Registration No. 2-76547
File No. 811-3420
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 33 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 31 / X /
OPPENHEIMER INTEGRITY FUNDS
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(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
1-303-768-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center - Suite 3400
New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ x / On April 27, 1998, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On _______________, pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On ________________, pursuant to paragraph (a)(2) of Rule 485
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
---------------------
Prospectus for Oppenheimer Bond Fund
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Front Cover Page
2 Expenses; Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; How the Fund is Managed -- Organization and History;
Investment Objective and Policies
5 How the Fund is Managed; Expenses; Back Cover
5A Performance of the Fund
6 Expenses; Dividends, Capital Gains and Taxes
7 Shareholder Account Rules and Policies; How to Buy Shares; How to
Exchange Shares; Special Investor Services; Service Plan for Class A
Shares; Distribution and Service Plan for Class B
Shares; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special Investor Services
9 *
- ------------------
* Not applicable or negative answer.
<PAGE>
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
---------------------
Statement of Additional Information for Oppenheimer Bond Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment Techniques and
Strategies; Additional Investment Restrictions
Appendix A (Prospectus) - Description of Securities Ratings
14 How the Fund is Managed; Trustees and Officers of the Fund
15 How the Fund is Managed -- Major Shareholders;
16 How the Fund is Managed; Distribution and Service Plans; Additional
Information about the Fund
17 Brokerage Policies of the Fund
18 Additional Information about the Fund
19 Your Investment Account; How to Buy Shares; How to Sell Shares; How to
Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
- ------------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER
Bond Fund
Prospectus dated April 27, 1998.
Oppenheimer Bond Fund, is a mutual fund with the investment objective of seeking
a high level of current income by investing mainly in debt instruments. The Fund
will, under normal market conditions, invest at least 65% of its total assets in
a diversified portfolio of investment grade debt securities. You should
carefully review the risks associated with an investment in the Fund. Please
refer to "Investment Objective and Polices" for more information about the types
of securities in which the Fund invests and refer to "Investment Risks" for a
discussion of the risks of investing in the Fund.
This Prospectus explains concisely what you should know before investing
in the Fund. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about the Fund in the April
27, 1998, Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Fund's Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-1-
<PAGE>
Contents
ABOUT THE FUND
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
11 Investment Objective and Policies
12 Investment Risks
15 Investment Techniques and Strategies
21 How the Fund is Managed
24 Performance of the Fund
ABOUT YOUR ACCOUNT
28 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
42 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
44 How to Sell Shares
By Mail
By Telephone
By Checkwriting
47 How to Exchange Shares
48 Shareholder Account Rules and Policies
50 Dividends, Capital Gains and Taxes
A-1 Appendix A: Description of Securities Ratings
B-1 Appendix B: Special Sales Charge Arrangements for Shareholders of
the Fund
Who Were Shareholders of the Former Quest for Value Funds
C-1 Appendix C: Special Sales Charge Arrangements for Shareholders of
the Fund Who Where Shareholders of the Former Connecticut Mutual
Investment Accounts, Inc.
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
value per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
your direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended December 31,
1997.
o Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of the Fund. Please refer to "About Your Account," starting on page 28
for an explanation of how and when these charges apply.
Class A Class B Class C Class Y
Shares Shares Shares Shares
- ------------------------------------------------------------------------------
Maximum Sales 4.75% None None None
Charge on Purchases
(as a % of offering price)
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge None(1) 5% in the first1.0% if None
(as a % of the lower year, decliningshares
of the original offering to 1% in the are redeemed
price or redemption proceeds) sixth year and within 12
eliminated months of
thereafter(2) purchase(2)
- ------------------------------------------------------------------------------
Maximum Sales Charge on None None None None
Reinvested Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None None
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge" on
page 33) in Class A shares you may have to pay a sales charge of up to 1% if you
sell your shares within 12 calendar months (18 months for shares purchased prior
to May 1, 1997)from the end of the calendar month in which you purchased those
shares. See "How to Buy Shares - Buying Class A Shares," below. (2) See "How to
Buy Shares - Buying Class B Shares," and "How to Buy Shares - Buying Class C
Shares" below for more information on the contingent deferred sales charges.
o Annual Fund Operating Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business. For example, the Fund
pays management fees to its investment adviser, OppenheimerFunds, Inc. (which is
referred to in this Prospectus as the "Manager"). The rates of the Manager's
fees are set forth in "How the Fund is Managed," below. The Fund has other
regular expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities, audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
Annual Fund Operating Expenses (as a Percentage of Average Net Assets):
Class A Class B Class C Class Y
Shares Shares Shares Shares
- ------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.25% 1.00% 1.00% 0.00 %
- ------------------------------------------------------------------------------
Other Expenses 0.27% 0.27% 0.27% 0.25%
- ------------------------------------------------------------------------------
Total Fund 1.27% 2.02% 2.02% 1.00%
Operating Expenses
The numbers in the table above are based on the Fund's expenses in its last
fiscal year ended December 31, 1997. These amounts are shown as a percentage of
the average net assets of each class of the Fund's shares for that year. The
12b-1 Distribution Plan Fees for Class A shares are service fees (the maximum
fee is 0.25% of average annual net assets of that class), and for Class B and
Class C shares, are the service fees (the maximum service fee is 0.25% of
average annual net assets of the
class) and the asset-based sales charge of 0.75%. These plans are discussed in
greater detail in "How to Buy Shares." Class Y shares were not publicly offered
during the fiscal year ended December 31, 1997. Therefore, the Other Expenses
for Class Y share are estimates based on expenses that would have been payable
if Class Y shares had been outstanding during that fiscal period. The actual
expenses for each class of shares in future years may be more or less than the
numbers in the chart, depending on a number of factors, including the actual
value of the Fund's assets represented by each class of shares.
o Examples. To try to show the effect of these expenses on an investment
over time, we have created the hypothetical examples shown below. Assume that
you make a $1,000 investment in each class of shares of the Fund, and that the
Fund's annual return is 5%, and that its operating expenses for each class are
the ones shown in the Annual Fund Operating Expense table above. If you were to
redeem your shares at the end of each period shown below, your investment would
incur the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------------
Class A Shares $60 $86 $114 $194
- ------------------------------------------------------------------------------
Class B Shares $71 $93 $129 $198
- ------------------------------------------------------------------------------
Class C Shares $31 $63 $109 $235
- ------------------------------------------------------------------------------
Class Y Shares $10 $32 $ 55 $122
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
- ------------------------------------------------------------------------------
Class A Shares $60 $86 $114 $194
- ------------------------------------------------------------------------------
Class B Shares $21 $63 $109 $198
- ------------------------------------------------------------------------------
Class C Shares $21 $63 $109 $235
- ------------------------------------------------------------------------------
Class Y Shares $10 $32 $ 55 $122
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge but Class B
and Class C expenses do not include contingent deferred sales
charges. The Class B expenses in years 7 through 10 are based on Class A
expenses shown above, because the Fund automatically converts your Class B
shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge on Class B and
Class C shares, long-term Class B and Class C shareholders could pay the
economic equivalent of an amount greater than the maximum front-end sales charge
allowed under applicable regulations. For Class B shareholders, the automatic
conversion of Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy Shares -Buying
Class B Shares" for more information.
These examples show the effect of expenses on an investment, but are not
meant to state or predict actual or expected costs or investment returns of the
Fund, all of which may be more or less than those shown.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete information can be found.
You should carefully read the entire Prospectus before making a decision about
investing in the Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to sell or exchange
shares.
o What Is The Fund's Investment Objective? The Fund seeks to achieve a high
level of current income by investing mainly in debt instruments.
o What Does The Fund Invest In? Under normal market conditions, the Fund
invests at least 65% of its total assets in a diversified portfolio of
investment grade fixed-income securities issued by foreign or domestic issuers.
These include (i) investment-grade debt securities rated BBB or above by
Standard and Poor's Corporation or Baa or above by Moody's Investors Service,
Inc. or another nationally recognized statistical rating organization, or, if
unrated, are of comparable quality as determined by the Fund's Manager; (ii)
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities or obligations secured by such
securities ("U.S. Government Securities"); and (iii) high-quality, short-term
money market instruments.
