been
acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that
was a Former Quest For Value Fund or into which such Former
Quest for Value Fund merged. Those shares must have been
purchased on or after March 6, 1995, but prior to November
24, 1995:
o redemptions following the death or disability of the
shareholder(s) (as evidenced by a determination
of total disability by the U.S. Social Security
Administration);
o withdrawals under an automatic withdrawal plan (but
only for Class B or Class C shares) where the
annual withdrawals do not exceed 10% of the
initial value of the account value; adjusted
annually, and
o liquidation of a shareholder's account if the
aggregate net asset value of shares held in the
account is less than the required minimum
account value.
A shareholder's account will be credited with the
amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the
Oppenheimer fund described in this section if the proceeds
are invested in the same Class of shares in that fund or
another Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of
Certain Oppenheimer Funds Who Were Shareholders of
Connecticut Mutual Investment Accounts, Inc.
- ---------------------------------------------------------
The initial and contingent deferred sale charge rates and
waivers for Class A and Class B shares described in the
respective Prospectus (or this Appendix) of the following
Oppenheimer funds (each is referred to as a "Fund" in this
section):
Oppenheimer U. S. Government Trust,
Oppenheimer Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders
who were shareholders of the following funds (referred to
as the "Former Connecticut Mutual Funds") on March 1, 1996,
when OppenheimerFunds, Inc. became the investment adviser
to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut
Mutual Total Return Account
Connecticut Mutual Government Securities Account CMIA
LifeSpan Capital Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan
Balanced Account
Connecticut Mutual Growth Account CMIA Diversified
Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|X| Class A Contingent Deferred Sales Charge. Certain
shareholders of a Fund and the other Former Connecticut
Mutual Funds are entitled to continue to make additional
purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A
contingent deferred sales charge that was in effect prior
to March 18, 1996 (the "prior Class A CDSC"). Under the
prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1%
contingent deferred sales charge on an amount equal to the
current market value or the original purchase price of the
shares sold, whichever is smaller (in such redemptions, any
shares not subject to the prior Class A CDSC will be
redeemed first).
Those shareholders who are eligible for the prior
Class A CDSC are:
1) persons whose purchases of Class A shares of a
Fund and other Former Connecticut Mutual Funds
were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases
pursuant to the Fund's policies on Combined
Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former
Connecticut Mutual Funds, and
2) persons whose intended purchases under a
Statement of Intention entered into prior to
March 18, 1996, with the former general
distributor of the Former Connecticut Mutual
Funds to purchase shares valued at $500,000 or
more over a 13-month period entitled those
persons to purchase shares at net asset value
without being subject to the Class A initial
sales charge
Any of the Class A shares of a Fund and the other
Former Connecticut Mutual Funds that were purchased at net
asset value prior to March 18, 1996, remain subject to the
prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant
to this arrangement they will be subject to the prior Class
A CDSC.
|X| Class A Sales Charge Waivers. Additional Class A
shares of a Fund may be purchased without a sales charge,
by a person who was in one (or more) of the categories
below and acquired Class A shares prior to March 18, 1996,
and still holds Class A shares:
1) any purchaser, provided the total initial
amount invested in the Fund or any one or more
of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made
pursuant to the Combined Purchases, Statement
of Intention and Rights of Accumulation
features available at the time of the initial
purchase and such investment is still held in
one or more of the Former Connecticut Mutual
Funds or a Fund into which such Fund merged;
2) any participant in a qualified plan, provided
that the total initial amount invested by the
plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled
$500,000 or more;
3) Directors of the Fund or any one or more of the
Former Connecticut Mutual Funds and members of
their immediate families;
4) employee benefit plans sponsored by Connecticut
Mutual Financial Services, L.L.C. ("CMFS"), the
prior distributor of the Former Connecticut
Mutual Funds, and its affiliated companies;
5) one or more members of a group of at least
1,000 persons (and persons who are retirees
from such group) engaged in a common business,
profession, civic or charitable endeavor or
other activity, and the spouses and minor
dependent children of such persons, pursuant to
a marketing program between CMFS and such
group; and
6) an institution acting as a fiduciary on behalf
of an individual or individuals, if such
institution was directly compensated by the
individual(s) for recommending the purchase of
the shares of the Fund or any one or more of
the Former Connecticut Mutual Funds, provided
the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and
(2) above may be subject to the Class A CDSC of the Former
Connecticut Mutual Funds described above.
Additionally, Class A shares of a Fund may be
purchased without a sales charge by any holder of a
variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the
Panorama Separate Account which is beyond the applicable
surrender charge period and which was used to fund a
qualified plan, if that holder exchanges the variable
annuity contract proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge
Waivers.
