Oppenheimer
INTERNATIONAL GROWTH FUND
Prospectus dated March 15, 2000
Oppenheimer International Growth Fund is a mutual fund that seeks long-term
capital appreciation to make your investment grow. It emphasizes investments in
common stocks of foreign 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.
(OppenheimerFunds logo)
Contents
ABOUT THE FUND
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
A B O U T T HE F U N D
The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks long-term capital
appreciation.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund currently invests mainly in common
stocks of growth companies that are domiciled outside the United States or have
their primary operations outside the U.S. "Growth companies" are issuers that
the Fund's portfolio manager believes have favorable growth prospects. The Fund
does not limit its investments to issuers within a specific market
capitalization range.
The Fund can invest in emerging markets as well as developed markets
throughout the world, although it may place greater emphasis on investing in one
or more particular regions from time to time, for example Asia, Europe or Latin
America. It can invest 100% of its assets in foreign securities. Under normal
market conditions,
o As a fundamental policy, the Fund will invest at least 65% of its total
assets in foreign common and preferred stock of issuers in at least
three different countries outside the United States.
o The Fund will emphasize investments in common stocks of issuers that
the Manager considers to be "growth" companies.
The Fund can also buy preferred stocks, securities convertible into common
stock and other securities having equity features. The Fund can also use hedging
instruments and certain derivative investments to seek capital appreciation or
to try to manage investment risks. These investments are more fully explained in
"About the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager evaluates
investment opportunities on a company-by-company basis. The portfolio manager
looks primarily for foreign companies with high growth potential using a "bottom
up" investment approach - that is, looking at the investment performance of
individual stocks before considering the impact of general or industry economic
trends. This approach includes fundamental analysis of a company's financial
statements and management structure and analysis of the company's operations and
product development, as well as the industry of which the issuer is part.
In seeking broad diversification of the Fund's portfolio, the portfolio
manager currently focuses on the factors below, which may vary in particular
cases and may change over time. The portfolio manager currently searches for:
o Companies that enjoy a strong competitive position and high demand for
their products or services.
o Companies with accelerating earnings growth and cash flow.
o Diversification to help reduce risks of foreign investing, such as
currency fluctuations and stock market volatility.
In applying these and other selection criteria, the portfolio manager
considers the effect of worldwide trends on the growth of particular business
sectors and looks for companies that may benefit from global trends. The trends,
or "global themes," currently considered include telecommunications/media
expansion, emerging consumer markets, infrastructure development, natural
resources, corporate restructuring, capital market development, health care and
biotechnology, and efficiency enhancing technologies and services. The portfolio
manager does not invest a fixed amount of the Fund's assets according to these
themes and this strategy and the themes that are considered may change over
time.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking capital appreciation in their investment over the long term. Those
investors should be willing to assume the greater risks of short-term share
price fluctuations that are typical for an aggressive fund focusing on growth
stock investments, and the special risks of investing in both emerging and
developed foreign countries. The Fund does not seek current income and the
income from its investments will likely be small, so it is not designed for
investors needing income. Because of its focus on long-term capital growth, the
Fund may be appropriate for some portion of a retirement plan investment.
However, the Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments carry 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 similar objectives.
RISKS OF INVESTING IN STOCKS. Because the Fund invests primarily in common
stocks of foreign companies, the value of the Fund's portfolio will be affected
by changes in the foreign stock markets and the special economic and other
factors that might primarily affect the prices of particular foreign markets.
The Fund's emphasis of growth stocks can also result in higher volatility, as
explained under "Growth Stock Investments." 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. 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.
Changes in the market prices of securities can occur at any time. The
share price of the Fund will change daily based on changes in market prices of
securities and market conditions, and in response to other economic events.
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. To the extent that the Fund increases the relative emphasis of its
investments in a particular industry, its share values can be expected to
fluctuate in response to events affecting that industry.
RISKS OF FOREIGN INVESTING. While foreign securities offer special investment
opportunities, there are also special risks. The change in value of a foreign
currency against the U.S. dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign currency. Foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign investments may be affected by
exchange control regulations, expropriation or nationalization of a company's
assets, foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors.
Special Risks of Emerging Markets. Securities in emerging market countries may
be more difficult to sell at an acceptable price and their prices may be more
volatile than securities of companies in more developed markets. Settlements of
trades may be subject to greater delays so that the Fund may not receive the
proceeds of a sale of a security on a timely basis. Emerging countries may have
less developed trading markets and exchanges. They may have less developed legal
and accounting systems, and investments in those markets may be subject to
greater risks of government restrictions on withdrawing the sales proceeds of
securities from the country.
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 price per share. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund. When you redeem your shares, they may
be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objective.
The 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 or liquidity
purposes. In the OppenheimerFunds spectrum, the Fund is an aggressive investment
vehicle, designed for investors willing to assume greater risks in the hope of
achieving long-term capital appreciation. It is likely to be subject to greater
fluctuations in its share prices than funds that do not invest in foreign
securities (especially emerging market securities) 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 changes in the Fund's performance (for its Class A shares) from
year to year for the full calendar years since the Fund's inception and by
showing how the average annual total returns of the Fund's shares compare to
those of a broad-based market index. The Fund's past investment performance 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 are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 43.49% (4thQ'99) and the lowest return (not
annualized) for a calendar quarter was -20.57% (3rdQ'98).
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Average Annual Total
Returns for the periods
ended December 31, 1999 1 Year Life of class*
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Class A Shares 51.20% 25.51%
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- --------------------------------------------------------------
MSCI EAFE Index 27.30% 13.63%
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Class B Shares 54.15% 26.03%
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- --------------------------------------------------------------
Class C Shares 58.26% 26.49%
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* The inception date of each share class was 3/25/96. The "life-of-class"
index performance is shown from 3/31/96.
The Fund's average annual total returns include the current maximum initial
sales charge of 5.75% for Class A; the contingent deferred sales charges of 5%
(1-year) and 3% (life of class) for Class B; and for Class C, the 1% contingent
deferred sales charge for the 1-year period.
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 Morgan
Stanley Capital International EAFE (Europe, Australia, Far East) Index, an
unmanaged index that is widely recognized as a measure of international stock
performance. The index performance 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
November 30, 1999.
Shareholder Fees (charges paid directly from your investment):
Class A Shares Class B Shares Class C Shares
Maximum Sales Charge
(Load) on purchases 5.75% None None
(as % of offering price)
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3
original offering price
or redemption proceeds)
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for 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.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Shares Class B Shares Class C Shares
Management Fees 0.79% 0.79% 0.79%
Distribution and/or 0.24% 1.00% 1.00%
Service
(12b-1) Fees
Other Expenses 0.52% 0.52% 0.53%
Total Annual Operating 1.55% 2.31% 2.32%
Expenses
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
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 1
Class A Shares $724 $1,036 $1,371 $2,314
Class B Shares $734 $1,021 $1,435 $2,281
Class C Shares $335 $724 $1,240 $2,656
If shares are not 1 Year 3 Years 5 Years 10 Years1
redeemed:
Class A Shares $724 $1,036 $1,371 $2,314
Class B Shares $234 $721 $1,235 $2,281
Class C Shares $235 $724 $1,240 $2,656
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges.
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.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
will vary over time based upon the Manager's evaluation of economic and market
trends. The Fund's portfolio might not always include all of the different types
of investments described 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 large
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does not
concentrate 25% or more of its assets in investments in any one industry.
Growth Stock Investments. The Fund emphasizes investments in common stocks of
foreign companies that the Manager believes have growth potential. Growth
companies can be new or established companies that may be developing new
products or services that have relatively favorable prospects, or that are
expanding into new and growing markets. Current examples include companies in
the fields of telecommunications, biotechnology, computer software, and new
consumer products.
Growth companies may be applying new technology, new or improved
distribution techniques or developing new services that might 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 competitors.
Growth companies tend to retain a large part of their earnings for
research, development or investment in capital assets. Therefore, they do not
tend to emphasize paying dividends, and may not pay any dividends for some time.
They are selected for the Fund's portfolio because the Manager believes the
price of their stock will increase over the long term. However, growth stocks
may be more volatile than other stock investments. They may lose favor with
investors if the issuer's business plans do not produce the expected results, or
if growth investing falls out of favor with investors. Growth stocks may be
subject to more volatility because of investor speculation about the issuer's
prospects.
Foreign Securities. The foreign securities the Fund can buy include stocks and
other equity securities of companies organized under the laws of a foreign
country or companies that have a substantial portion of their operations or
assets abroad, or derive a substantial portion of their revenue or profits from
businesses, investments or sales outside the U.S. Foreign securities include
securities traded primarily on foreign securities exchanges or in foreign
over-the-counter markets. The Fund considers securities of foreign issuers that
are represented in the U.S. securities markets by American Depository Receipts
(ADRs) or similar depository arrangements to be "foreign securities" for
purposes of its investment allocations.
The Fund can also buy debt securities issued by foreign companies, but
they would primarily be convertible securities. It can buy debt securities
issued by foreign governments or their agencies, but these are not expected to
be a main investment strategy of the Fund.
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 investment
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.
Convertible Securities. While the Fund emphasizes investments in common stocks,
it can also buy securities convertible into common stock. Although some
convertible securities are debt securities, the Manager considers some of them
to be "equity equivalents" because of the conversion feature and in those cases
their rating has less impact on the investment decision than in the case of
other debt securities. Nevertheless, convertible debt securities are subject to
both "credit risk" (the risk that the issuer will not pay interest or repay
principal in a timely manner) and "interest rate risk" (the risk that the prices
of the securities will be affected inversely by changes in prevailing interest
rates).
The Fund does not expect that its holdings of convertible securities (or
other debt securities) will normally represent more than 5% of its total assets.
The Fund can buy below-investment-grade convertible debt securities, which are
subject to greater risks of default than investment-grade securities. To the
extent the Fund buys debt securities it will focus primarily on investment-grade
securities.
Investing in Special Situations. At times the Fund might use aggressive
investment techniques. These might include seeking to benefit from what the
portfolio manager perceives to be "special situations," such as mergers,
reorganizations or other unusual events expected to affect a particular issuer.
However, there is a risk in investing in special situations that the change or
event might not occur, which could have a negative impact on the price of the
issuer's securities. The Fund's investment might not produce the expected gains
or could incur a loss for the portfolio.