The Fund may invest up to 35% of its total assets in non-investment grade
debt instruments issued by foreign or domestic issuers. Although non-investment
grade securities generally offer the potential for higher income than investment
grade securities, they may be subject to greater market fluctuations and a
greater risk of default because of the issuer's low creditworthiness. The Fund
may also write covered calls and use certain types of securities called
"derivative investments" and hedging instruments to try to manage investment
risks. These investments are more fully explained in "Investment Objective and
Policies" starting on page 11.
o Who Manages The Fund? The Fund's investment adviser (the "Manager") is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios currently having over $85 billion in assets as of March 31,
1998. The Manager is paid a management fee by the Fund, based on its net assets.
The Fund's portfolio managers, who are primarily responsible for the selection
of the Fund's securities, are David P. Negri and Jerry A. Webman. The Fund's
Board of Trustees, elected by shareholders, oversees the Manager. Please refer
to "How the Fund is Managed," starting on page 21 for more information about the
Manager and its fees.
o How Risky is the Fund? All investments carry risks to some degree. The
Fund's investments in fixed-income securities are subject to changes in their
value and their yield from a number of factors, including changes in the general
bond market and changes in interest rates. Non- investment grade securities may
have speculative characteristics and be subject to a greater risk of default
than investment grade securities. These changes affect the value of the Fund's
investments and its share prices for each class of its shares. In the
OppenheimerFunds spectrum the Fund is generally considered a moderately risky
income fund, more aggressive than money market funds but less aggressive than
high yield funds. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased for
the portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objective and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Objective and Policies" starting on page 11 and "Investment
Risks" starting on page 12 for a more complete discussion of the Fund's
investment risks.
o How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic Investment
Plan under AccountLink. Please refer to "How to Buy Shares" starting on page 28
for more details.
o Will I Pay a Sales Charge to Buy Shares? The Fund offers the individual
investor three classes of shares. All classes have the same investment portfolio
but different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a contingent
deferred sales charge (starting at 5% and declining as shares are held longer)
if redeemed within 6 years of purchase. Class C shares are offered without a
front-end sales charge, but may be subject to a contingent deferred sales charge
of 1% if redeemed within 1 year of purchase. There is also an annual asset-based
sales charge on Class B and Class C shares. Please review "How to Buy Shares"
starting on page 28 for more details, including a discussion about factors you
and your financial advisor should consider in determining which class may be
appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail or by telephone
call to the Transfer Agent on any business day, or through your dealer or by
using Checkwriting. Please refer to "How to Sell Shares" starting on page 44.
The Fund also offers exchange privileges to other Oppenheimer funds, described
in "How to Exchange Shares" on page 47.
o How Has the Fund Performed? The Fund measures its performance by quoting
its yield, average annual total return and cumulative total return which measure
historical performance. Those yields and total returns can be compared to the
returns (over similar periods) of other funds. The Fund's performance can also
be compared to broad market indices, which we have done on pages 26 and 27.
Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information about
the Fund, including per share data and expense ratios and other data based on
the Fund's average net assets. This information for the 1991 through 1997 fiscal
years has been audited by Deloitte & Touche LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal year
ended December 31, 1997 is included in the Statement of Additional Information.
The information in the table for the fiscal periods prior to 1991 was audited by
the Fund's previous independent auditors.
[Tables]
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992
==================================================================================================================
PER SHARE OPERATING DATA
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.70 $10.98 $10.01 $11.12 $10.74 $10.80
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .77 .78 .69 .65 .69 .75
Net realized and unrealized gain (loss) .27 (.28) .96 (1.08) .40 (.05)
------ ------- ------ ------ ------- ------
Total income (loss) from
investment operations 1.04 .50 1.65 (.43) 1.09 .70
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.77) (.75) (.68) (.65) (.71) (.76)
Dividends in excess of net
investment income -- -- -- (.03) -- --
Tax return of capital -- (.03) -- -- -- --
------ ------- ------ ------ ------- ------
Total dividends and distributions
to shareholders (.77) (.78) (.68) (.68) (.71) (.76)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.97 $10.70 $10.98 $10.01 $11.12 $10.74
====== ====== ====== ====== ====== ======
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 10.13% 4.87% 16.94% (3.87)% 10.30% 6.77%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $190,706 $193,515 $169,059 $ 96,640 $110,759 $106,290
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $187,458 $178,130 $116,940 $102,168 $111,702 $ 98,672
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.20% 7.35% 6.47% 6.25% 6.20% 7.00%
Expenses, before voluntary
reimbursement by the Manager 1.27% 1.30% 1.27% 1.06% 1.06% 1.10%
Expenses, net of voluntary
reimbursement by the Manager N/A N/A 1.26% N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 50.5% 53.7% 175.4% 70.3% 110.1% 116.4%
</TABLE>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
3. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not neccessarily representative
of operating results the Fund may achieve under its current investment
objectives and policies.
4. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
8
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ------------------------------------------------------------- -----------------------------------------------
ELEVEN
MONTHS
ENDED YEAR ENDED
DEC. 31, JAN. 31, YEAR ENDED DECEMBER 31,
1991(4) 1990 1989 1988(3) 1988(3) 1997 1996 1995 1994 1993(2)
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.86 $10.29 $10.12 $10.55 $11.30 $10.69 $10.98 $10.01 $11.11 $11.10
- ---------------------------------------------------------------------------------------------------------------
.82 .88 .92 .93 1.09 .69 .70 .63 .58 .40
.90 (.43) .19 (.36) (.55) .28 (.29) .94 (1.08) .03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1.72 .45 1.11 .57 .54 .97 .41 1.57 (.50) .43
- ---------------------------------------------------------------------------------------------------------------
(.78) (.88) (.94) (1.00) (1.29) (.69) (.67) (.60) (.57) (.42)
-- -- -- -- -- -- -- -- (.03) --
-- -- -- -- -- -- (.03) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(.78) (.88) (.94) (1.00) (1.29) (.69) (.70) (.60) (.60) (.42)
- ---------------------------------------------------------------------------------------------------------------
$10.80 $ 9.86 $10.29 $10.12 $10.55 $10.97 $10.69 $10.98 $10.01 $11.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
===============================================================================================================
18.28% 4.74% 11.31% 4.48% N/A 9.41% 3.99% 16.06% (4.53)% 3.91%
===============================================================================================================
$90,623 $87,021 $ 96,380 $102,293 $118,568 $48,255 $38,826 $39,187 $3,451 $1,809
- ---------------------------------------------------------------------------------------------------------------
$86,471 $90,065 $100,891 $111,264 $118,724 $41,439 $38,068 $12,823 $2,747 $ 922
- ---------------------------------------------------------------------------------------------------------------
8.02% 8.85% 8.85% 8.75% 10.28% 6.42% 6.59% 5.84% 5.53% 4.80%(6)
1.23% 1.26% 1.14% 1.05% 0.98% 2.02% 2.05% 2.12% 1.78% 1.90%(6)
N/A 1.24% N/A N/A N/A N/A N/A 2.08% N/A N/A
- ---------------------------------------------------------------------------------------------------------------
97.1% 80.4% 41.3% 45.0% 19.5% 50.5% 53.7% 175.4% 70.3% 110.1%
</TABLE>
6. Annualized.
7. 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 and mortgage
"dollars-rolls") for the period ended December 31, 1997 were $150,140,882 and
$134,090,911, respectively. For the year ended December 31, 1995, purchases and
sales of investment securities included mortgage "dollar-rolls."
9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED) CLASS C
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995(1)
=================================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.70 $10.99 $10.89
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .69 .70 .28
Net realized and unrealized gain (loss) .28 (.29) .10
------ ------ ------
Total income (loss) from investment operations .97 .41 .38
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.69) (.67) (.28)
Dividends in excess of net investment income -- -- --
Tax return of capital -- (.03) --
------ ------ ------
Total dividends and distributions
to shareholders (.69) (.70) (.28)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.70 $10.99
====== ====== ======
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 9.39% 4.00% 3.76%
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $9,188 $4,322 $3,971
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,134 $3,404 $ 979
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.36% 6.60% 6.32%(6)
Expenses, before voluntary reimbursement
by the Manager 2.02% 2.05% 2.25%(6)
Expenses, net of voluntary reimbursement
by the Manager N/A N/A 1.96%(6)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 50.5% 53.7% 175.4%
</TABLE>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
3. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not neccessarily representative
of operating results the Fund may achieve under its current investment
objectives and policies.
4. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. 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 and mortgage
"dollars-rolls") for the period ended December 31, 1997 were $150,140,882 and
$134,090,911, respectively. For the year ended December 31, 1995, purchases and
sales of investment securities included mortgage "dollar-rolls."
10
Investment Objective and Policies
Objective. The Fund seeks a high level of current income by investing mainly in
debt instruments.
Investment Policies and Strategies. Under normal market conditions, the Fund
invests at least 65% of its total assets in investment grade debt securities,
U.S. Government Securities, and money market instruments. Investment-grade debt
securities are those rated in one of the four highest categories by Standard &
Poor's Corporation ("Standard & Poor's"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. or other nationally-recognized rating
organization. A description of these rating categories is included as Appendix A
to this Prospectus. Debt securities (often referred to as "fixed-income
securities") are used by issuers to borrow money from investors. The issuer
promises to pay the investor interest at a fixed or variable rate, and to pay
back the amount it borrowed (the "principal") at maturity. Some debt securities,
such as zero coupon bonds (discussed below) do not pay current interest. The
Fund may invest up to 35% of its total assets in debt securities rated less than
investment grade or, if unrated, judged by the Manager to be of comparable
quality to such lower-rated securities (collectively, "lower-grade securities").