In addition to the waivers set forth in the Prospectus and
in this Appendix, above, the contingent deferred sales
charge will be waived for redemptions of Class A and Class
B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former
Connecticut Mutual Fund provided that the Class A or Class
B shares of the Fund to be redeemed or exchanged were (i)
acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former
Connecticut Mutual Fund. Additionally, the shares of such
Former Connecticut Mutual Fund must have been purchased
prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in
Section 72(m)(7) of the Internal Revenue Code;
3) for retirement distributions (or loans) to
participants or beneficiaries from retirement plans
qualified under Sections 401(a) or 403(b)(7)of the
Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other
employee benefit plans;
4) as tax-free returns of excess contributions to such
retirement or employee benefit plans;
5) in whole or in part, in connection with shares sold
to any state, county, or city, or any
instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment
laws from paying a sales charge or concession in
connection with the purchase of shares of any
registered investment management company;
6) in connection with the redemption of shares of the
Fund due to a combination with another investment
company by virtue of a merger, acquisition or similar
reorganization transaction;
7) in connection with the Fund's right to involuntarily
redeem or liquidate the Fund;
8) in connection with automatic redemptions of Class A
shares and Class B shares in certain retirement plan
accounts pursuant to an Automatic Withdrawal Plan but
limited to no more than 12% of the original value
annually; or
9) as involuntary redemptions of shares by operation of
law, or under procedures set forth in the Fund's
Articles of Incorporation, or as adopted by the Board
of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders
of Advance America Funds, Inc.
- ------------------------------------------------------------
Shareholders of Oppenheimer Municipal Bond Fund,
Oppenheimer U.S. Government Trust, Oppenheimer Strategic
Income Fund and Oppenheimer Capital Income Fund who
acquired (and still hold) shares of those funds as a result
of the reorganization of series of Advance America Funds,
Inc. into those Oppenheimer funds on October 18, 1991, and
who held shares of Advance America Funds, Inc. on March 30,
1990, may purchase Class A shares of those four Oppenheimer
funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares
of Oppenheimer Convertible Securities Fund
- ------------------------------------------------------------
Oppenheimer Convertible Securities Fund (referred to as the
"Fund" in this section) may sell Class M shares at net
asset value without any initial sales charge to the classes
of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were
permitted to purchase those shares at net asset value
without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and
employees (and their "immediate families" as
defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its
affiliates, and retirement plans established by
them or the prior investment advisor of the Fund
for their employees,
|_| registered management investment companies or
separate accounts of insurance companies that had
an agreement with the Fund's prior investment
advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with
the Distributor, if they purchase shares for their
own accounts or for retirement plans for their
employees,
|_| employees and registered representatives (and their
spouses) of dealers or brokers described in the
preceding section or financial institutions that
have entered into sales arrangements with those
dealers or brokers (and whose identity is made
known to the Distributor) or with the Distributor,
but only if the purchaser certifies to the
Distributor at the time of purchase that the
purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors
that had entered into an agreement with the
Distributor or the prior distributor of the Fund
specifically providing for the use of Class M
shares of the Fund in specific investment products
made available to their clients, and
|_| dealers, brokers or registered investment advisors
that had entered into an agreement with the
Distributor or prior distributor of the Fund's
shares to sell shares to defined contribution
employee retirement plans for which the dealer,
broker, or investment advisor provides
administrative services.
Oppenheimer Select Managers
Internet Web Site:
WWW.OPPENHEIMERFUNDS.COM
------------------------
Investment Adviser for OSM - Mercury Advisors Samp;amp;P 500 Index
Fund and
OSM - Mercury Advisors Focus Growth Fund
Mercury Advisors
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Investment Adviser for OSM - QM Active Balanced Fund, OSM -
Jennison Growth Fund, OSM - Salomon Brothers All Cap Fund
and OSM - Gartmore Millennium Growth Fund II
OppenheimerFunds, Inc.
498 Seventh Avenue
New York, New York 10018
Distributor
OppenheimerFunds Distributor, Inc.
498 Seventh Avenue
New York, New York 10018
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL.OPP (225.5677)
Custodian Bank for the Funds
Citibank, N.A.
111 Wall Street
New York, New York 10005
Custodian Bank for Master Focus Twenty Trust
The Bank of New York
23 William Street
New York, New York 10286
Custodian Bank for the Samp;amp;P 500 Index Series of the
Quantitative Master Series Trust
Merrill Lynch Trust Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Independent Auditors
Deloitte amp;amp; Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Counsel to the Funds Counsel to the
Independent Trustees
Myer, Swanson, Adams amp;amp; Wolf, P.C. Mayer,
Brown, Rowe amp;amp; Maw
1600 Broadway 1675
Broadway
Denver, Colorado 80202 New York,
New York 10019
1234
PX0000.0303
- --------
1. In accordance with Rule 12b-1 of the Investment Company
Act, the term "Independent Trustees" in this Statement of
Additional Information refers to those Trustees who are not
"interested persons" of the Fund and who do not have any
direct or indirect financial interest in the operation of
the distribution plan or any agreement under the plan.