Cyclical Opportunities. The Fund might also seek to take advantage of changes in
the business cycle by investing in companies that are sensitive to those changes
if the Manager believes they have growth potential. For example, when the
economy is expanding, companies in the consumer durables and technology sectors
might benefit and present long-term growth opportunities. The Fund focuses on
seeking growth over the long term but might seek to take tactical advantage of
short-term market movements or events affecting particular issuers or
industries. There is the risk that those securities can lose value when the
issuer or industry is out of phase in the business cycle.
Investing in Small, Unseasoned Companies. The Fund can invest in small,
unseasoned companies. These are companies that have been in operation less than
three years, including the operations of any predecessors. These securities may
have limited liquidity (which means the Fund may have difficulty selling them at
an acceptable price when it wants to), and their prices may be very volatile.
Investing in Domestic Securities. The Fund does not expect to invest more than
10% of its assets under normal market conditions in securities of U.S. issuers.
However, it can hold common and preferred stocks of U.S. companies as well as
their debt securities, and can also invest in U.S. corporate and government debt
securities for defensive and liquidity purposes.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market. That may make 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. The Fund will
not invest more than 10% of its net assets in illiquid or restricted securities.
The Fund's Board of Trustees 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 use "derivative" investments to seek
increased returns or to try to hedge investment risks, although it does not do
so currently to a significant degree. 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,
exchange-traded options, futures contracts, forward contracts and other hedging
instruments the Fund might use can 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, although it
does not do so currently to a significant degree.
There are Special Risks in Using Derivative Investments. Markets underlying
securities and indices may move in a direction not anticipated by the Manager.
Interest rate and stock market changes in the U.S. and abroad may also influence
the performance of derivatives. 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 Manager expected it to perform. If that
happens, the Fund's share price could decline.
The Fund has limits on the amount of particular types of derivatives it can
hold. However, using derivatives can cause the Fund to lose money on its
investments and/or increase the volatility of its share prices. As a result of
these risks the Fund could realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may be illiquid.
Hedging. The Fund can buy and sell futures contracts, put and call options,
forward contracts and options on futures and broadly-based securities indices.
These are all referred to as "hedging instruments." The Fund uses forward
contracts to hedge foreign currency risks when buying and selling securities, it
does not currently use other types of hedging extensively and does not use
hedging instruments for speculative purposes. It has limits on its use of
hedging. The Fund is not required to use hedging instruments in seeking its goal
and currently does not use them to a significant degree.
Options trading involves the payment of premiums and has special tax effects on
the Fund. There are also special risks in particular hedging strategies. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, the strategy could reduce the Fund's return. The Fund could also
experience losses if the price 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 Investments. In times of unstable or adverse market or
economic conditions, the Fund can invest up to 100% of its assets in temporary
defensive investments. Generally they would be cash equivalents (such as
commercial paper in the top two rating categories of national rating
organizations), money market instruments, short-term debt securities, U.S.
government securities, or repurchase agreements. They can also include other
investment grade debt securities. The Fund might also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or
portfolio securities or to meet anticipated redemptions of Fund shares. To the
extent the Fund invests in these securities, it might not achieve its investment
objective.
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
(including subsidiaries and an affiliate) managed more than $120 billion in
assets as of January 31, 2000, including other Oppenheimer funds with more than
5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Manager. The portfolio manager of the Fund is George Evans. He
has been the person principally responsible for the day-to-day management of the
Fund's portfolio since its inception in 1996. He is a Vice President of the Fund
and of the Manager. He serves as an officer and portfolio manager of other
Oppenheimer funds, and has been employed by the Manager since 1990.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional assets as
the Fund grows: 0.80% of the first $250 million of average annual net assets of
the Fund, 0.77% of the next $250 million, 0.75% of the next $500 million; 0.69%
of the next $1 billion; and 0.67% of average annual net assets in excess of $2
billion. The Fund's management fee for the fiscal year ended November 30, 1999
was 0.79% of average annual net assets for each class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
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 Fund's 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.
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
1.800.525.7048 to notify the Distributor of the wire, and to receive
further instructions.
Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfer 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.
Buying Shares Through Asset Builder Plans. You may purchase shares of the
Fund (and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are in the 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. There are reduced minimum investments under special investment plans.
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. You can make purchases of at least
$25 by telephone through AccountLink.
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 under an Asset Builder Plan, the $25 minimum
applies. Additional purchases may be as little as $25.
Theminimum 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 and sends it to the Distributor.
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., New York time, but may close earlier on
some days. All references to time in this Prospectus mean "New York 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
securities and obligations for which market values cannot be readily obtained.
Because some foreign securities trade in markets and exchanges that operate on
U.S. holidays and weekends, the value of some of the Fund's foreign investments
might change significantly on days when investors cannot buy or redeem Fund
shares.
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. Otherwise, the order will receive the next offering price that
is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors three
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 $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.
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 six 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%, as described in "How Can You Buy Class C Shares?"
below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE ? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is 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 effect 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 or Class C.
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 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.
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 or Class C shareholders. Other features
may not be advisable (because of the effect of the contingent deferred sales
charge) for Class B or Class C 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 and Class C shareholders
will be reduced by the additional expenses borne by those classes that are not
borne by Class A shares, such as the Class B and Class C asset-based sales
charge described below and in the Statement of Additional Information. Share
certificates are not available for Class B and Class C shares, and 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 My 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 and Class C 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 commissions 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 commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
Front-End Sales Front-End Sales
Charge As a Charge As a Commission As
Percentage of Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,000 4.75% 4.99% 4.00%
$100,000 or more
but less than 3.75% 3.90% 3.00%
$250,000
$250,000 or more
but less than 2.50% 2.56% 2.00%
$500,000
$500,000 or more
but less than $1 2.00% 2.04% 1.60%
million
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 described in Appendix B to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more (other than purchases by those
retirement accounts, which are not permitted in the Fund). For those retirement
plan accounts, the commission is 1.0% of the first $2.5 million, plus 0.50% of
the next $2.5 million, plus 0.25% of purchases over $5 million, calculated on a
calendar year basis. In either case, the commission will be paid only on
purchases that were not previously subject to a front-end sales charge and
dealer commission.1 That commission will not be paid on purchases of shares in
amounts of $1 million or more (including any rights of accumulation) by a
retirement plan that pays for the purchase with the redemption of Class C shares
of one or more Oppenheimer funds held by the plan for more than one year.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. That sales charge will be equal to
1.0% of the lesser of (1) 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 (2) the original net asset value of
the redeemed shares. However, the Class A contingent deferred sales charge will
not exceed the aggregate amount of the commissions the Distributor paid to your
dealer on all purchases of Class A shares of all Oppenheimer funds you made that
were subject to the Class A contingent deferred sales charge.
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.
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 6 years of the end 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:
Contingent Deferred Sales Charge on
Years Since Beginning of Month in Which Redemptions in That Year
Purchase Order Was Accepted (as % of amount subject to charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. In applying the 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 you hold
convert any other Class B shares that were acquired by reinvesting of 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 end 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.
DISTRIBUTION AND SERIVCE (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.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to pay the
Distributor for its services and costs in distributing Class B and Class C
shares and servicing accounts. Under the plans, the Fund pays the Distributor an
annual asset-based sales charge of 0.75% per year on Class B shares and on Class
C shares. The Distributor also receives a service fee of 0.25% per year under
each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% of the net assets per year of the respective class. Because
these fees are paid out of the Fund's assets on an ongoing 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 or Class C 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 currently pays sales concessions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales concessions 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
1.00% of the purchase price. The Distributor pays the asset-based sales charge
as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
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:
transmit funds electronically to purchase shares by telephone (through a service
representative or by PhoneLink) or automatically under Asset Builder Plans, or
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 1.800.852.8457. 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 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
special PhoneLink number, 1.800.533.3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
by calling 1-800.533.3310. You must have established AccountLink privileges to
link your bank account with the Fund to pay for these purchases.
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 1.800.525.7048 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 WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://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 web site. To perform account
transactions, you must first obtain a Personal Identification Number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. At times, the web site 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 6 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 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 can be used
by individuals and employers:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pensions 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
1.800.525.7048, 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):
You wish to redeem more than $100,000 and receive a check The redemption
check is not payable to all shareholders listed on the account
statement
The redemption check is not sent to the address of record on your account
statement Shares are being transferred to a Fund account with a different
owner or name 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 instructions that includes:
Your name The Fund's name Your Fund account number (from your account
statement) The dollar amount or number of shares to be redeemed Any
special payment instructions Any share certificates for the shares you are
selling The signatures of all registered owners exactly as the account is
registered, and 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 requests by mail: Send courier or express mail
requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217-5270 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 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.
To redeem shares through a service representative, call 1.800.852.8457 To redeem
shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds 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 7-day period. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.
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 Class A, Class B or Class C 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:
Shares of the fund selected for exchange must be available for sale in
your state of residence.
The prospectuses of both funds must offer the exchange privilege. You must
hold the shares you buy when you establish your account for at least 7
days
before you can exchange them. After the account is open 7 days, you can
exchange shares every regular business day.
Youmust meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.
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 1.800.525.7048. 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 at 1.800.852.8457, or by using PhoneLink for
automated exchanges by calling 1.800.533.3310. Telephone exchanges may be made
only between accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
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 a same-day exchange. For
example, the receipt of multiple exchange requests from a "market
timer" might require the Fund to sell securities at a disadvantageous
time or price.
Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
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.
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.
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. 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 can perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
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 forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase payment
has cleared. That delay may be as much as 10 days from the date the shares were
purchased. That delay may be avoided if you purchase shares by Federal Funds
wire 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 annual and semi-annual report to shareholders having the
same last name and address on the Fund's records. However, each shareholder may
call the Transfer Agent at 1.800.525.7048 to ask that copies of those materials
be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for 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 shares will generally be higher than dividends for
Class B and Class C shares, which normally have higher expenses than Class A.
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 ARE YOUR CHOICES 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 and Capital Gains. You can elect to reinvest some
distribution (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.
If more than 50% of the 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 return for foreign taxes paid by the Fund.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Dividend." If you buy shares on or just before the ex-dividend
date or just before the Fund declares a capital gain distribution, you will pay
the full price for the shares and then receive a portion of the price back as a
taxable dividend or capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, 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 adviser
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). 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.