Lower- grade securities include securities rated BB, B, CCC, CC and D by
Standard & Poor's or Ba, B, Caa, Ca and C by Moody's. Lower-grade securities
(often called "junk bonds") are considered speculative and involve greater risk
as explained below.
When investing the Fund's assets, the Manager considers many factors,
including current developments and trends in both the economy and the financial
markets. The Fund may try to hedge against losses in the value of its portfolio
securities by using hedging strategies described below. The Manager may employ
special investment techniques, also described below. Additional information
about the securities the Fund may invest in, the hedging strategies the Fund may
employ and the special investment techniques may be found under the same
headings in the Statement of Additional Information.
o Can the Fund's Investment Objective and Policies Change? The Fund has an
investment objective, which is described above, as well as investment policies
it follows to try to achieve its objective. Additionally, the Fund uses certain
investment techniques and strategies in carrying out those investment policies.
The Fund's investment policies and techniques are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a particular
policy is "fundamental." The Fund's investment objective is a fundamental
policy.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of the Fund's outstanding voting shares. The term "majority" is
defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Fund's Board of Trustees may change non-fundamental
policies without shareholder approval, although significant changes will be
described in amendments to this Prospectus.
o Portfolio Turnover. A "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%. Portfolio turnover affects brokerage costs
the Fund pays. The Fund normally does not engage in substantial short-term
trading to try to achieve its objective. The Financial Highlights table above
shows the Fund's portfolio turnover rates during prior fiscal years.
Investment Risks
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk") or that
the underlying issuer will experience financial difficulties and may default on
its obligation under a fixed-income investment to pay interest and repay
principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They affect the value of the Fund's investments, its
investment performance, and the prices of its shares. These risks collectively
form the risk profile of the Fund.
Because of the types of companies the Fund invests in and the investment
techniques the Fund uses, some of which may be speculative, the Fund is designed
for those investors who are investing for the long-term and who are willing to
accept greater risks of loss of their capital in the hope of achieving higher
income. There is no assurance that the Fund will achieve its objective, and when
you redeem your shares, they may be worth more or less than what you paid for
them.
o Interest Rate Risks. In addition to credit risks, described below, debt
securities are subject to changes in their value due to changes in prevailing
interest rates. When prevailing interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally decline. The magnitude of
these fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. Changes in the value of securities held by the
Fund mean that the Fund's share prices can go up or down when interest rates
change, because of the effect of the change on the value of the Fund's portfolio
of debt securities. Certain of the Fund's investments, such as I/Os, P/Os and
mortgage-backed securities such as CMOs, can be very sensitive to interest rate
changes and their values can be quite volatile.
o Credit Risks. Debt securities are also subject to credit risks. 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. Generally,
higher-yielding, lower-rated bonds (which the Fund may hold) are subject to
greater credit risk than higher-rated bonds. Securities issued or guaranteed by
the U.S. Government are subject to little, if any, credit risk. While the
Manager may rely to some extent on credit ratings by nationally recognized
rating agencies, such as Standard & Poor's or Moody's, in evaluating the credit
risk of securities selected for the Fund's portfolio, it may also use its own
research and analysis. However, many factors affect an issuer's ability to make
timely payments, and there can be no assurance that the credit risks of a
particular security will not change over time.
o Foreign Securities Have Special Risks. There are certain risks of holding
foreign securities. The first is the risk of changes in foreign currency values.
Because the Fund may purchase securities denominated in foreign currencies, a
change in the value of a foreign currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's securities denominated in that
currency. The currency rate change will also affect its income available for
distribution. Although the Fund's investment income from foreign securities may
be received in foreign currencies, the Fund will be required to distribute its
income in U.S. dollars. Therefore, the Fund will absorb the cost of currency
fluctuations. If the Fund suffers losses on foreign currencies after it has
distributed its income during the year, the Fund may have to re-characterize
those distributions at the end of its fiscal year. That could result in a return
of capital to shareholders.
There are other risks of foreign investing. For example, foreign issuers
are not required to use generally-accepted accounting principles. If foreign
securities are not registered for sale in the U.S. under U.S. securities laws,
the issuer does not have to comply with the disclosure requirements of our laws,
which are generally more stringent than foreign laws. The values of foreign
securities investments will be affected by other factors, including exchange
control regulations or currency blockage and possible expropriation or
nationalization of assets. There may also be changes in governmental
administration or economic or monetary policy in the U.S. or abroad that can
affect foreign investing. In addition, it is generally more difficult to obtain
court judgments outside the United States if the Fund has to sue a foreign
broker or issuer. Additional costs may be incurred because foreign broker
commissions are generally higher than U.S. rates, and there are additional
custodial costs associated with holding securities abroad.
o Special Risks of Lower-Grade Securities. High yield, lower-grade
securities, whether rated or unrated, often have speculative characteristics.
Lower-grade securities, often referred to as "junk bonds," have special risks
that make them riskier investments than investment grade securities. They may be
subject to greater market fluctuations and risk of loss of income and principal
than lower yielding, investment-grade securities. There may be less of a market
for them and therefore they may be harder to sell at an acceptable price. There
is a relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.
These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. The Fund is not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced. For foreign lower-grade securities, these risks are in
addition to the risks described in "Foreign Securities." Convertible securities
may be less subject to some of these risks than other debt securities, to the
extent they can be converted into stock, which may be more liquid and less
affected by these other risk factors.
As of the close of the fund's fiscal year ended December 31, 1997, the
Fund's portfolio included debt securities rated by various nationally-recognized
rating organizations as well as unrated securities and securities assigned a
rating by the Manager. Securities rated by a rating organization represented the
following percentages of the Fund's total assets (securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category):
AAA: 2.2%; AA: 1.8%; A: 13.2%; BBB: 12.3%; BB: 5.5%; B: 8.4%; CCC: 1.4% and CC:
0%.
o Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and knowledge of
investment techniques that are different from what is required for normal
portfolio management. If the Manager uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market for the
future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is exercised on
an investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if the
investment has increased in value above the call price. In writing puts, there
is a risk that the Fund may be required to buy the underlying security at a
disadvantageous price. The use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. Interest rate swaps are subject to the risk that the
other party will fail to meet its obligations (or that the underlying issuer
will fail to pay on time), as well as interest rate risks. The Fund could be
obligated to pay more under its swap agreements than it receives under them, as
a result of interest rate changes. These risks are described in greater detail
in the Statement of Additional Information.
o Special Risks in Investing in Derivative Investments. One risk of
investing in derivatives is that the company issuing the instrument may fail to
pay the amount due on the maturity of the instrument. Also, the underlying
investment or security on which the derivative is based, and the derivative
itself, might not perform the way the Manager expected it to perform. Markets,
underlying securities and indices may move in a direction not anticipated by the
Manager.
Performance of derivative investments may also be influenced by interest rate
and stock market changes in the U.S. and abroad. All of this can mean that the
Fund will realize less principal or income from the investment than expected.
Certain derivative investments held by the Fund may be illiquid. Please refer to
"Illiquid and Restricted Securities."
o Year 2000 Risks. Because many computer software systems in use today
cannot distinguish the year 2000 from the year 1900, the markets for securities
in which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. Data processing errors by corporate and government issuers of
securities could result in production problems and economic uncertainties, and
those issuers may entail substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Fund's investments and
returns.
Investment Techniques and Strategies
The Fund may use the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on their
use that are designed to reduce some of the risks.
o U.S. Government Securities. Certain U.S. Government Securities, including
U.S. Treasury bills, notes and bonds, and mortgage participation certificates
guaranteed by Government National Mortgage Association ("Ginnie Mae") are
supported by the full faith and credit of the U.S. government, which in general
terms means that the U.S. Treasury stands behind the obligation to pay principal
and interest. Ginnie Mae certificates are one type of mortgage-related U.S.
Government Security the Fund invests in. Other mortgage-related U.S. Government
Securities the Fund invests in that are issued or guaranteed by federal agencies
or government-sponsored entities are not supported by the full faith and credit
of the U.S. government. Those securities include obligations supported by the
right of the issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan Mortgage Corporation ("Freddie Mac"), obligations supported
only by the credit of the instrumentality, such as Federal National Mortgage
Association ("Fannie Mae") and obligations supported by the discretionary
authority of the U.S. Government to repurchase certain obligations of U.S.
Government agencies or instrumentalities such as the Federal Land Banks and the
Federal Home Loan Banks. Other U.S. Government Securities the Fund invests in
are collateralized mortgage obligations ("CMOs").
The value of U.S. Government Securities will fluctuate depending on
prevailing interest rates. Because the yields on U.S. Government Securities are
generally lower than on corporate debt securities, when the Fund holds U.S.