1 Certain waivers also apply to Class M shares of
Oppenheimer Convertible Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to
contingent deferred sales charges mean the Fund's Early
Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement,
whether or not it is "qualified" under the Internal Revenue
Code, under which Class N shares of an Oppenheimer fund or
funds are purchased by a fiduciary or other administrator
for the account of participants who are employees of a
single employer or of affiliated employers. These may
include, for example, medical savings accounts, payroll
deduction plans or similar plans. The fund accounts must be
registered in the name of the fiduciary or administrator
purchasing the shares for the benefit of participants in
the plan.
4 The term "Group Retirement Plan" means any qualified or
non-qualified retirement plan for employees of a
corporation or sole proprietorship, members and employees
of a partnership or association or other organized group of
persons (the members of which may include other groups), if
the group has made special arrangements with the
Distributor and all members of the group participating in
(or who are eligible to participate in) the plan purchase
shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution
designated by the group. Such plans include 457 plans,
SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than
plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans
and non-qualified deferred compensation plans and IRAs that
purchase shares of an Oppenheimer fund or funds through a
single investment dealer, broker or other financial
institution that has made special arrangements with the
Distributor.
5 However, that concession will not be paid on purchases of
shares in amounts of $1 million or more (including any
right of accumulation) by a Retirement Plan that pays for
the purchase with the redemption proceeds of Class C shares
of one or more Oppenheimer funds held by the Plan for more
than one year.
6 This provision does not apply to IRAs.
7 This provision does not apply to 403(b)(7) custodial
plans if the participant is less than age 55, nor to IRAs.
8 The distribution must be requested prior to Plan
termination or the elimination of the Oppenheimer funds as
an investment option under the Plan.
9 This provision does not apply to IRAs.
10 This provision does not apply to loans from 403(b)(7)
custodial plans and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
11 This provision does not apply to 403(b)(7) custodial
plans if the participant is less than age 55, nor to IRAs.
PART C
OPPENHEIMER GROWTH FUND
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
- -------------------------
Reference is made to the provisions of Article
Seventh of Registrant's Amended and Restated Declaration of
Trust, filed by cross-reference to Exhibit 16(1) to this
Registration Statement, and incorporated herein by
reference.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of Registrant pursuant to
the foregoing provisions or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
Item 16. Exhibits
- ------------------
(1) Amended and Restated Declaration of Trust dated
August 5, 2002: Previously filed with Registrant's
Post-Effective Amendment No. 59, 8/22/02, and incorporated
herein by reference.
(2) By-Laws
as amended through December 14, 2000:
Previously filed with Registrant's Post-Effective Amendment
No. 58, 12/19/01, and incorporated herein by reference.
(3) N/A
(4) Agreement and Plan of Reorganization dated April 28,
2003: See Exhibit A to Part A of the Registration Statement.
(5) (i) Specimen Class A Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 58,
12/19/01, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 58,
12/19/01, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 58,
12/19/01, and incorporated herein by reference.
(iv) Specimen Class N Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 58,
12/19/01, and incorporated herein by reference.
(v) Specimen Class Y Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 58,
12/19/01, and incorporated herein by reference.
(6) Amended and Restated Investment Advisory Agreement
dated 1/1/00: Previously filed with Registrant's
Post-Effective Amendment No. 57, 12/27/00, and incorporated
herein by reference.
(7) (i) General Distributor's Agreement dated December
10, 1992: Previously filed with Registrant's Post-Effective
Amendment No. 41, 7/30/93, and incorporated herein by
reference.
(ii) Form of Dealer Agreement of OppenheimerFunds
Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01,
and incorporated herein by reference.
(iii) Form of Broker Agreement of OppenheimerFunds
Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01,
and incorporated herein by reference.
(iv) Form of Agency Agreement of OppenheimerFunds
Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01,
and incorporated herein by reference.
(v) Form of Trust Company Fund/SERV Purchase
Agreement of OppenheimerFunds Distributor, Inc.: Previously
filed with Post-Effective Amendment No. 45 to the
Registration Statement of Oppenheimer High Yield Fund (Reg.
No. 2-62076), 10/26/01, and incorporated herein by
reference.
(vi) Form of Trust Company Agency Agreement of
OppenheimerFunds Distributor, Inc.: Previously filed with
Post-Effective Amendment No. 45 to the Registration
Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.