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
<CAPTION>
Class A Year Ended November 30, 1999 1998 1997 1996(1)
==========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.11 $14.37 $11.74 $10.00
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.02) .05 (.05)(2) (.01)
Net realized and unrealized gain 5.02 .91 2.68(2) 1.75
------------------------------------------------------
Total income from
investment operations 5.00 .96 2.63 1.74
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) -- -- --
Distributions from net realized gain (.76) (.22) -- --
------------------------------------------------------
Total dividends and distributions
to shareholders (.89) (.22) -- --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.22 $15.11 $14.37 $11.74
======================================================
==========================================================================================================
Total Return, at Net Asset Value(3) 35.31% 6.78% 22.40% 17.40%
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $208,981 $186,859 $122,720 $16,918
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $180,719 $175,022 $66,156 $8,992
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.15)% 0.44% (0.36)% (0.26)%
Expenses 1.55% 1.40%(5) 1.78%(5) 1.88%(5)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
29 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS Continued
================================================================================
<TABLE>
<CAPTION>
Class B Year Ended November 30, 1999 1998 1997 1996(1)
=========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.76 $14.15 $11.65 $10.00
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.14) (.03) (.12)(2) (.10)
Net realized and unrealized gain 4.92 .86 2.62(2) 1.75
-----------------------------------------------------
Total income from
investment operations 4.78 .83 2.50 1.65
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) -- -- --
Distributions from net realized gain (.76) (.22) -- --
-----------------------------------------------------
Total dividends and distributions
to shareholders (.79) (.22) -- --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.75 $14.76 $14.15 $11.65
=====================================================
=========================================================================================================
Total Return, at Net Asset Value(3) 34.32% 5.95% 21.46% 16.50%
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $176,021 $142,127 $90,565 $8,673
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $145,203 $125,772 $45,553 $3,628
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.91)% (0.34)% (1.14)% (1.46)%
Expenses 2.31% 2.18%(5) 2.56%(5) 2.84%(5)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
30 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Class C Year Ended November 30, 1999 1998 1997 1996(1)
============================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.78 $14.17 $11.66 $10.00
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13) (.03) (.13)(2) (.09)
Net realized and unrealized gain 4.91 .86 2.64(2) 1.75
---------------------------------------------------------
Total income from
investment operations 4.78 .83 2.51 1.66
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) -- -- --
Distributions from net realized gain (.76) (.22) -- --
---------------------------------------------------------
Total dividends and distributions
to shareholders (.79) (.22) -- --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.77 $14.78 $14.17 $11.66
=========================================================
============================================================================================================
Total Return, at Net Asset Value(3) 34.28% 5.94% 21.53% 16.60%
- ------------------------------------------------------------------------------------------------------------
============================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $49,242 $36,776 $21,908 $2,149
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $39,641 $32,460 $10,864 $938
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.92)% (0.34)% (1.18)% (1.48)%
Expenses 2.32% 2.17%(5) 2.55%(5) 2.82%(5)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
31 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
For More Information About Oppenheimer International 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, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.800.525.7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can send us a request by e-mail or read or down-load documents on the
OppenheimerFunds web site: http://www.oppenheimerfunds.com You can also obtain
copies of the Statement of Additional Information and other Fund documents and
reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone
1.202.942.8090) or the EDGAR database on the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address: [email protected] 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:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-07489
PR0825.001.0300 Printed on recycled paper.
Appendix to Prospectus of
Oppenheimer International Growth Fund
Graphic material included in the Prospectus of Oppenheimer International
Growth Fund (the "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 each of the most recent calendar years, without deducting sales charge. Set
forth below are the relevant data that will appear on the bar chart.
Annual
Year Total
Ended Returns
12/31/97 22.86%
12/31/98 6.37%
12/31/99 60.42%
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer International Growth Fund
- ------------------------------------------------------------------------------
Two World Trade Center, New York, New York 10048-0203
1.800.525.7048
Statement of Additional Information dated March 15, 2000
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated March 15, 2000. 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 web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 5
Investment Restrictions............................................ 19
How the Fund is Managed ............................................... 21
Organization and History........................................... 21
Trustees and Officers.............................................. 23
The Manager........................................................ 28
Brokerage Policies of the Fund......................................... 29
Distribution and Service Plans......................................... 31
Performance of the Fund................................................ 35
About Your Account
How To Buy Shares...................................................... 39
How To Sell Shares..................................................... 47
How To Exchange Shares................................................. 52
Dividends, Capital Gains and Taxes..................................... 54
Additional Information About the Fund.................................. 56
Financial Information About the Fund
Independent Auditors' Report........................................... 57
Financial Statements................................................... 58
Appendix A: Industry Classifications................................... A-1
Appendix B: Special Sales Charge Arrangements and Waivers.............. B-1
- ------------------------------------------------------------------------------
<PAGE>
A B O U T T H E F U N D
- ------------------------------------------------------------------------------
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., 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| Investments in Stocks and Other Equity Securities. The Fund focuses
its investments in common stocks of foreign growth companies, but it can invest
in other equity securities. Equity securities include common stocks, preferred
stocks, rights and warrants, and securities convertible into common stock. The
Fund can purchase securities of issuers having a small, medium or large market
capitalization.
Current income is not a criterion used to select portfolio securities.
However, certain debt securities can be selected for the Fund's portfolio for
defensive purposes. The Fund can also buy debt securities that the Manager
believes might offer some opportunities for capital appreciation when stocks are
disfavored, including convertible securities as discussed below.
Securities of newer growth companies might offer greater opportunities for
capital appreciation than securities of large, more established companies.
However, these securities also involve greater risks than securities of more
established companies. 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.
|_| Growth Companies. Growth companies are those companies that the
Manager believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage.
Growth companies might have a variety of characteristics that in the
Manager's view define them as "growth" issuers. They might be generating or
applying new technologies, new or improved distribution techniques or new
services. They might own or develop natural resources. They might be companies
that can benefit from changing consumer demands or lifestyles, or companies that
have projected earnings in excess of the average for their sector or industry.
In each case, they have prospects that the Manager believes are favorable for
the long term. The portfolio manager of the Fund looks for growth companies with
strong, capable management, sound financial and accounting policies, successful
product development and marketing and other factors.
|_| Convertible 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: 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.
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.
While some 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 than in the case of non-convertible debt fixed income
securities.
To determine whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors: (1) whether, at the
option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation
in the price of the issuer's common stock.
|_| Rights and Warrants. The Fund can invest up to 5% of its total
assets in warrants or rights. That 5% limit does not apply to warrants and
rights the Fund has acquired as part of units of securities or that are attached
to other securities that the Fund buys. Warrants basically are options to
purchase equity securities at specific prices valid for a specific period of
time. Their prices do not necessarily move parallel to the prices of the
underlying securities. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders. Rights
and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
|_| Preferred Stock. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred stock
dividends may be cumulative or non-cumulative. "Cumulative" dividend provisions
require all or a portion of prior unpaid dividends to be paid before dividends
can be paid on the issuer's common stock. Preferred stock may be "participating"
stock, which means that it may be entitled to a dividend exceeding the stated
dividend in certain cases.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of the 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.
|X| Foreign Securities. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the
United States and of governments other than the U.S. government. "Foreign
securities" also include securities of companies (including those that are
located in the U.S. or organized under U.S. law) that derive a significant
portion of their revenue or profits from foreign businesses, investments or
sales, or that have a significant portion of their assets abroad. Those
securities 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 considered "foreign securities" for the purpose of
the Fund's investment allocations. They are subject to some of the special
considerations and risks, discussed below, that apply to foreign securities
traded and held abroad.
The amount of the Fund's assets invested in securities of issuers in a
particular country will vary over time, based upon the Manager's evaluation of
the investment merits of particular issuers as well as the market and economic
conditions in a particular country or region. Factors that might be considered
could include, for example, a country's balance of payments, inflation rate,
economic self-sufficiency, and social and political factors.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Risks of Foreign Investing. Investments in foreign securities
may offer special opportunities for investing but also present special
additional risks and considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency
blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic
issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or adverse
diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign
economies.
In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries.
|X| 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. The Fund does not expect to 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
from time to time can use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times might 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 might have a limited trading market, which could 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. The Fund has no limit on the amount of its net
assets that may be invested in those securities.
|X| Investing in Debt Securities. While the Fund does not invest for the
purpose of seeking current income, at times the Fund can invest in debt
securities, including the convertible debt securities described above under the
description of equity investments. Debt securities also can be selected for
investment by the Fund for defensive purposes, as described below. For example,
when the stock market is volatile, or when the portfolio manager believes that
growth opportunities in stocks are not attractive, certain debt securities might
provide not only offer defensive opportunities but also some opportunities for
capital appreciation.
The Fund's debt investments can include corporate bonds and notes of
foreign or U.S. companies, as well as U.S. and foreign government securities. It
is not expected that this will be a significant portfolio strategy of the Fund
under normal market circumstances, and the Fund normally does not intend to
invest more than 5% of its total assets in debt securities.
|_| Credit Risk. 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, the Fund's income may be reduced and if the issuer fails to repay
principal, the value of that bond and of the Fund's shares may be reduced. The
Manager may rely to some extent on credit ratings by nationally recognized
rating agencies in evaluating the credit risk of securities selected for the
Fund's portfolio. It may also use its own research and analysis. Many factors
affect an issuer's ability to make timely payments, and the credit risks of a
particular security may change over time.
While the Fund can invest in higher-yielding lower-grade debt securities
(that is, securities below investment grade), its debt investments will
generally be investment grade. Those are securities rated in the four highest
rating categories of Standard & Poor's Rating Service or Moody's Investors
Service, Inc., or having equivalent ratings from other rating agencies or, in
the case of unrated securities, comparable ratings assigned to a security by the
Manager.
The Fund can invest in securities rated as low as "C" or "D" or which are
in default when the Fund buys them. Securities rated "Baa" by Moody's or "BBB"
by Standard & Poor's are considered investment grade but may be subject to
greater market fluctuations and risks of loss of income and principal than
higher grade securities. They may be considered to have speculative elements.
The Fund can also buy unrated securities to which the Manager assigns a rating
based upon its evaluation of the yield and risks of comparable rated securities.
The Fund is not obligated to dispose of a security if the rating is reduced
after the Fund buys the security, but the Manager will monitor those securities
to determine whether they should be retained in the Fund's portfolio.
|_| Interest Rate Risks. In addition to credit risks, debt
securities 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 fall,
and the bonds may sell at a discount from their face amount. The magnitude of
these price changes is generally greater for bonds with longer maturities.