Government Securities it may attempt to increase the income it can earn from
them by writing covered call options against them, when market conditions are
appropriate. Writing covered calls is explained below, under "Other Investment
Techniques and Strategies."
o Short-Term Debt Securities. The high quality, short-term money market
instruments in which the Fund may invest include U.S. Treasury and agency
obligations; commercial paper (short-term, unsecured, negotiable promissory
notes of a domestic or foreign company); short-term obligations of corporate
issuers; bank participation certificates; and certificates of deposit and
bankers' acceptances (time drafts drawn on commercial banks usually in
connection with international transactions) of banks and savings and loan
associations.
o Mortgage-Backed Securities and CMOs. Certain mortgage-backed securities,
whether issued by the U.S. government or by private issuers, "pass-through" to
investors the interest and principal payments generated by a pool of mortgages
assembled for sale by government agencies. Pass-through mortgage-backed
securities entail the risk that principal may be repaid at any time because of
prepayments on the underlying mortgages. That may result in greater price and
yield volatility than traditional fixed-income securities that have a fixed
maturity and interest rate.
o Collateralized Mortgage Obligations.
The Fund may also invest in collateralized mortgage-backed obligations
(referred to as "CMOs"), which generally are obligations fully collateralized by
a portfolio of mortgages or mortgage-related securities. Payment of the interest
and principal generated by the pool of mortgages is passed through to the
holders as the payments are received. CMOs are issued with a variety of classes
or series which have different maturities. Certain CMOs may be more volatile and
less liquid than other types of mortgage-related securities, because of the
possibility of the prepayment of principal due to prepayments on the underlying
mortgage loans.
Some CMOs are issued by private issuers, such as commercial banks, savings
and loan institutions, private mortgage insurance companies, mortgage bankers
and other secondary market issuers. CMOs issued by such private issuers are not
issued or guaranteed by the U.S. Government or its agencies and are, therefore,
also subject to credit risks described above.
The price and yields to maturity of CMOs are, in part, determined by
assumptions about cash- flows from the rate of payments of underlying mortgages.
However, changes in prevailing interest rates may cause the rate of prepayments
of underlying mortgages to change. In general, prepayments on fixed rate
mortgage loans increase during periods of falling interest rates and decrease
during periods of rising interest rates. Faster than expected prepayments of
underlying mortgages will reduce the market value and yield to maturity of
issued CMOs. If prepayments of mortgages underlying a short-term or
intermediate-term CMO occur more slowly than anticipated because of rising
interest rates, the CMO effectively may become a longer-term security. The
prices of longer-term debt securities change more than the prices of short
intermediate term securities in response to changes in interest rates which, in
turn, may result in greater fluctuations in the Fund's share prices.
The Fund may also invest in CMOs that are "stripped." That means that the
security is divided into two parts, one of which receives some or all of the
principal payments (and is known as a "P/O") and the other which receives some
or all of the interest (and is known as an "I/O"). P/Os and I/Os are generally
referred to as "derivative investments," discussed further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the underlying
mortgages. Principal prepayments increase that
sensitivity. Stripped securities that pay "interest only" are therefore subject
to greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund will lose
the anticipated cash flow from the interest on the prepaid mortgages.
That risk is increased when general interest rates fall, and in times of rapidly
falling interest rates, the Fund might receive back less than its investment.
The value of "principal only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon- bearing bonds of the same maturity.
Private-issuer stripped securities are generally purchased and sold by
institutional investors through investment banking firms. At present,
established trading markets have not yet developed for these securities.
Therefore, most private-issuer stripped securities may be deemed "illiquid." If
the Fund holds illiquid stripped securities, the amount it can hold will be
subject to the Fund's investment policy limiting investments in illiquid
securities to 10% of the Fund's net assets.
The Fund may also enter into "forward roll" transactions with
mortgage-backed securities. The Fund sells mortgage-backed securities it holds
to banks or other buyers and simultaneously agrees to repurchase a similar
security from that party at a later date at an agreed-upon price. Forward rolls
are considered to be a borrowing. The Fund is required to segregate liquid
assets on its books in an amount equal to its obligation under the forward roll.
The main risk of this investment strategy is risk of default by the
counterparty.
o Asset-Backed Securities. The Fund may invest in "asset-backed"
securities. These represent interests in pools of consumer loans and other trade
receivables, similar to mortgage-backed securities. They are issued by trusts
and "special purpose corporations." They are backed by a pool of assets, such as
credit card or auto loan receivables, which are the obligations of a number of
different parties. The income from the underlying pool is passed through to
holders, such as the Fund. These securities may be supported by a credit
enhancement, such as a letter of credit, a guarantee or a preference right.
However, the extent of the credit enhancement may be different for different
securities and generally applies to only a fraction of the security's value.
These securities present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in the
related collateral.
|X| Zero Coupon Securities. These securities, which may be issued by the
U.S. government, its agencies or instrumentalities or by private issuers, pay no
current interest and are purchased at a substantial discount from their face
value. They are subject to greater fluctuations in market value as interest
rates change than debt securities that pay interest periodically. Interest
accrues on zero coupon bonds even though cash is not actually received.
|X| Other Debt Securities. The Fund may invest in preferred stocks.
Preferred stock, unlike common stock, generally offers a stated dividend rate
payable from the corporation's earnings. Such preferred stock dividends may be
cumulative or non-cumulative, fixed, participating, or auction rate.
If interest rates rise, a fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. The rights to
payment of dividends and distributions on preferred stocks are generally
subordinate to rights associated with a corporation's debt securities.
o Securities of Foreign Governments and Companies. The Fund may invest in
debt securities issued or guaranteed by foreign companies, and debt securities
of foreign governments or their agencies. These foreign securities may include
debt obligations such as government bonds, debentures issued by companies, as
well as notes. Some of these debt securities may have variable interest rates or
"floating" interest rates that change in different market conditions. Those
changes will affect the income the Fund receives. These securities are described
in more detail in the Statement of Additional Information.
o Hedging. The Fund may buy and sell certain kinds of futures contracts,
put and call options, forward contracts, and options on futures, broadly-based
stock or bond indices and foreign currency, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments." The Fund does
not use hedging instruments for speculative purposes, and has limits on the use
of them, described below.
The Fund may buy and sell options, futures and forward contracts for a
number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its exposure to
changing interest rates. Some of these strategies, such as selling futures,
buying puts and writing covered calls, hedge the Fund's portfolio against price
fluctuations.
Other hedging strategies, such as buying futures and call options and
writing puts, tend to increase the Fund's exposure to the securities market.
Forward contracts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect against
declines in the dollar value of foreign securities the Fund owns, or to protect
against an increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for liquidity purposes,
defensive reasons, or to raise cash to distribute to shareholders.
oFutures. The Fund may buy and sell futures contracts that relate to (1)
foreign currencies (these are referred to as "Forward Contracts"), (2) financial
indices, such as U.S. or foreign government securities indices, corporate debt
securities indices or equity securities indices (these are referred to as
"Financial Futures"), (3) interest rates (these are referred to as "Interest
Rate Futures") and (4) Commodities (these are referred to as "Commodity
Futures"). These types of Futures are described in "Hedging" in the Statement of
Additional Information.
The Fund may buy and sell exchange-traded and over-the-counter put and
call options, including index options, securities options, currency options,
commodities options, and options on the other types of futures described in
Futures, previously. A call or put may be purchased only if, after the purchase,
the value of all call and put options held by the Fund will not exceed 5% of the
Fund's total assets.
If the Fund sells (that is, writes) a call option, it much be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 50% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
oForward 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 purchased or sold,
or to protect against possible losses from changes in the relative value of the
U.S. dollar and a foreign currency. The Fund may also use "cross hedging," where
the Fund hedges against changes in currencies other than the currency in which a
security it holds is denominated.
o Interest Rate Swaps. In an interest rate swap, the Fund and another party
exchange their right to receive, or their obligation to pay, interest on a
security. For example, they may swap a right to receive floating rate interest
payments for fixed rate payments. The Fund enters into swaps only on securities
it owns. The Fund may not enter into swaps with respect to more than 25% of its
total assets. The Fund will segregate liquid assets of any type including equity
and debt securities of any grade to cover any amounts it could owe under swaps
that exceed the amounts it is entitled to receive, and it will adjust that
amount daily, as needed.
o Non-Concentration. The Fund shall not invest 25% or more of its total
assets in any industry; however, for the purposes of this restriction,
obligations of the U.S. government, its agencies or instrumentalities are not
considered to be part of any single industry.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell such securities on
a "delayed delivery" basis. These terms refer to securities that have been
created and for which a market exists, but which are not available for immediate
delivery or are to be delivered at a later date. There may be a risk of loss to
the Fund if the value of the security changes prior to the settlement date.
o Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase transaction, the Fund buys a security and simultaneously sells it
to the vendor for delivery at a future date. Repurchase agreements must be fully
collateralized. 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 Fund will
not enter into a repurchase agreement that will cause more than 10% of the
Fund's net assets to be subject to repurchase agreements having maturities
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.