(8) Form of Deferred Compensation Plans for Disinterested
Trustees/Directors:
(i) Amended and Restated Retirement Plan for
Non-Interested Trustees or Directors dated 8/9/01:
Previously filed with Post-Effective Amendment No. 34 to
the Registration Statement of Oppenheimer Gold amp;amp; Special
Minerals Fund (Reg. No. . 2-82590), 10/25/01, and
incorporated herein by reference.
(9) Global Custody Agreement dated August 16, 2002
between Registrant and JP Morgan Chase Bank: Previously
filed with Post-Effective Amendment No. 9 to the
Registration Statement of Oppenheimer International Bond
Fund (Reg. No. 33-58383), 11/21/02, and incorporated herein
by reference.
(10) (i) Amended and Restated Distribution and Service
Plan and Agreement for Class A shares dated April 11, 2002:
Previously filed with Registrant's Post-Effective Amendment
No. 60, 10/23/02, and incorporated herein by reference.
(ii) Amended and Restated Distribution and Service
Plan and Agreement for Class B shares dated August 5, 2002:
Previously filed with Registrant's Post-Effective Amendment
No. 60, 10/23/02, and incorporated herein by reference.
(iii) Amended and Restated Distribution and Service
Plan and Agreement for Class C shares dated February 12,
1998: Previously filed with Registrant's Post-Effective
Amendment No. 53, 10/23/98, and incorporated herein by
reference.
(iv) Distribution and Service Plan and Agreement for
Class N shares dated October 12, 2000: Previously filed
with Registrant's Post-Effective Amendment No. 60,
10/23/02, and incorporated herein by reference.
(v) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 updated through 10/22/02: Previously filed with
Post-Effective Amendment No. 22 to the Registration
Statement of Oppenheimer Global Growth amp;amp; Income Fund (Reg.
No. 33-33799), 11/20/02, and incorporated herein by
reference.
(11) Opinion and Consent of Counsel - To be filed by
Amendment.
(12) Tax Opinions Relating to the Reorganization: To be filed
by amendment.
(13) N/A
(14) (i) Consent of Deloitte amp;amp; Touche LLP: To be filed by
Amendment.
(ii) Consent of KPMG LLP: To be filed by Amendment.
(15) N/A.
(16) Powers of Attorney for all Trustees/Directors
(including Certified Board Resolutions): Previously filed
with Registration Statement on Form N-14 of Oppenheimer
Multiple Strategies Fund (Reg. No. 333-105374), 5/19/03,
and incorporated herein by reference.
(17) Amended and Restated Code of Ethics of the
Oppenheimer Funds dated May 15, 2002 under Rule 17j-1 of
the Investment Company Act of 1940: Previously filed with
Post-Effective Amendment No. 29 to the Registration
Statement of Oppenheimer Discovery Fund (Reg. No. 33-371),
11/21/02, and incorporated herein by reference.
Item 17. Undertakings
- ----------------------
(1) N/A.
(2) N/A.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and/or the Investment Company Act of 1940, the Registrant
has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York on the 18th
day of July 2003.
OPPENHEIMER GROWTH FUND
By: /s/ John V. Murphy*
-------------------------------------------
John V. Murphy,
President,Principal Executive
Officer amp;amp; Trustee
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities on the dates indicated:
Signatures Title
- ---------- -----
Date
- ----
/s/ Clayton K. Yeutter* Chairman of the July 18, 2003
- ------------------------------Board of Trustees
Clayton K. Yeutter
/s/ Donald W. Spiro* Vice Chairman of the July 18, 2003
- ------------------------------Board and Trustee
Donald W. Spiro
/s/ John V. Murphy * President, Principal July 18, 2003
- ------------------------------Executive Officer
John V. Murphy and Trustee
/s/ Brian W. Wixted* Treasurer, Principal July 18, 2003
- ------------------------------Financial and
Brian W. Wixted Accounting Officer
/s/ Robert G. Galli* Trustee July 18, 2003
- ------------------------------
Robert G. Galli
/s/ Phillip A. Griffiths Trustee July 18, 2003
- -------------------------------
Phillip A. Griffiths
/s/ Joel W. Motley* Trustee July 18, 2003
- ---------------------------------
Joel W. Motley
/s/ Elizabeth B. Moynihan* Trustee July 18, 2003
- ------------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee July 18, 2003
- ------------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee July 18, 2003
- ------------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee July 18, 2003
- -------------------------------
Russell S. Reynolds, Jr.
*By: /s/ Robert G. Zack July 18, 2003
- -----------------------------------------
Robert G. Zack, Attorney-in-Fact