Therefore, when the average maturity of the Fund's debt securities is longer,
its share price may fluctuate more when interest rates change.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes, as described below.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 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 monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
|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 can also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted securities,
as stated in the Prospectus. Those percentage restrictions 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, 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
finders', 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. The Fund has the ability to borrow up to 10%
of the value of its net assets from banks on an unsecured basis to invest the
borrowed funds in portfolio securities. This speculative technique is known as
"leverage." The Fund may borrow only from banks. Under current regulatory
requirements, borrowings can be made only to the extent that the value of the
Fund's assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings (including the proposed borrowing). If the value of the
Fund's assets fails to meet this 300% asset coverage requirement, the Fund will
reduce its bank debt within three days to meet the requirement. To do so, the
Fund might have to sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. Additionally, the Fund's net asset value per share might fluctuate
more than that of funds that do not borrow. Currently, the Fund does not
contemplate using this technique, but if it does so, it will not likely do so to
a substantial degree.
|X| 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 might 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 them. It is not required to do so in
seeking its goal. To attempt to protect against declines in the market value of
the Fund's portfolio, to permit the Fund to retain unrealized gains in the value
of portfolio securities which have appreciated, or to facilitate selling
securities for investment reasons, the Fund could:
sell futures contracts,
buy puts on such futures or on securities, or
write covered calls on securities or futures. Covered calls can also be
used to seek income, but the Manager does not expect to engage
extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could:
buy futures, or
buy calls on such futures or on securities.
The Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate
to
(1) broadly-based stock indices (these are referred to as "stock index
futures"), and
(2) foreign currencies (these are referred to as "forward contracts").
A broadly-based stock index is used as the basis for trading stock index
futures. In some cases these futures may be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. These contracts obligate the seller to deliver,
and the purchaser to take, cash to settle the futures 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.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions (except forward contracts)
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain kinds of
put options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, and options on the other types of
futures described above.
|_| 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
identifying liquid assets on the Fund's books 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 premium.
The Fund's custodian bank, 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 can 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 on the Fund's books. The Fund
will identify additional liquid assets on the Fund's books 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.
|_| 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 50% 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 liquid assets
identified on the Fund's books. 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 deposit in escrow 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.
|_| 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 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 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 can buy a call or put only if, after the purchase, the value of
all call and put options held by the Fund will not exceed 5% of the Fund's total
assets.
|_| Buying and Selling Options on Foreign Currencies. The Fund can
buy and sell calls and puts on foreign currencies. They include puts and calls
that trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options. The Fund
could use these calls and puts to try to protect against declines in the dollar
value of foreign securities and increases in the dollar cost of foreign
securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in an
identified account by its 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 cash, U.S. government
securities or other liquid, high-grade debt securities in an amount equal to the
exercise price of the option, in an identified account with the Fund's custodian
bank.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund could pay a brokerage commission each time it buys a call or put,
sells a call or 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 might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
|_| Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to try to "lock in" the U.S.
dollar price of a security denominated in a foreign currency that the Fund has
bought or sold, or to protect against possible losses from changes in the
relative values of the U.S. dollar and 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 can 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 can 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.
|_| 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 liquid assets, in an amount equal to the market value of the
securities underlying the future, less the margin deposit applicable to it.
|_| Tax Aspects of Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40% short-term
capital gains or losses under the Code. However, foreign currency gains or
losses arising from Section 1256 contracts that are forward contracts generally
are treated as ordinary income or loss. In addition, Section 1256 contracts held
by the Fund at the end of each taxable year are "marked-to-market," and
unrealized gains or losses are treated as though they were realized. These
contracts also may be marked-to-market for purposes of determining the excise
tax applicable to investment company distributions and for other purposes under
rules prescribed pursuant to the Internal Revenue Code. An election can be made
by the Fund to exempt those transactions from this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in "straddles"
for Federal income tax purposes. The straddle rules may affect the character and
timing of gains (or losses) recognized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent that the loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, the following gains or losses are treated
as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in a
foreign currency or foreign currency forward contracts and the date of
disposition.
Currency gains and losses are offset against market gains and losses on each
trade before determining a net "Section 988" gain or loss under the Internal
Revenue Code for that trade, which may increase or decrease the amount of the
Fund's investment income available for distribution to its shareholders.
|X| Temporary Defensive Investments. When market conditions are unstable,
or the Manager believes it is otherwise appropriate to reduce holdings in
stocks, the Fund can invest in a variety of debt securities for defensive
purposes. The Fund can also purchase these securities for liquidity purposes to
meet cash needs due to the redemption of Fund shares, or to hold while waiting
to reinvest cash received from the sale of other portfolio securities. The Fund
can buy:
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) rated in the top two rating categories of a
nationally-recognized rating organization,
o debt obligations of corporate issuers, rated investment grade (rated at
least Baa by Moody's Investors Service, Inc. or at least BBB by
Standard & Poor's Rating Service, or a comparable rating by another
rating organization), or unrated securities judged by the Manager to be
of a quality comparable to rated securities in those categories,
o certificates of deposit and bankers' acceptances of domestic and
foreign banks and savings and loan associations, and
o repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly, are
not generally subject to significant fluctuations in principal value and their
value will be less subject to interest rate risk than longer-term debt
securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
67%or more of the shares present or represented by proxy at a shareholder
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
The Fund cannot buy securities issued or guaranteed by any one issuer if more
than 5% of its total assets would be invested in securities of that issuer or if
it would then own more than 10% of that issuer's voting securities. That
restriction applies to 75% of the Fund's total assets. The limit does not apply
to securities issued by the U.S. government or any of its agencies or
instrumentalities.
The Fund cannot lend money. However, it can invest in all or a portion of an
issue of bonds, debentures, commercial paper or other similar corporate
obligations, whether or not they are publicly distributed (however, the purchase
of obligations that are not publicly distributed is limited by the Fund's policy
on holding restricted and illiquid securities). The Fund may also lend its
portfolio securities subject to any restrictions adopted by the Board of
Trustees, and may enter into repurchase agreements.
The Fund cannot concentrate investments. That means it cannot invest 25% or more
of its total assets in companies in any one industry. Obligations of the U.S.
government, its agencies and instrumentalities are not considered to be part of
an "industry" for the purposes of this restriction.
The Fund cannot invest in real estate or 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. This restriction does not prevent the
Fund from borrowing money for investment or emergency purposes, or from entering
into margin, collateral or escrow arrangements permitted by its other investment
policies.
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 commodities or commodity contracts, other than
the hedging instruments permitted by any of its other investment policies.
It does not matter whether the hedging instrument is considered to be a
commodity or commodity contract.
The Fund cannot invest in companies for the purpose of acquiring
control or management of them.
The Fund cannot purchase securities on margin. However, the Fund
may make margin deposits in connection with any of the hedging
instruments permitted by any of its other investment policies.
The Fund cannot invest in or hold securities of any issuer if officers and
Trustees or Directors of the Fund or the Manager individually
beneficially own more than 1/2 of 1% of the securities of that issuer
and together own more than 5% of the securities of that issuer.
The Fund cannot mortgage or pledge any of its assets. However,
this does not prohibit the escrow arrangements contemplated by
the writing of 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.
The Fund cannot invest in other open-end investment companies. It cannot
invest more than 5% of its net assets in closed-end investment
companies, including small business development companies. Any
brokerage commissions it pays in investing in closed-end investment
companies must not exceed normal commission rates.
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. That is not a
fundamental policy.
As a non-fundamental policy, the Fund cannot sell securities short except
in collateralized transactions. In those cases the Fund must own an equivalent
amount of the securities sold short. Not more than 15% of the Fund's net assets
may be held as collateral for short sales at any time. The Fund does not expect
to engage in this type of transaction as part of its normal portfolio management
techniques.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in December
1995.
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 Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares authorized: Class A, Class B, Class C and Class Y. The Fund currently
does not offer Class Y shares to investors. All classes invest in the same
investment portfolio. 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.
The Trustees are authorized 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.
|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.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company Act.
All of the Trustees are Trustees or Directors of the following New York-based
Oppenheimer funds1:
Oppenheimer California Municipal Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund
Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Europe Fund
Oppenheimer New York Municipal Fund
Oppenheimer Global Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer Trinity Core Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Trinity Growth Fund
Oppenheimer Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Fund
Ms. Macaskill and Messrs. Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of March 1, 2000, 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. Ms. Macaskill and Mr. Donohue are trustees of that
plan.
Leon Levy, Chairman of the Board of Trustees, Age: 74.
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee, Age: 66.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Trustee Age: 61.
97 Olden Lane, Princeton, N. J. 08540
The Director of the Institute for Advanced Study, Princeton, N.J. (since 1991)
and a member of the National Academy of Sciences (since 1979); formerly a
director of Bankers Trust Corporation (1994 through June, 1999), Provost and
Professor of Mathematics at Duke University (1983 - 1991), a director of
Research Triangle Institute, Raleigh, N.C. (1983 - 1991), and a Professor of
Mathematics at Harvard University (1972 - 1983).
Benjamin Lipstein, Trustee, Age: 76.
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill, President and Trustee, Age: 51
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Elizabeth B. Moynihan, Trustee, Age: 70.
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age: 72.
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), and Prime
Retail, Inc. (real estate investment trust); formerly President and Chief
Executive Officer of The Conference Board, Inc. (international economic and
business research) and a director of Lumbermens Mutual Casualty Company,
American Motorists Insurance Company and American Manufacturers Mutual
Insurance Company.
Edward V. Regan, Trustee, Age: 69.
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age: 68.
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited (a U.K.
temporary staffing company); a life trustee of International House
(non-profit educational organization), and a trustee of the Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee, Age: 74.
399 Ski Trail, Smoke Rise, New Jersey 07405
Formerly he held the following positions: Chairman Emeritus (August 1991 -
August 1999), Chairman (November 1987 - January 1991) and a director (January
1969 - August 1999) of the Manager; President and Director of the Distributor
(July 1978 - January 1992).
Clayton K. Yeutter, Trustee, Age: 69.
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra,
Inc. (food and agricultural products), Farmers Insurance Company (insurance),
FMC Corp. (chemicals and machinery) and Texas Instruments, Inc.
(electronics); formerly (in descending chronological order), Counsellor to
the President (Bush) for Domestic Policy, Chairman of the Republican National
Committee, Secretary of the U.S. Department of Agriculture, U.S. Trade
Representative.