See the Statement of Additional Information for more details.
o Illiquid and Restricted Securities. Under the policies established by
the Fund's Board of Trustees, the Manager determines the liquidity of certain of
the Fund's investments. Investments may be illiquid because of the absence of an
active trading market, making it difficult to value them or dispose of them
promptly at an acceptable price. A restricted security is one that has a
contractual restriction on its resale or which cannot be sold publicly until it
is registered under the Securities Act of 1933. The Fund will not invest more
than 10% of its net assets in illiquid or restricted securities (the Board may
increase that limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are eligible
for resale to qualified institutional purchasers. Illiquid securities include
repurchase agreements maturing in more than seven days or certain participation
interests other than those with puts exercisable within seven days. The Manager
monitors holdings of illiquid securities on an ongoing basis and at times the
Fund may be required to sell some holdings to maintain adequate liquidity.
o Loans of Portfolio Securities. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions. The Fund must
receive collateral for a loan. These loans are limited to not more than 25% of
the value of the Fund's total assets and are subject to other conditions
described in the Statement of Additional Information. The Fund presently does
not intend to lend its portfolio securities, but if it does, the value of
securities loaned is not expected to exceed 5% of the value of the Fund's total
assets in the coming year.
o Derivative Investments. In general, a "derivative investment" is a
specially designed investment whose performance is linked to the performance of
another investment or security, such as an option, future, index, currency or
commodity. The Fund may not purchase or sell physical commodities; however, the
Fund may purchase and sell foreign currency and engage in hedging transactions.
This shall not prevent the Fund from buying or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or whose value is measured by physical commodities.
Derivative investments used by the Fund are used in some cases for hedging
purposes and in other cases to seek income. In the broadest sense,
exchange-traded options and futures contracts (discussed in "Hedging," above)
may be considered "derivative investments."
The Fund may invest in different types of derivatives. "Index-linked" or
"commodity-linked" notes are debt securities of companies that call for interest
payments and/or payment on the maturity of the note in different terms than the
typical note where the borrower agrees to pay a fixed sum on the maturity of the
note. Principal and/or interest payments on an index-linked note depend on the
performance of one or more market indices, such as the S & P 500 Index or a
weighted index of commodity futures, such as crude oil, gasoline and natural
gas. The Fund may invest in "debt exchangeable for common stock" of an issuer or
"equity-linked" debt securities of an issuer. At maturity, the principal amount
of the debt security is exchanged for common stock of the issuer or is payable
in an amount based on the issuer's common stock price at the time of maturity.
In either case there is a risk that the amount payable at maturity will be less
than the expected principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically, these
are short-term or intermediate-term debt securities having a value at maturity,
and/or an interest rate, determined by reference to one or more foreign
currencies. The currency-indexed securities purchased by the Fund may make
payments based on a formula. The payment of principal or periodic interest may
be calculated as a multiple of the movement of one currency against another
currency, or against an index. These investments may entail increased risk to
principal and increased price volatility.
Other Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund cannot do
any of the following:
o The Fund cannot make short sales except for sales "against the box";
o The Fund cannot borrow money or enter into reverse repurchase
agreements, except that the Fund may borrow money from banks and enter into
reverse repurchase agreements as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of making investments), provided
that the aggregate amount of all such borrowings and commitments under such
agreements does not, at the time of borrowing or of entering into such an
agreement, exceed 10% of the Fund's total assets taken at current market value;
the Fund will not purchase additional portfolio securities at any time that the
aggregate amount of its borrowings and its commitments under reverse repurchase
agreements exceeds 5% of the Fund's net assets (for purposes of this
restriction, entering into portfolio lending agreements shall not be deemed to
constitute borrowing money);
o The Fund cannot concentrate its investments in any particular industry
except that it may invest up to 25% of the value of its total assets in the
securities of issuers in any one industry (of the utility companies, gas,
electric, water and telephone will each be considered as a separate industry);
and
o buy securities issued or guaranteed by any one issuer (except the U.S.
Government or any of its agencies or instrumentalities) if with respect to 75%
of its total assets (1) more than 5% of the Fund's total assets would be
invested in the securities of that issuer, or (2) the Fund would own more than
10% of that issuer's voting securities.
Unless the prospectus or the Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time that Fund makes an investment and the Fund need not sell securities to
meet the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions are listed in
"Investment Restrictions" in the Statement of Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the "Trust") was
organized in 1982 as a multi-series Massachusetts business trust and the Fund is
a series of that Trust. The Trust is an open-end, diversified management
investment company, with an unlimited number of authorized shares of beneficial
interest.
The Trust is governed by a Board of Trustees, which is responsible under
Massachusetts law for protecting the interests of shareholders. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
provides more information about them and the officers of the Fund. Although the
Fund will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into two or more classes. The Board has done
so, and the Fund currently has four classes of shares, Class A, Class B, Class C
and Class Y. All classes invest in the same investment portfolio. Each class has
its own dividends and distributions, and pays certain expenses which may be
different for the different classes. Each class may have a different net asset
value. Each share has one vote at shareholder meetings, with fractional shares
voting proportionally on matters submitted to the vote of shareholders. Shares
of each class may have separate voting rights on matters in which interests of
one class are different from interests of another class, and shares of a
particular class vote as a class on matters that affect that class alone. Shares
are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
OppenheimerFunds, Inc. which is responsible for selecting the Fund's investments
and handles its day-to-day business. The Manager carries out its duties, subject
to the policies established by the Board of Trustees, under an Investment
Advisory Agreement which states the Manager's responsibilities. The Agreement
sets forth the fees paid by the Fund to the Manager and describes the expenses
that the Fund is responsible to pay to conduct its business. Prior to July 10,
1995, the Manager had contracted with Massachusetts Mutual Life Insurance
Company ("MassMutual") to act as the Fund's Sub-Adviser. The Sub-Adviser was
responsible for choosing the Fund's investments. The Manager, not the Fund, paid
the Sub-Adviser. Effective July 10, 1995, the Sub-Advisory Agreement between the
Manager and MassMutual terminated and the Manager became responsible for
selecting the Fund's investments as well as for its day to day business,
pursuant to an investment advisory agreement dated July 10, 1995.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $85 billion as of March 31, 1998,
and with more than 4 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event,
although there cannot be assurance of success. Additionally, because the
services they provide depend on the interaction of their computer systems with
the computer systems of brokers, information services and other parties, any
failure on the part of the computer systems of those third parties to deal with
the year 2000 may also have a negative effect on the services provided to the
Fund.
o Portfolio Managers. The Portfolio Managers of the Fund are David P. Negri
and Jerry A. Webman. They are the individuals principally responsible for the
day-to-day management of the Fund's portfolio. Mr. Negri is a Vice President of
the Manager and has been a portfolio manager since July 10, 1995. Mr. Webman is
also a Vice President of the Manager and became a portfolio manager effective
July 16, 1997. They each serve as officers and portfolio managers of other
Oppenheimer funds.
o Fees and Expenses. Under an investment advisory agreement dated July 10,
1995 with the Manager, the Fund pays the Manager the following annual fees,
which decline on additional assets as the Fund grows: 0.75% of the first $200
million of the Fund's average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million, and 0.50% of net assets in excess of $1 billion. The Fund's
management fee for its last fiscal year was .75% of average annual net assets
for its Class A, Class B and Class C shares, as set forth in the "Annual Fund
Operating Expenses" chart on page 4.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain Trustees' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of the Fund's
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the Investment Advisory Agreement and the
other expenses paid by the Fund is contained in the Statement of Additional
Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio transactions. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it incurs
relatively little expense for brokerage. When deciding which brokers to use, the
Manager is permitted by the advisory agreement to consider whether brokers have
sold shares of the Fund or any other funds for which the Manager or its
affiliates serve as investment adviser.
o 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 the shares of the other
Oppenheimer funds managed by the Manager and is sub-distributor for funds
managed by a subsidiary of the Manager.
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
Services, a division of the Manager, which acts as the shareholder servicing
agent for the Fund on an "at-cost" basis. It also acts as shareholder servicing
agent for other Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free number shown
below under "How to Sell Shares" in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total return,"
"cumulative total return," "average annual total return" and "yield" to
illustrate its performance. The performance of each class of shares is shown
separately, because the performance of each class of shares will usually be
different, as a result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how well your investment
has done and to compare it to other funds or market indices, as we have done
below.
It is important to understand that the Fund's total returns and yields
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's performance. The
Fund's investment performance will vary over time, depending on market
conditions, the composition of the portfolio, expenses and which class of shares
you purchase.
o Total Returns. There are different types of total returns used to measure
the Fund's performance. Total return is the change in value of a hypothetical
investment in the Fund over a given period, assuming that all dividends and
capital gains distributions are reinvested in additional shares. The cumulative
total return measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show the Fund's
actual year-by-year performance.
When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B or Class C shares, normally the contingent deferred sales charge that
applies to the period for which total return is shown has been deducted. When
total returns are quoted for Class Y shares, there is no sales charge which is
deducted. However, total returns may also be quoted "at net asset value,"
without considering the effect of the sales charge or CDSC, and those returns
would be less if sales charges were deducted.
o Yield. Different types of yields may be quoted to show performance. Each
class of shares calculates its standardized yield by dividing the annualized net
investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the period. The yield of each class
will differ because of the different expenses of each class of shares. The yield
data represents a hypothetical investment return on the portfolio, and does not
measure an investment return based on dividends actually paid to shareholders.
To show that return, a dividend yield may be calculated.
Dividend yield is calculated by dividing the dividends of a class paid for
a stated period by the maximum offering price on the last day of the period and
annualizing the results. Yields for Class A shares normally reflect the
deduction of the maximum initial sales charge, but may also be shown without
deducting sales charge. Yields for Class B and Class C shares do not reflect the
deduction of the contingent deferred sales charge. Yields for Class Y shares are
shown at net asset value.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended December 31, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
o Management's Discussion of Performance. During fiscal year ended
December 31, 1997, the Fund performed well despite volatility in the short-term
bond market. The Fund's positive performance was helped in large part when the
Fund increased its average duration which made the Fund's portfolio more
sensitive to declining interest rates and helped produce higher rates of capital
appreciation for the Fund. The Fund's performance also benefited from the low
inflation and decreasing interest rates in the second half of 1997. Because
interest rates and bond prices moved in opposite directions, the result was
attractive total rates of return for most bonds during 1997. The Fund had
virtually no exposure to Southeast Asia and was therefore only slightly impacted
by the Asian economic crisis, mainly by the ripple effect of that crisis which
caused a devaluation of other currencies relative to the U.S. dollar offsetting
the returns from the bond market rallies in other countries for U.S. investors.
o Comparing the Fund's Performance to the Market. The graphs below show
the performance of a hypothetical $10,000 investment in Class A, Class B and
Class C shares of the Fund held at December 31, 1997; in the case of Class A
shares, from the inception of the class on April 15, 1988, in the case of Class
B shares, from the inception of the class on May 1, 1993 and in the case of
Class C shares, performance is measured from the inception of the class on July
11, 1995. Class Y shares were not publicly offered during the fiscal year ended
December 31, 1997. Accordingly, no performance information is presented on Class
Y shares in the graphs below.
The performance of each class of the Fund's shares is compared to the
performance of the Lehman Brothers Corporate Bond Index, a broad-based,
unmanaged index of publicly-issued nonconvertible investment grade corporate
debt of U.S. issuers, widely recognized as a measure of the U.S. fixed-rate
corporate bond market. Prior to July 10, 1995, the Fund's investments were
limited to investment grade bonds, U.S. Government Securities, and money market
instruments. The Lehman Brothers Corporate Bond Index includes a factor for the
reinvestment of interest, but does not reflect expenses or taxes. Index
performance reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data below shows
the effect of taxes. Also, the Fund's performance reflects the effect of Fund
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in any one index. Moreover, the
index performance data does not reflect any assessment of the risk of the
investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class A) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class A Shares of the Fund at 12/31/971
1 Year 5 Years Life
------------------------------------------
4.90% 6.40% 7.93%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class B) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class B Shares of the Fund at 12/31/972
1 Year Life
------------------------------------------
4.41% 5.61%
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class C) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class C Shares of the Fund at 12/31/973
1 Year Life
------------------------------------------
8.39% 6.94%
Total returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions (1) The inception date of the Fund
(Class A shares) was April 15, 1988. The average annual total returns are shown
net of the applicable 4.75% maximum initial sales charge. (2) Class B shares of
the Fund were first publicly offered on May 1, 1993. The average annual total
returns reflect reinvestment of all dividends and capital gains distributions,
and are shown net of the applicable 5% and 2% contingent deferred sales charges,
respectively, for the 1-year period and life- of-the-class. The ending account
value in the graph is net of the applicable 2% contingent deferred sales charge.
(3) Class C shares of the Fund were first publicly offered on July 11, 1995. The
average annual total return reflect the reinvestment of all dividends and
capital gains distributions and the one year return is shown net of the
applicable 1% contingent deferred sales charge. Past performance is not
predictive of future performance. Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers individual investors three different classes
of shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices.
o Class A Shares. If you buy Class A shares, you pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans" defined in "Class A Contingent Deferred Sales Charge" on page
33). If you purchase Class A shares as part of an investment of at least $1
million ($500,000 for Retirement Plans) in shares of one or more Oppenheimer
funds, you will not pay an initial sales charge, but if you sell any of those
shares within 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), you may pay a contingent deferred sales charge. The
amount of that sales charge will vary depending on the amount you invested.
Sales charge rates are described in "Buying Class A Shares," below.
o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "Buying
Class B Shares," below.
o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
discussed in "Buying Class C Shares," below.
o Class Y Shares. Class Y shares are offered only to certain institutional
investors that have special agreements with the Distributor. Please refer to
"Buying Class Y Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that apply to a
class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time. The most important
factors are how much you plan to invest and how long you plan to hold your
investment. If your goals and objectives change over time and you plan to
purchase additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to Class A, Class B and Class C shares, and considered
the effect of the annual asset-based sales charge on Class B and Class C
expenses (which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of appreciation in
investment each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual investment
returns, and the operating expenses borne by each class of shares, and which
class of shares you invest in.
The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
o How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment (which reduces the amount of
your investment dollars used to buy shares for your account), compared to the
effect over time of higher class-based expenses on shares of Class B or Class C
for which no initial sales charge is paid.
o Investing for the Short-Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares, because of the effect of the Class B contingent deferred sales charge
if you redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in the
short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then the more you invest and the more your investment horizon increases toward
six years, Class C shares might not be as advantageous as Class A shares. That
is because the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced front-end
sales charge available for larger purchases of Class A shares. For example,
Class A shares might be more advantageous than Class C (as well as Class B)
shares for investments of more than $100,000 expected to be held for 5 or 6
years (or more). For investments over $250,000 expected to be held 4 to 6 years
(or more), Class A shares may become more advantageous than Class C (and Class
B) shares. If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.
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, respectively, from a single investor.
o Investing for the Longer Term. If you are investing for the longer term,
for example, for retirement, and do not expect to need access to your money for
seven years or more, Class B shares may be an appropriate consideration, if you
plan to invest less than $100,000. If you plan to invest more than $100,000 over
the long term, Class A shares will likely be more advantageous than Class B
shares or Class C shares, as discussed above, because of the effect of the
expected lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Right of
Accumulation.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore, you should
analyze your options carefully.
o Are There Differences in Account Features That Matter to You? Because
some account features may not be available to or advisable for Class B or Class
C shareholders, you should carefully review how you plan to use your investment
account before deciding which class of shares is better for you. For example,
share certificates are not available for Class B or Class C shares and if you
are considering using your shares as collateral for a loan, that may be a factor
to consider. Also, checkwriting privileges are not available for Class B or
Class C shares or Class A shares, subject to a contingent deferred sales charge.
Additionally, the dividends payable to Class B and Class C shareholders will be
reduced by the additional expenses borne by those classes, such as the
asset-based sales charges described below and in the Statement of Additional
Information.
o How Does It Affect Payments to My Broker? A salesperson, such as a
broker, or any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class of shares
than for selling another class. It is important that investors understand that
the purpose of the Class B and Class C contingent deferred sales charges and
asset-based sales charges is the same as the purpose of the front-end sales
charge on sales of Class A shares, that is, to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling shares.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans:
o With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans and military allotment plans, you can make initial and subsequent
investments for as little as $25; and subsequent purchases of at least $25 can
be made by telephone through AccountLink.
o Under pension, profit-sharing, 401(k) plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250 (if
your IRA is established under an Asset Builder Plan, the $25 minimum applies),
and subsequent investments may be as little as $25.
o There is no minimum investment requirement if you are buying shares by
reinvesting dividends and distributions from the Fund or other Oppenheimer funds
(a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the Distributor.
o How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with the
Distributor, or directly through the Distributor, or automatically from your
bank account through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase and redemption orders. When you buy
shares, be sure to specify Class A, Class B or Class C shares. If you do not
choose, your investment will be made in Class A shares.
o Buying Shares Through Your Dealer. Your dealer will place your order with
the Distributor on your behalf.
o Buying Shares Through the Distributor. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for you.
o Buying Shares Through Federal Funds Wire: Shares may be purchased by
Federal Funds wire. The minimum investment is $2,500. You must first call the
Distributor's Wire Department at 1-800-525-7041 to notify the Distributor of the
wire, and receive further instructions. -----
o Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or other
financial institution that is an Automated Clearing House (ACH) member. You can
then transmit funds electronically to purchase shares, or have the Transfer
Agent send redemption proceeds or to transmit dividends and distributions to
your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions used to
establish your account. Please refer to "AccountLink" below for more details.
o Asset Builder Plans. You may purchase shares of the Fund (and up to four
other Oppenheimer funds) automatically each month from your account at a bank or
other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Statement of Additional Information.
o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial sales charge that applies)
that is next determined after the Distributor receives the purchase order in
Denver, Colorado, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive your order by
the close of The New York Stock Exchange on a regular business day and transmit
it to the Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor in its sole
discretion may reject any purchase order for the Fund's shares.