Andrew J. Donohue, Secretary, Age: 49.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Scott T. Farrar, Assistant Treasurer, Age: 34.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer Funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Brian W. Wixted, Treasurer, Age: 40.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
George Evans, Vice President and Portfolio Manager, Age: 40. Vice President of
the Manager (since joining the Manager in September 1990) and HarbourView Asset
Management Corporation (since July 1994); an officer of other Oppenheimer funds.
|X| Remuneration of Trustees. The officers of the Fund and a Trustee of
the Fund (Ms. Macaskill) who is affiliated with the Manager receive no salary or
fee from the Fund. Mr. Spiro was affiliated with the Manager until July 31,
1999. The remaining Trustees of the Fund received the compensation shown below.
The compensation from the Fund was paid during its fiscal year ended November
30, 1999. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1999.
<PAGE>
Total
Retirement Compensation
Benefits From all
Aggregate Accrued as Part New York based
Trustee's Name Compensation of Fund Oppenheimer
and Other Positions from Fund1 Expenses Funds (24 Funds)2
Leon Levy $2,593 $815 $166,700
Chairman
Robert G. Galli 3 $1,060 $0 $176,216
Study Committee Member
Philip A. Griffths5 $174 $0 $17,835
Benjamin Lipstein $2,438 $901 $144,100
Study Committee
Chairman,
Audit Committee Member
Elizabeth B. Moynihan $1,195 $112 $101,500
Study Committee Member
Kenneth A. Randall $1,489 $496 $93,100
Audit Committee Member
Edward V. Regan $982 $0 $92,100
Proxy Committee
Chairman, Audit
Committee Member
Russell S. Reynolds, Jr. $889 $154 $68,900
Proxy Committee Member
Donald W. Spiro6 $0 $0 $10,250
Vice Chairman
Clayton K. Yeutter $735 4 $0 $68,900
Proxy Committee Member
- -----------------------
1 Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Trustee.
2 For the 1999 calendar year.
3 Total compensation for the 1999 calendar year includes compensation received
for serving as Trustee or Director of 11 other Oppenheimer funds.
4 Includes $345 deferred under Deferred Compensation Plan described below.
5 Mr. Griffiths became Trustee on June 5, 1999. His Fund
compensation includes $121 deferred under Deferred Compensation
Plan described below.
6 Mr. Spiro was affiliated with the Manager and received no compensation from
the Fund prior to August 1, 1999.
|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 New York-based 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.
Major Shareholders. As of March 1, 2000, the only persons who owned of
record or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding securities of any class were the following: Charles Schwab & Co.,
Inc., 101 Montgomery Street, San Francisco, California, which owned 985,070.755
Class A shares (5.89% of the Class A shares then outstanding), and Merrill
Lynch, Pierce & Smith, 4800 Deer Lake Drive, E., Jacksonville, Florida 32246,
which owned 436,224.099 Class C shares (12.18% of the Class C shares then
outstanding), for the benefit of their respective customers.
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 Manger.
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
1-800-202-942-8090. 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: [email protected].,
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, in particular Mr. William Wilby and Mr.
Frank Jennings, 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 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 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.
Fiscal Year ended 11/30: Management Fees Paid to OppenheimerFunds, Inc.
1997 $ 976,002
1998 $2,637,912
1999 $2,888,430
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 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.
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 concessions 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 11/30: Total Brokerage Commissions Paid by the Fund 1
1997 $ 708,344
1998 $1,360,441
1999 $1,115,5792
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 11/30/99, the amount of transactions directed to
brokers for research services was $294,253,983 and the amount of the
commissions paid to broker-dealers for those services was $716,455.
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 is not obligated to
sell a specific number of shares. Expenses normally attributable to sales are
borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
- --------------------------------------------------------------------------------
Aggregate Class A Commissions Commissions Commissions
Fiscal Front-End Front-End on Class A on Class B on Class C
Year Sales Sales Shares Shares Shares
Ended Charges on Charges Advanced by Advanced by Advanced by
11/30: Class A Retained by Distributor1 Distributor1 Distributor1
Shares Distributor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 $1,433,719 $411,249 $ 39,859 $2,575,841 $ 89,963
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $1,366,674 $394,993 $119,332 $2,142,928 $195,286
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $732,494 $208,769 $174,092 $883,662 $120,524
- --------------------------------------------------------------------------------
1. The Distributor advances commission 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.
- --------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent
Fiscal Year Deferred Sales Deferred Sales Deferred Sales
Ended 11/30: Charges Retained by Charges Retained by Charges Retained by
Distributor Distributor Distributor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $99,158 $473,644 $23,122
- --------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Trustees, including a
majority of the Independent Trustees2, 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 each class of shares of the
Fund.
Under the plans, the Manager and the Distributor may make payments to
affiliates and in their sole discretion, from time to time may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the
Fund. In their sole discretion, the Distributor and the Manager may increase or
decrease the amount of payments they make from their own resources to plan
recipients.
Unless a plan is terminated as described below, the plan continues in effect
from year to year but only if the Fund's Board of Trustees and its Independent
Trustees specifically vote annually to approve its continuance. Approval must be
by a vote cast in person at a meeting called for the purpose of voting on
continuing the plan. A plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Trustees and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under a plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares of the Fund automatically convert into
Class A shares after six years, the Fund must obtain the approval of both Class
A and Class B shareholders for a proposed material amendment to the Class A Plan
that would materially increase payments under the plan. That approval must be by
a "majority" (as defined in the Investment Company Act) of the shares of each
Class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each plan states that while it is in effect, the selection and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made to any recipient in any
quarter in which the aggregate net asset value of all Fund shares of that class
held by the recipient for itself and its customers does not exceed a minimum
amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
|X| Class A Service Plan. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions (they are referred to as "recipients") for personal
services and account maintenance services they provide for their customers who
hold Class A shares. The services include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. While the plan permits
the Board to authorize payments to the Distributor to reimburse itself for
services under the plan, the Board has not yet done so. The Distributor makes
payments to plan recipients quarterly at an annual rate not to exceed 0.25% of
the average annual net assets consisting of Class A shares held in the accounts
of the recipients or their customers.
For the fiscal period ended November 30, 1999 payments under the Class A
Plan totaled $426,752, all of which was paid by the Distributor to recipients.
That included $44,002 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 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 and Class C Service and Distribution Plan. 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 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 plans 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 and the Class C 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 or Class C 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 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 commission 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 and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C 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 and
Class C shares. The payments are made to the Distributor in recognition that the
Distributor:
o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales commissions 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 and Class C
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.
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 11/30/99
Distributor's Distributor's
Aggregate Unreimbursed
Total Amount Unreimbursed Expenses as % of
Payments Retained by Expenses Under Net Assets of
Class Under Plan Distributor Plan Class
Class B Plan
$ 1,451,083 $ 1,189,880 $ 3,686,324 2.09%
Class C Plan
$ 396,071 $ 180,142 $ 425,149 0.86%
The Distributor's actual expenses in selling Class B and Class C 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 either the
Class B or the Class C 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 to compensate it for its expenses incurred for distributing shares
before the plan was terminated.
All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
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 as of how
total returns are calculated is set forth below. The charts below show the
Fund's performance of the Fund's most recent fiscal year end. You can obtain
current performance as information by calling the Fund's Transfer Agent at
1.800.525.7048 or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1-, 5- and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication).
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you
buy or sell shares during the period, or you bought your shares at a
different time and price than the shares used in the model.
The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
An investment in the Fund is not insured by the FDIC or any other
government agency.
The principal value of the Fund's shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.
When an investor's shares are redeemed, they may be worth more or less
than their original cost.
Total returns for any given past period represent historical performance
information and are not, and should not be considered, a prediction of
future returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The total returns of each
class of shares of the Fund are affected by market conditions, the quality of
the Fund's investments, the maturity of debt investments, the types of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|X| Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed 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.
|_| 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:
1/n
( ERV )
(----- ) - 1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
-------- = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B or Class C shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
The Fund's Total Returns for the Periods Ended 11/30/99
Cumulative Total Average Annual Total Returns
Class of Returns (Life of
Shares Class)
1-Year Life-of-Class
After Without After Without After Sales Without Sales
Sales Sales Sales Sales Charge Charge
Charge Charge Charge Charge
Class A 95.67% 107.61% 27.53% 35.31% 20.01% 1 21.95% 1
Class B 98.37% 101.37% 29.32% 34.32% 20.45% 2 20.95% 2
Class C 101.58% 101.58% 33.28% 34.28% 20.98% 3 20.98% 3
1. Inception of Class A: 3/25/96
2. Inception of Class B: 3/25/96
3. Inception of Class C: 3/25/96
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is a widely-recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, including the Fund,
and ranks their performance for various periods in categories based on
investment styles. 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 and Rankings. From time to time the Fund may
publish the ranking and/or star rating of the performance of its classes of
shares by Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar rates and ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds and
municipal bond funds. The Fund is included in the international stock funds
category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk measures a fund's
(or class's) performance below 90-day U.S. Treasury bill returns. Risk and
investment return are combined to produce star ratings reflecting performance
relative to the average fund in a fund's category. Five stars is the "highest"
rating (top 10% of funds in a category), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). The current star rating is the
fund's (or class's) overall rating, which is the Fund's 3-year rating. Ratings
are subject to change monthly.
The Fund may also compare its total return rating to that of other funds
in its Morningstar category, in addition to its star ratings. Those total return
ratings are percentages from one percent to one hundred percent and are not risk
adjusted. For example, if a fund is in the 94th percentile, that means that 94%
of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
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.
- ------------------------------------------------------------------------------
A B O U T Y O U R A C C O U N T
- ------------------------------------------------------------------------------
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. 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 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and 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:
Class A and Class B shares you purchase for your individual accounts, or
for your joint accounts, or for trust or custodial accounts on behalf
of your children who are minors, and
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
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.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Limited-Term Government Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Main Street Growth & Income
Fund
Oppenheimer Capital Preservation
Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal
Fund Oppenheimer MidCap in Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities
Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing MarketsFund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation
Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Europe Fund Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Quest Opportunity Value
Fund
Oppenheimer Global Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Gold & Special Minerals
Fund Oppenheimer Real Asset Fund
Oppenheimer Growth Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Core Fund
Oppenheimer International Bond Fund Oppenheimer Trinity Growth Fund
Oppenheimer International Growth Fund Oppenheimer Trinity Value Fund
Oppenheimer International Growth Fund Oppenheimer U.S. Government Trust
Oppenheimer International Small Oppenheimer World Bond Fund
Company Fund Oppenheimer Large Cap Growth Fund
Limited-Term New York Municipal Fund
Rochester Fund Municipals
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.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds 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.
|X| 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.
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 commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
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 commissions allowed or paid to the dealer over the amount of commissions that
apply to the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
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 commissions 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.
|_| 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 thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. 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. 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 a (ACH) member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employee-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of shares of up to four
other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix B to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. 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.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
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 or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C 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 and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C 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 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| 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 value 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).
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 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., New York 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). 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 U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those 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
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|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:
Equity securities traded on a U.S. securities exchange or on NASDAQ 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.
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.
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.
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.
The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts:o
(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.
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
Information on how to sell shares of the Fund is stated in the Prospectus. The
information below provides additional information about the procedures and
conditions for redeeming shares.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
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
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, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $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 or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must:
(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 persons) 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 and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix B, below).
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.
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
by calling the Distributor at 1.800.525.7048.
All of the Oppenheimer funds currently offer Class A, B and C
shares except Oppenheimer Money Market Fund, Inc., Centennial
Money Market Trust, Centennial Tax Exempt Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares. Oppenheimer Main
Street California Municipal Fund currently offers only Class A
and Class B shares. Class B and Class C shares of Oppenheimer
Cash Reserves are generally available only by exchange from the
same class of shares of other Oppenheimer funds or through
OppenheimerFunds-sponsored 401 (k) plans.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y
shares of Oppenheimer Real Asset Fund may not be exchanged for shares
of any other Fund.
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 A shares of Senior Floating Rate Fund are not available by
exchange of shares of Oppenheimer Money Market Fund or Class A
shares of Oppenheimer Cash Reserves. 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 Class X shares of Limited Term New York Municipal Fund can 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.
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.
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 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.
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 days 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. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years of the
initial purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the exchanged Class C
shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or 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 and Class C shares
are expected to be lower than dividends on Class A shares. That is because of
the effect of the asset-based sales charge on Class B and Class C 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 and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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.
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. 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.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized capital
gains to shareholders without having to pay tax on them. This avoids a double
tax on that income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund (unless the Fund's
shares are held in a retirement account or the shareholder is otherwise exempt
from tax). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
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.
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 acts on an "at-cost" basis. 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. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. 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.
<PAGE>
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INDEPENDENT AUDITORS' REPORT
================================================================================
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To the Board of Trustees and Shareholders of
Oppenheimer International Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer International Growth Fund as of
November 30, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended and the period from March 25, 1996
(commencement of operations) to November 30, 1996. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer International Growth Fund as of November 30, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the three-year period then ended and the period from March
25, 1996 (commencement of operations) to November 30, 1996, in conformity with
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 20, 1999
STATEMENT OF INVESTMENTS November 30, 1999
================================================================================
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
====================================================================================
<S> <C> <C>
Common Stocks--105.1%
- ------------------------------------------------------------------------------------
Capital Goods--8.2%
- ------------------------------------------------------------------------------------
Aerospace/Defense--1.1%
Embraer-Empresa Brasileira de Aeronautica SA, Preference 1,533,000 $ 4,828,032
- ------------------------------------------------------------------------------------
Electrical Equipment--0.8%
Halma plc 2,032,100 3,527,813
- ------------------------------------------------------------------------------------
Industrial Services--4.1%
Aegis Group plc 3,083,600 8,840,250
- ------------------------------------------------------------------------------------
Bellsystem 24, Inc. 1,700 1,946,470
- ------------------------------------------------------------------------------------
Boskalis Westminster 253,103 4,128,560
- ------------------------------------------------------------------------------------
Falck AS 20,000 1,989,767
- ------------------------------------------------------------------------------------
ICTS International NV (1) 165,000 825,000
----------
17,730,047
- ------------------------------------------------------------------------------------
Manufacturing--2.2%
Sauer, Inc. 150,000 1,940,625
- ------------------------------------------------------------------------------------
Sidel SA 83,000 7,788,976
----------
9,729,601
- ------------------------------------------------------------------------------------
Communication Services--18.2%
- ------------------------------------------------------------------------------------
Telecommunications: Long Distance--13.6%
Altran Technologies SA 58,000 27,594,095
- ------------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. 598 10,709,400
- ------------------------------------------------------------------------------------
Sonera Corp. 219,100 9,047,290
- ------------------------------------------------------------------------------------
Tandberg Television ASA(1) 516,000 6,720,834
- ------------------------------------------------------------------------------------
Tiscali SpA(1) 30,000 4,811,975
----------
58,883,594
- ------------------------------------------------------------------------------------
Telephone Utilities--3.7%
CCT Telecom Holdings Ltd.(1) 5,320,000 2,243,382
- ------------------------------------------------------------------------------------
DDI Corp. 330 4,553,506
- ------------------------------------------------------------------------------------
Tele Norte Leste Participacoes SA, ADR 79,000 1,407,187
- ------------------------------------------------------------------------------------
Telefonica SA 128,520 2,676,132
- ------------------------------------------------------------------------------------
Telefonica SA, Bonus Shares(1) 2,570 53,514
- ------------------------------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR(2) 234,000 5,323,500
----------
16,257,221
- ------------------------------------------------------------------------------------
Telecommunications: Wireless--0.9%
Telecom Italia Mobile SpA 303,000 2,379,707
- ------------------------------------------------------------------------------------
Telesp Celular SA, Cl. B, Preference 35,400,000 1,715,822
----------
4,095,529
</TABLE>
12 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Consumer Cyclicals--11.5%
- --------------------------------------------------------------------------------
Autos & Housing--3.7%
Aucnet, Inc. 49,300 $ 4,342,125
- --------------------------------------------------------------------------------
Brazil Realty SA, GDR(3) 121,300 1,235,744
- --------------------------------------------------------------------------------
Ducati Motor Holding SpA(1) 1,141,000 3,090,468
- --------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 1,363,718 4,337,057
- --------------------------------------------------------------------------------
Porsche AG, Preference 1,100 2,951,727
----------
15,957,121
- --------------------------------------------------------------------------------
Leisure & Entertainment--1.5%
Granada Group plc 375,549 3,080,405
- --------------------------------------------------------------------------------
Sony Music Entertainment (Japan), Inc. 22,000 3,401,673
----------
6,482,078
- --------------------------------------------------------------------------------
Media--4.6%
Lusomundo SGPS SA(1) 303,579 4,416,985
- --------------------------------------------------------------------------------
Naspers Ltd., N Shares 581,800 5,182,024
- --------------------------------------------------------------------------------
Reed International plc 1,000,000 6,251,348
- --------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 214,000 4,012,500
----------
19,862,857
- --------------------------------------------------------------------------------
Retail: Specialty--0.9%
Dixons Group plc 182,482 3,970,130
- --------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.8%
Gucci Group NV, NY Registered Shares 41,000 3,413,250
- --------------------------------------------------------------------------------
Consumer Staples--15.2%
- --------------------------------------------------------------------------------
Beverages--0.5%
Allied Domecq plc 406,050 2,158,414
- --------------------------------------------------------------------------------
Broadcasting--5.2%
Canal Plus 104,000 8,597,315
- --------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1) 165,000 8,054,062
- --------------------------------------------------------------------------------
ProSieben Media AG, Preference 120,000 5,594,336
- --------------------------------------------------------------------------------
PT MULTIMEDIA--Servicos de Telecomunicacoes
e Multimedia SGPS SA(1) 10,600 417,533
----------
22,663,246
- --------------------------------------------------------------------------------
Entertainment--6.7%
Imagineer Co. Ltd. 75,000 1,570,681
- --------------------------------------------------------------------------------
Infogrames Entertainment SA(1) 66,300 8,411,441
- --------------------------------------------------------------------------------
Nintendo Co. Ltd. 74,500 12,401,478
- --------------------------------------------------------------------------------
Village Roadshow Ltd., Cl. A, Preference 3,615,285 6,802,781
----------
29,186,381
13 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF INVESTMENTS Continued
================================================================================
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- ----------------------------------------------------------------------------------
<S> <C> <C>
Household Goods--1.1%
Wella AG, Preference 208,000 $ 5,005,501
- ----------------------------------------------------------------------------------
Tobacco--1.7%
Cie Financiere Richemont AG, A Units 3,250 7,252,184
- ----------------------------------------------------------------------------------
Energy--0.8%
- ----------------------------------------------------------------------------------
Energy Services--0.8%
Expro International Group plc 605,000 3,276,184
- ----------------------------------------------------------------------------------
Financial--5.5%
- ----------------------------------------------------------------------------------
Banks--4.1%
Banco Espirito Santo SA 132,500 3,308,673
- ----------------------------------------------------------------------------------
Espirito Santo Financial Group, ADR 234,700 3,711,194
- ----------------------------------------------------------------------------------
Julius Baer Holding AG, Cl. B 1,135 3,388,805
- ----------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR 307,300 7,240,756
----------
17,649,428
- ----------------------------------------------------------------------------------
Insurance--1.4%
AXA SA 29,500 3,977,305
- ----------------------------------------------------------------------------------
Ockham Holdings plc 1,460,000 1,999,794
----------
5,977,099
- ----------------------------------------------------------------------------------
Healthcare--14.0%
- ----------------------------------------------------------------------------------
Healthcare/Drugs--8.0%
Biocompatibles International plc(1) 2,512,585 12,359,361
- ----------------------------------------------------------------------------------
Eisai Co. Ltd. 323,000 7,143,710