Special Sales Charge Arrangements for Certain Persons. Appendix B and Appendix C
to this Prospectus set forth conditions for the waiver of, or exemption from,
sales charges or the special sales charge rates that apply to purchases of
shares of the Fund (including purchases by exchange) by a person who was a
shareholder of one of the Former Quest for Value Funds or the former CMIA funds
(as defined in each Appendix).
Buying Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, purchases are not subject to an initial sales charge, and the
offering price will be the net asset value. In some cases, reduced sales charges
may be available, as described below. Out of the amount you invest, the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor and allocated to your dealer as commission. The
current sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Sales Front-End Sales
Charge as a Charge as a Commission as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested
Offering Price
- ------------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ------------------------------------------------------------------------------
$50,000 or more but 4.50% 4.71% 3.75%
less than $100,000
- ------------------------------------------------------------------------------
$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
- ------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
- ------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter" under
Federal securities laws.
o Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds in the following cases:
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000; o Purchases aggregating
$1 million or more; o Purchase by a retirement plan qualified under section
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified deferred
compensation plan, employee benefit plan, group retirement plan (see "How
to Buy Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial plan
account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans are
collectively referred to as "Retirement Plans"); that (1) buys shares
costing $500,000 or more or (2) has, at the time of purchase, 100 or more
eligible participants, or (3) certifies that it projects to have annual
plan purchases of $200,000 or more; or
o Purchases by an OppenheimerFunds-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 these purchases, or
(2) by a direct rollover of a distribution from a qualified retirement plan if
the administrator of that plan has made special arrangements with the
distributor for those purchases.
The Distributor pays dealers of record commissions on those purchases in an
amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million, plus 0.25% of purchases over $5 million calculated on a calendar
year basis. That commission will be paid only on those purchases that were not
previously subject to a front-end sales charge and dealer commission. No sales
commission will be paid to the dealer, broker or financial institution on sales
of Class A shares purchased with the redemption proceeds of shares of a mutual
fund offered as an investment option in a retirement Plan in which Oppenheimer
funds are also offered as investment options under a special arrangement with
the Distributor if the purchase occurs more than 30 days after the addition of
the Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, within
18 months of the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. A Class A contingent deferred
sales charge may be deducted from the redemption proceeds of any of those shares
purchased on or after May 1, 1997 that are redeemed within 12 months of the end
of the calendar month of their purchase. That sales charge will be equal to 1.0%
of the lesser of (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original purchase price (which is the original net
asset value) of the redeemed shares. However, the Class A contingent deferred
sales charge will not exceed the aggregate commissions the Distributor paid to
your dealer on all Class A shares of all Oppenheimer funds you purchased subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable, the
Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order that you purchased them. The Class A
contingent deferred sales charge is waived in certain cases described in
"Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However, if the
shares acquired by exchange are redeemed within 12 months (18 months for shares
purchased prior to May 1, 1997) of the end of the calendar month of the purchase
of the exchanged shares, the contingent deferred sales charge will apply.
o Special Arrangements With Dealers. The Distributor may advance up to 13
months' commissions to dealers that have established special arrangements with
the Distributor for Asset Builder Plans for their clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible to buy
Class A shares at reduced sales charge rates in one or more of the following
ways:
o Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together Class A and Class B shares you purchase for your individual accounts,
or jointly, or for trust or custodial accounts on behalf of your children who
are minors. A fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and Class
B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also count Class A
and Class B shares of Oppenheimer funds you previously purchased subject to an
initial or contingent deferred sales charge to reduce the sales charge rate for
current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds. The Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The Oppenheimer funds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current purchases and
must be requested when you buy your shares.
o Letter of Intent. Under a Letter of Intent, if you purchase Class A
shares or Class A shares and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your intended
purchases of both Class A and Class B shares will determine the reduced sales
charge rate for Class A shares purchased during that period. This can include
purchases made up to 90 days before the date of the Letter. More information is
contained in the Application and in "Reduced Sales Charges" in the Statement of
Additional Information.
o Waivers of Class A Sales Charges. The Class A sales charges are not
imposed in the circumstances described below. There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent which conditions apply.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges:
o the Manager or its affiliates;
o present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees;
o registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose; o dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for retirement
plans for their employees; o employees and registered representatives (and their
spouses) of dealers or brokers described above or financial institutions that
have entered into sales arrangements with such dealers
or brokers (and are identified to the Distributor) or with the Distributor; the
purchaser must certify to the Distributor at the time of purchase that the
purchase is for the purchaser's own account (or for the benefit of such
employee's spouse or minor children);
o dealers, brokers or registered investment advisors that have entered
into an agreement with the Distributor (1) providing specifically for the use of
shares of the Fund in particular investment products or employee benefit plans
made available to their clients (those clients may be charged a transaction fee
by their dealer, broker or advisor for the purchase or sale of Fund shares); or
(2) 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;
o (1) 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, (2) Retirement Plans and deferred compensation
plans and trusts used to fund those Plans (including, for example, plans
qualified or created under section 401(a), 403(b) or 457 of the Internal Revenue
Code), and "rabbi trusts" that buy shares for their own accounts, in each case
if those purchases are made through a broker or agent or other financial
intermediary that has made special arrangements with the Distributor for those
purchases; and (3) clients of such investment advisors or financial planners
(who have entered into an agreement for this purpose with the Distributor) who
buy shares for their own accounts may also purchase shares without sales charge
but only if their accounts are linked to a master account of their investment
advisor or financial planner on the books and records of the broker, agent or
financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares);
o directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment 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;
o any unit investment trust that has entered into an appropriate agreement
with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements were
consummated and share purchases commenced by December 31, 1996.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to Class A sales charges:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Manager or its affiliates acts as sponsor;
o shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash
Reserves) or unit investment trusts for which reinvestment arrangements have
been made with the Distributor;
o shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid (this waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner); this waiver must be requested when the purchase
order is placed for your shares of the Fund, and the Distributor may require
evidence of your qualification for this waiver; or
o shares purchased with the proceeds of maturing principal of units of any
Qualified Unit Investment Liquid Trust Series.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
o to make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o if, at the time of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission in
installments of 1/18th of the commission per month (and no further commission
will be payable if the shares are redeemed within 18 months of purchase);
o if, at the time of purchase of shares (if purchased during the period
May 1, 1997 through December 31, 1997) the dealer agreed in writing to accept
the dealer's portion of the sales commission in installments of 1/12th of the
commission per month (and no further commission will be payable if the shares
are redeemed within 12 months of purchase);
o for distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program;
o for distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes: (1) following
the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess contributions; (3)
to return contributions made due to a mistake of fact; (4) hardship withdrawals,
as defined in the plan; (5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of a mutual fund (other than a fund managed by the Manager or its
subsidiaries) offered as an investment options in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in-service
distributions," if the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA;
o for distributions from Retirement Plans with 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option for the Plan; or
o for distributions from certain 401(k) plan programs sponsored by
broker-dealers that have entered into a special agreement with the Distributor
allowing this waiver.
o Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares to reimburse the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of accounts that hold
Class A shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the Fund. The
Distributor uses all of those fees to compensate dealers, brokers, banks and
other financial institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A shares and to
reimburse itself (if the Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures under the
Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in
the Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the average
annual net assets of Class A shares held in accounts of the service providers or
their customers. The payments under the Plan increase the annual expenses of
Class A shares. For more details, please refer to "Distribution and Service
Plans" in the Statement of Additional Information.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed within
6 years of their purchase, a contingent deferred sales charge will be deducted
from the redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the net asset
value of the redeemed shares at the time of redemption or the original purchase
price (which is the original net asset value). The contingent deferred sales
charge is not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The Class B
contingent deferred sales charge is paid to the Distributor to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period. The
contingent deferred sales charge is not imposed in the circumstances described
in "Waivers of Class B and Class C Sales Charges," below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Years Since Contingent Deferred Sales Charge
Beginning of Month in which On Redemptions in That Year
Purchase Order Was Accepted (As % of Amount Subject to Charge)
------------------------------------------------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which the
purchase was made.
o Automatic Conversion of Class B Shares. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and Class
C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.0% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original purchase price (which is the original net asset value). The contingent
deferred sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price.
The Class C contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12- month period.
All purchases are considered to have been made on the first regular business day
of the month in which the purchase was made.
o Distribution and Service Plans for Class B and Class C Shares. The Fund
has adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for its services in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that are
outstanding for 6 years or less and on Class C shares. The Distributor also
receives from the Fund a service fee of 0.25% per year under each plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge allows
investors to buy Class B or Class C shares without a front-end sales charge
while allowing the Distributor to compensate dealers that sell those shares. The
asset-based sales charge and service fees increase Class B and Class C expenses
by up to 1.00% of the net assets per year of the respective class.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. Those
services are similar to those provided under the Class A Service Plan, described
above. The Distributor typically pays the 0.25% service fees to
dealers in advance for the first year after Class B or Class C shares have been
sold by the dealer and retains the service fee paid by the Fund in that year.