- ----------------------------------------------------------------------------------
Elan Corp. plc, ADR(1) 157,140 4,301,707
- ----------------------------------------------------------------------------------
Genset, Sponsored ADR(1) 234,300 2,343,000
- ----------------------------------------------------------------------------------
Nicox SA(1) 71,600 1,802,351
- ----------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(2) 291,650 3,521,674
- ----------------------------------------------------------------------------------
QIAGEN NV 48,000(1) 3,286,522
----------
34,758,325
- ----------------------------------------------------------------------------------
Healthcare/Supplies & Services--6.0%
Nichii Gakkan Co. 44,250 9,098,131
- ----------------------------------------------------------------------------------
Novogen Ltd.(1) 2,004,300 3,949,814
- ----------------------------------------------------------------------------------
Ortivus AB, Cl. B(1)(4) 551,400 2,789,107
- ----------------------------------------------------------------------------------
PowderJect Pharmaceuticals plc(1) 331,000 5,234,934
- ----------------------------------------------------------------------------------
SkyePharma plc(1) 5,334,100 4,842,504
----------
25,914,490
</TABLE>
14 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- ---------------------------------------------------------------------------------
<S> <C> <C>
Technology--29.6%
- ---------------------------------------------------------------------------------
Computer Services--9.8%
Cap Gemini SA 25,500 $ 4,508,697
- ---------------------------------------------------------------------------------
Computer Services Solutions Holding NV 285,900 5,354,432
- ---------------------------------------------------------------------------------
Equant NV, NY Registered Shares(1) 44,500 4,194,125
- ---------------------------------------------------------------------------------
Getronics NV 318,060 19,455,468
- ---------------------------------------------------------------------------------
Icon Medialab International AB(1) 51,900 5,647,277
- ---------------------------------------------------------------------------------
Unit 4(1) 160,000 3,302,632
-----------
42,462,631
- ---------------------------------------------------------------------------------
Computer Software--10.2%
Lernout & Hauspie Speech Products NV(1) 78,300 2,946,038
- ---------------------------------------------------------------------------------
Misys plc 563,199 6,099,648
- ---------------------------------------------------------------------------------
Psion plc 401,900 16,412,321
- ---------------------------------------------------------------------------------
SAP AG, Preference 28,600 11,492,155
- ---------------------------------------------------------------------------------
Solution 6 Holdings Ltd.(1) 1,026,300 7,241,850
-----------
44,192,012
- ---------------------------------------------------------------------------------
Communications Equipment--2.1%
Telefonaktiebolaget LM Ericsson, Cl. B, Sponsored ADR 193,200 9,309,825
- ---------------------------------------------------------------------------------
Electronics--7.5%
Hoya Corp. 56,000 4,055,390
- ---------------------------------------------------------------------------------
Racal Electronic plc 789,800 6,594,617
- ---------------------------------------------------------------------------------
Sony Corp. 42,000 7,768,263
- ---------------------------------------------------------------------------------
STMicroelectronics NV, NY Registered Shares 50,000 6,243,750
- ---------------------------------------------------------------------------------
Thomson Multimedia(1) 183,400 7,940,615
-----------
32,602,635
- ---------------------------------------------------------------------------------
Transportation--2.1%
- ---------------------------------------------------------------------------------
Shipping--2.1%
MIF Ltd.(1,3) 204,400 3,803,262
- ---------------------------------------------------------------------------------
Smit Internationale NV, CVA 241,315 5,272,668
-----------
9,075,930
-----------
Total Common Stocks (Cost $343,198,471) 456,221,558
</TABLE>
15 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF INVESTMENTS Continued
================================================================================
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
======================================================================================================
<S> <C> <C>
Preferred Stocks--1.6%
Ceres, Inc., Preferred Callable Stocks(3) 600,000 $ 2,400,000
- ------------------------------------------------------------------------------------------------------
Fresenius Medical Care AG, Preferred 112,200 4,744,915
---------
Total Preferred Stocks (Cost $6,937,950) 7,144,915
<CAPTION>
Units
======================================================================================================
<S> <C> <C>
Rights, Warrants and Certificates--0.1%
Biocompatibles International plc Wts., Exp. 12/15/99 (Cost $18,020) 309,827 296,077
- ------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $350,154,441) 106.8% 463,662,550
- ------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (6.8) (29,418,313)
-----------------------
Net Assets 100.0% $ 434,244,237
=======================
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:
Geographic Diversification Market Value Percent
- --------------------------------------------------------------------------------
Great Britain $ 84,943,797 18.4%
France 79,207,545 17.1
Japan 66,990,825 14.4
The Netherlands 45,819,407 9.9
Germany 29,788,635 6.4
Australia 17,994,444 3.9
Sweden 17,746,209 3.8
Brazil 16,427,542 3.5
Italy 13,695,401 3.0
Portugal 11,854,385 2.6
Switzerland 10,640,989 2.3
Norway 10,524,096 2.3
Finland 9,047,290 2.0
Mexico 8,054,063 1.7
India 5,323,500 1.1
South Africa 5,182,024 1.1
United States 4,340,625 0.9
Argentina 4,337,057 0.9
Ireland 4,301,708 0.9
Singapore 4,012,500 0.9
Croatia 3,521,674 0.8
Belgium 2,946,038 0.6
Spain 2,729,647 0.6
Hong Kong 2,243,382 0.5
Denmark 1,989,767 0.4
-------------------------------
Total $463,662,550 100.0%
===============================
16 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
(1) Non-income-producing security.
(2) Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $8,845,174 or 2.04% of the Fund's net
assets as of November 30, 1999.
(3) Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
(4) Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended November 30, 1999.
The aggregate fair value of securities of affiliated companies held by the Fund
as of November 30, 1999, amounts to $2,789,107. Transactions during the period
in which the issuer was an affiliate are as follows:
Shares Shares
November 30, Gross Gross November 30,
1998 Additions Reductions 1999
- --------------------------------------------------------------------------------
ICTS International NV* 375,000 -- 210,000 165,000
Lusomundo SGPS SA* 382,000 -- 78,421 303,579
Ortivus AB, Cl. B** 501,400 50,000 -- 551,400
* Not an affiliate as of November 30, 1999
** Not an affiliate as of November 30, 1998
See accompanying Notes to Financial Statements.
17 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES November 30, 1999
================================================================================
================================================================================
Assets
- -------------------------------------------------------------------------------
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $341,868,696) $ 460,873,443
Affiliated companies (cost $8,285,745) 2,789,107
- -------------------------------------------------------------------------------
Cash--foreign currency (cost $344,463) 344,463
- -------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,050,119
Interest and dividends 920,446
Other 7,893
-------------
Total assets 465,985,471
===============================================================================
Liabilities
- -------------------------------------------------------------------------------
Bank overdraft 19,796,969
- -------------------------------------------------------------------------------
Unrealized depreciation on foreign currency exchange contracts 20,006
- -------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 6,205,301
Shares of beneficial interest redeemed 5,194,752
Transfer and shareholder servicing agent fees 143,423
Distribution and service plan fees 142,286
Trustees' compensation 61,419
Other 177,078
-------------
Total liabilities 31,741,234
===============================================================================
Net Assets $ 434,244,237
=============
===============================================================================
Composition of Net Assets
- -------------------------------------------------------------------------------
Paid-in capital $ 316,447,185
- -------------------------------------------------------------------------------
Overdistributed net investment income (59,065)
- -------------------------------------------------------------------------------
Accumulated net realized gain on
investments and foreign currency transactions 4,318,482
- -------------------------------------------------------------------------------
Net unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies 113,537,635
-------------
Net assets $ 434,244,237
=============
18 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================
<S> <C>
Net Asset Value Per Share
- --------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $208,980,880 and 10,875,151 shares of beneficial interest outstanding) $19.22
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $20.39
- --------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$176,020,999 and 9,388,170 shares of beneficial interest outstanding) $18.75
- --------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$49,242,358 and 2,623,438 shares of beneficial interest outstanding) $18.77
</TABLE>
See accompanying Notes to Financial Statements.
19 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
STATEMENT OF OPERATIONS For the Year Ended November 30, 1999
================================================================================
<TABLE>
<CAPTION>
========================================================================================
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $383,610) $4,984,013
- ----------------------------------------------------------------------------------------
Interest 155,484
-----------
Total income 5,139,497
========================================================================================
Expenses
- ----------------------------------------------------------------------------------------
Management fees 2,888,430
- ----------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 426,752
Class B 1,451,083
Class C 396,071
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 1,177,504
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 377,585
- ----------------------------------------------------------------------------------------
Shareholder reports 271,380
- ----------------------------------------------------------------------------------------
Other 95,238
-----------
Total expenses 7,084,043
Less expenses paid indirectly (2,963)
-----------
Net expenses 7,081,080
========================================================================================
Net Investment Loss (1,941,583)
========================================================================================
Realized and Unrealized Gain (Loss)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies 16,247,738
Affiliated companies (281,649)
Foreign currency transactions (8,212,091)
-----------
Net realized gain 7,753,998
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 122,751,680
Translation of assets and liabilities denominated in foreign currencies (10,260,633)
-----------
Net change 112,491,047
-----------
Net realized and unrealized gain 120,245,045
========================================================================================
Net Increase in Net Assets Resulting from Operations $118,303,462
============
</TABLE>
See accompanying Notes to Financial Statements.
20 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended November 30, 1999 1998
=================================================================================================
<S> <C> <C>
Operations
- -------------------------------------------------------------------------------------------------
Net investment income (loss) $(1,941,583) $232,417
- -------------------------------------------------------------------------------------------------
Net realized gain 7,753,998 19,125,853
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 112,491,047 (11,043,346)
-----------------------------
Net increase in net assets resulting from operations 118,303,462 8,314,924
=================================================================================================
Dividends and/or Distributions to Shareholders
- -------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (1,612,367) --
Class B (254,658) --
Class C (67,795) --
- -------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (9,482,138) (1,923,099)
Class B (7,304,835) (1,435,063)
Class C (1,902,453) (354,072)
=================================================================================================
Beneficial Interest Transactions
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (26,426,483) 59,959,570
Class B (3,877,361) 51,650,994
Class C 1,107,177 14,355,929
=================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------
Total increase 68,482,549 130,569,183
- ------------------------------------------------------------------------------------------------
Beginning of period 365,761,688 235,192,505
-----------------------------
End of period [including undistributed (overdistributed)
net investment income of $(59,065) and $1,849,052, respectively] $434,244,237 $365,761,688
=============================
</TABLE>
See accompanying Notes to Financial Statements.
21 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
<CAPTION>
Class A Year Ended November 30, 1999 1998 1997 1996(1)
==========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.11 $14.37 $11.74 $10.00
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.02) .05 (.05)(2) (.01)
Net realized and unrealized gain 5.02 .91 2.68(2) 1.75
------------------------------------------------------
Total income from
investment operations 5.00 .96 2.63 1.74
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.13) -- -- --
Distributions from net realized gain (.76) (.22) -- --
------------------------------------------------------
Total dividends and distributions
to shareholders (.89) (.22) -- --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.22 $15.11 $14.37 $11.74
======================================================
==========================================================================================================
Total Return, at Net Asset Value(3) 35.31% 6.78% 22.40% 17.40%
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $208,981 $186,859 $122,720 $16,918
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $180,719 $175,022 $66,156 $8,992
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.15)% 0.44% (0.36)% (0.26)%
Expenses 1.55% 1.40%(5) 1.78%(5) 1.88%(5)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
See accompanying Notes to Financial Statements.
22 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Class B Year Ended November 30, 1999 1998 1997 1996(1)
=========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.76 $14.15 $11.65 $10.00
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.14) (.03) (.12)(2) (.10)
Net realized and unrealized gain 4.92 .86 2.62(2) 1.75
-----------------------------------------------------
Total income from
investment operations 4.78 .83 2.50 1.65
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) -- -- --
Distributions from net realized gain (.76) (.22) -- --
-----------------------------------------------------
Total dividends and distributions
to shareholders (.79) (.22) -- --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.75 $14.76 $14.15 $11.65
=====================================================
=========================================================================================================
Total Return, at Net Asset Value(3) 34.32% 5.95% 21.46% 16.50%
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $176,021 $142,127 $90,565 $8,673
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $145,203 $125,772 $45,553 $3,628
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.91)% (0.34)% (1.14)% (1.46)%
Expenses 2.31% 2.18%(5) 2.56%(5) 2.84%(5)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
See accompanying Notes to Financial Statements.
23 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS Continued
================================================================================
<TABLE>
<CAPTION>
Class C Year Ended November 30, 1999 1998 1997 1996(1)
============================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $14.78 $14.17 $11.66 $10.00
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13) (.03) (.13)(2) (.09)
Net realized and unrealized gain 4.91 .86 2.64(2) 1.75
---------------------------------------------------------
Total income from
investment operations 4.78 .83 2.51 1.66
- ------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.03) -- -- --
Distributions from net realized gain (.76) (.22) -- --
---------------------------------------------------------
Total dividends and distributions
to shareholders (.79) (.22) -- --
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.77 $14.78 $14.17 $11.66
=========================================================
============================================================================================================
Total Return, at Net Asset Value(3) 34.28% 5.94% 21.53% 16.60%
- ------------------------------------------------------------------------------------------------------------
============================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $49,242 $36,776 $21,908 $2,149
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $39,641 $32,460 $10,864 $938
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income (loss) (0.92)% (0.34)% (1.18)% (1.48)%
Expenses 2.32% 2.17%(5) 2.55%(5) 2.82%(5)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 75% 82% 64% 43%
</TABLE>
(1) For the period from March 25, 1996 (commencement of operations) to November
30, 1996.
(2) Based on average shares outstanding for the period.
(3) Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
(4) Annualized for periods of less than one full year.
(5) Expense ratio reflects the effect of expenses paid indirectly by the Fund.
(6) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended November 30, 1999, were $277,140,513 and $285,822,706, respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
================================================================================
1. Significant Accounting Policies
Oppenheimer International Growth Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek
capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc.
(the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are
sold at their offering price, which is normally net asset value plus an initial
sales charge. Class B and Class C shares are sold without an initial sales
charge but may be subject to a contingent deferred sales charge. All classes of
shares have identical rights to earnings, assets and voting privileges, except
that each class has its own expenses directly attributable to that class and
exclusive voting rights with respect to matters affecting that class. Classes A,
B and C have separate distribution and/or service plans. 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. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
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.
25 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENT Continued
================================================================================
================================================================================
1. Significant Accounting Policies Continued
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, 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 loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted a nonfunded retirement plan for the
Fund's independent Trustees. Benefits are based on years of service and fees
paid to each Trustee during the years of service. During the year ended
November 30, 1999, a provision of $2,660 was made for the Fund's projected
benefit obligations and payments of $12,207 were made to retired Trustees,
resulting in an accumulated liability of $59,065 as of November 30, 1999.
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 Trustee 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 affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
income per share.
26 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
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 distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
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, 1999, amounts have been reclassified to reflect a
decrease in overdistributed net investment income of $1,968,286. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
27 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
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:
<TABLE>
<CAPTION>
Year Ended November 30, 1999 Year Ended November 30, 1998
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Sold 28,386,105 $443,398,379 18,467,865 $286,589,304
Dividends and/or
distributions reinvested 755,138 10,481,320 128,681 1,855,568
Redeemed (30,634,400) (480,306,182) (14,770,487) (228,485,302)
--------------------------------------------------------------
Net increase (decrease) (1,493,157) $(26,426,483) 3,826,059 $59,959,570
==============================================================
- -------------------------------------------------------------------------------------------
Class B
Sold 5,389,439 $81,564,985 6,056,317 $93,527,036
Dividends and/or
distributions reinvested 535,401 7,308,215 97,718 1,387,772
Redeemed (6,163,506) (92,750,561) (2,926,466) (43,263,814)
--------------------------------------------------------------
Net increase (decrease) (238,666) $(3,877,361) 3,227,569 $51,650,994
==============================================================
- -------------------------------------------------------------------------------------------
Class C
Sold 9,122,829 $139,300,660 6,214,051 $93,630,903
Dividends and/or
distributions reinvested 137,399 1,876,855 23,895 339,786
Redeemed (9,124,669) (140,070,338) (5,296,238) (79,614,760)
--------------------------------------------------------------
Net increase 135,559 $1,107,177 941,708 $14,355,929
==============================================================
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of November 30, 1999, net unrealized appreciation on securities of
$113,508,108 was composed of gross appreciation of $137,573,855, and gross
depreciation of $24,065,747.
28 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
4. Management 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 0.80% of
the first $250 million of average annual net assets of the Fund, 0.77% of the
next $250 million, 0.75% of the next $500 million, 0.69% of the next $1 billion,
and 0.67% of average annual net assets in excess of $2 billion. The Fund's
management fee for the year ended November 30, 1999, was 0.79% of average annual
net assets for each class of shares.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, 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.
<TABLE>
<CAPTION>
Aggregate Class A Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C
Sales Charges Sales Charges Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor(1) Distributor(1) Distributor(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
November 30, 1999 $732,494 $208,769 $174,092 $883,662 $120,524
</TABLE>
(1) The Distributor advances commission 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.
<TABLE>
<CAPTION>
Class A Class B Class C
Contingent Deferred Contingent Deferred Contingent Deferred
Sales Charges Sales Charges Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained by Distributor
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
November 30, 1999 $99,158 $473,644 $23,122
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C 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.
29 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
================================================================================
4. Management Fees and Other Transactions with Affiliates Continued
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. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. 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 of the Fund. For the fiscal year ended November 30, 1999, payments under
the Class A Plan totaled $426,752, all of which was paid by the Distributor to
recipients. That included $44,002 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.
- --------------------------------------------------------------------------------
Class B and Class C Distribution and Service 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 and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C 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 either the
Class B or the Class C 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. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended November 30, 1999,
were as follows:
<TABLE>
<CAPTION>
Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $1,451,083 $1,189,880 $3,686,324 2.09%
Class C Plan 396,071 180,142 425,149 0.86
</TABLE>
30 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
5. Foreign Currency Contracts
A foreign currency exchange contract is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate. The Fund may enter into
foreign currency exchange contracts for operational purposes and to seek to
protect against adverse exchange rate fluctuations. Risks to the Fund include
the potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided by
a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Realized gains and losses are reported with all
other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency cont racts are noted in the Statement of
Investments where applicable.
As of November 30, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Contract Valuation as of Unrealized
Contract Description Expiration Date Amount (000s) November 30, 1999 Appreciation
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Purchase
Euro (EUR) 12/30/99 EUR 5,707 $5,760,805 $20,006
=======
</TABLE>
================================================================================
6. Illiquid and Restricted Securities
As of November 30, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 10% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of illiquid
or restricted securities subject to this limitation as of November 30, 1999,
was $7,439,006, which represents 1.71% of the Fund's net assets, of which
$2,400,000 is considered restricted. Information concerning restricted
securities is as follows:
<TABLE>
<CAPTION>
Valuation
Per Unit as of
Security Acquisition Date Cost Per Unit November 30, 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stocks and Warrants
Ceres, Inc., Preferred Callable Stocks 1/6/99 $ 4.00 $ 4.00
</TABLE>
31 OPPENHEIMER INTERNATIONAL GROWTH FUND
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
================================================================================
7. 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 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 November 30,
1999.
APPENDIX A
- ------------------------------------------------------------------------------
Corporate Industry Classifications
- ------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
Appendix B
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OppenheimerFunds Special Sales Charge Arrangements and Waivers
- ------------------------------------------------------------------------------
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs,
Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the "Transfer
Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may
- --------------
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 A 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 Class A 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 Class A 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
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
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 of the end 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 commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."1 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases by
a Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or total
plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser
that has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special
arrangements with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a)
mutual funds, other than those advised or managed by Merrill
Lynch Asset Management, L.P. ("MLAM"), 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 MLAM (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).
-----------------
1. However, that commission 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.
<PAGE>
Purchases by a Retirement Plan whose record keeper had a cost-allocation
agreement with the Transfer Agent on or before May 1, 1999.
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 commissions 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.
|-|
<PAGE>
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 commissions 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)
<PAGE>
To return contributions made due to a mistake of fact. (4) Hardship
withdrawals, as defined in the plan.3 (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.4
(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 Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C 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 and Class C 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, including a
trustee of a grantor trust or revocable living trust for which the
trustee is also the sole beneficiary. The death or disability must have
occurred after the account was established, and for disability you must
provide evidence of a determination of disability by the Social
Security Administration.
|_| 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 $1 million or more held by the
Retirement Plan for more than one year, if the redemption proceeds are
invested in Class A shares of one or more Oppenheimer funds.
|_| Distributions 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.5
(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.6
(9) On account of the participant's separation from service.7
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.
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.
Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the
Oppenheimer funds that had been offered.
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.
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.
|_|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:
<PAGE>
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Global Value Fund
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 Fund
Quest for Value New York Tax-Exempt Income Fund
Quest for Value Investment Quality Fund
Quest for Value National Tax-Exempt Income 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
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering 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:
|_| 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.
|_| 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:
|_| 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
|_| 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:
|_| 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);
|_| 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
|_| 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):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o 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 CMIA LifeSpan Capital Appreciation
Account 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.
|_| 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.
|_| 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 commission 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 Equity 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.
<PAGE>
- ------------------------------------------------------------------------------
Oppenheimer International Growth Fund
- ------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048
Custodian Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019-5820
67890
PX825.sai00b.0300