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 commissions of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is 4.00% of the
purchase price. The Distributor may pay the Class B service fee and the
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase. The Distributor
currently pays sales commissions of 0.75% of the purchase price of Class C
shares to dealers from its own resources at the time of sale. Including the
advance of the service fee, the total amount paid by the Distributor to the
dealer at the time of sale of Class C shares is 1.00% of the purchase price. The
Distributor may pay the Class C service fee and the asset-based sales charge to
the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
The Fund pays the asset-based sales charge to the Distributor to
compensate it for its services rendered in connection with the distribution of
Class B and Class C shares. Those services include paying sales commissions,
advancing service fee payments, and paying or financing the costs of
distributing and selling Class B and Class C shares. The Distributor retains the
asset-based sales charges paid by the Fund for Class B shares. For Class C
shares, the Distributor retains the asset-based sales charge paid by the Fund
during the first year Class C shares are outstanding, and after the first year
the Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for a year
or more.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B and Class C shares. At December 31, 1997, the end of
the Class B Plan year, the Distributor had incurred unreimbursed expenses in
connection with sales of Class B shares of $1,268,141 (equal to 2.63% of the
Fund's net assets represented by Class B shares on that date). At December 31,
1997, the end of the Class C plan year, the Distributor had incurred
unreimbursed expenses in connection with the sale of Class C shares of $120,021
(equal to 1.31% of the Fund's net assets represented by Class C shares on that
date). If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to the Distributor
for distributing shares before the Plan was terminated.
o Waivers of Class B and Class C Sales Charges. The Class B and Class C
contingent deferred sales charges will not be applied to shares purchased in
certain types of transactions nor will it apply to Class B and Class C shares
redeemed in certain circumstances as described below. The reasons for this
policy are in "Reduced Sales Charges" in the Statement of Additional
Information. In order to receive a waver of the Class B or Class C Contingent
Deferred Sales Charge, you must notify the Transfer Agent which conditions
apply.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charge will be waived for redemptions of shares in the
following cases:
o distributions to participants or beneficiaries from Retirement Plans, if
the distributions are made (a) under an Automatic Withdrawal Plan after the
participant reaches age 59-1/2, as long as the payments are no more than 10% of
the account value annually (measured from the date the Transfer Agent receives
the request), or (b) following the death or disability (as defined in the
Internal Revenue Code) of the participant or beneficiary (the death or
disability must have) occurred after the account was established;
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (the death or disability must have occurred after the account was
established and for disability; you must provide evidence of a determination of
disability by the Social Security Administration);
o returns of excess contributions to Retirement Plans;
o distributions from retirement plans that qualify as "substantially equal
periodic payments" under Section 72(t) of the Internal Revenue Code that do not
exceed 10% of the account value annually, measured from the date the Transfer
Agent receives the request;
o distributions from OppenheimerFunds prototype 401(k)plans and from
certain Massachusetts Mutual Life Insurance Company prototype 401(k) plans for
(1) for hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make "substantially
equal periodic payments" as described in Section 72(t) of the Internal Revenue
Code; (5) for separation from service; or (6) for loans to participants or
beneficiaries; or
o distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases: o shares sold to the Manager or its affiliates; o
shares sold to registered management investment companies or separate accounts
of insurance companies having an agreement with the Manager or the Distributor
for that purpose; or o shares issued in plans of reorganization to which the
Fund is a party.
Buying Class Y Shares. Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors, such as
insurance companies, registered investment companies and employee benefit plans,
that have special agreements with the Distributor for this purpose. These
include Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, which may purchase Class Y shares of the Fund and other Oppenheimer
funds (as well as Class Y shares of funds advised by MassMutual) for asset
allocation programs, investment companies or separate investment accounts it
sponsors and offers to its customers. Individual investors are not able to
invest in Class Y shares directly.
While Class Y shares are not subject to initial or contingent deferred
sales charges or asset-based sales charges, an institutional investor buying the
shares for its customers' accounts may impose charges on those accounts. The
procedures for purchasing, redeeming, exchanging, or transferring the Fund's
other classes of shares (other than the time those orders must be received by
the Distributor or Transfer Agent) and the special account features available to
purchasers of those other classes of shares described elsewhere in this
Prospectus do not apply to Class Y shares. Instructions for purchasing,
redeeming, exchanging or transferring Class Y shares must be submitted by the
institutional investor, not by its customers for whose benefit the shares are
held.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send money
electronically between those accounts to perform a number of types of account
transactions. These include purchases of shares by telephone (either through a
service representative or by PhoneLink, described below), automatic investments
under Asset Builder Plans, and sending dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
AccountLink privileges should be requested on your dealer's settlement
instructions if you buy your shares through your dealer. After your account is
established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
o Using AccountLink to Buy Shares. Purchases may be made by telephone only
after your account has been established. To purchase shares in amounts up to
$250,000 through a telephone representative, call the Distributor at
1-800-852-8457. The purchase payment will be debited from your bank account.
o PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system
that enables you to perform a number of account transactions automatically using
a touch-tone phone. PhoneLink may be used on already-established Fund accounts
after you obtain a Personal Identification Number (PIN), by calling the special
PhoneLink number: 1-800-533-3310.
o Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund, to pay for these purchases.
o Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number. Please refer to "How to Exchange Shares,"
below, for details.
o Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below, for
details.
Shareholder Transactions by Fax. Certain account transactions may be sent to the
Transfer Agent by fax (telecopier). Please call 1-800-525-7048 for more
information about which transactions are included. Transaction requests
submitted by fax are subject to the same rules and restrictions as written and
telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. Information about the Fund, including your
account balance, daily share prices, market and Fund portfolio information, may
be obtained by visiting the OppenheimerFunds Internet Web Site at the following
Internet address:
http://www.oppenheimerfunds.com. Additionally, certain account transactions may
be requested by any shareholder listed in the registration on an account as well
as by the dealer representative of record, through a special section of that Web
Site. To access that section of the Web Site you must first obtain a personal
identification number ("PIN") by calling OppenheimerFunds PhoneLink at
1-800-533-3310. If you do not wish to have Internet account transactions
capability for your account, please call our customer service representatives at
1-800-525-7048. To find out more information about Internet transactions and
procedures, please visit the Web Site.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another Oppenheimer funds
account on a regular basis:
o Automatic Withdrawal Plans. If your Fund account is $5,000 or more, you
can establish an Automatic Withdrawal Plan in order to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. Automatic
Withdrawal Plans are not advisable for Class B and Class C shares subject to a
contingent deferred sales charge ("CDSC") unless waivers of the CDSC apply. The
checks may be sent to you or sent automatically to your bank account through
AccountLink. You may even set up certain types of withdrawals of up to $1,500
per month by telephone. You should consult the Statement of Additional
Information for more details.
o Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of the same
class of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase for each
Oppenheimer funds account is $25. These exchanges are subject to the terms of
the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies 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. Please consult the
Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or administrator must make the purchase of shares for your retirement plan
account. The Distributor offers a number of different retirement plans that can
be used by individuals and employers:
o Individual Retirement Accounts including rollover IRAs, for individuals
and their spouses and SIMPLE IRAs offered by employers o 403(b)(7)
Custodial Plans for employees of eligible tax-exempt organizations, such
as schools, hospitals and charitable organizations o SEP-IRAs (Simplified
Employee Pension Plans) for small business owners or people with income
from self-employment o Pension and Profit-Sharing Plans for self-employed
persons and other employers o 401(k) prototype retirement plans for
businesses
Please call the Distributor for the OppenheimerFunds plan documents, which
contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will be sold
at the next net asset value calculated after your order is received and accepted
by the Transfer Agent. The Fund offers you a number of ways to sell your shares;
in writing, or by using the Fund's checkwriting privilege or by telephone. You
can also set up Automatic Withdrawal Plans to redeem shares on a regular basis,
as described
above. If you have questions about any of these procedures, and especially if
you are redeeming shares in a special situation, such as due to the death of the
owner, or from a retirement plan, please call the Transfer Agent first, at
1-800-525-7048, for assistance.
o Retirement Accounts. To sell shares in an OppenheimerFunds-sponsored
retirement account in your name, call the Transfer Agent for a distribution
request form. There are special income tax withholding requirements for
distributions from retirement plans and you must submit a withholding form with
your request to avoid delay. If your retirement plan account is held for you by
your employer, you must arrange for the distribution request to be sent by the
plan administrator or trustee. There are additional details in the Statement of
Additional Information.
o Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):
o You wish to redeem more than $50,000 worth of shares and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement o The redemption check is not sent to the address of
record on the account statement o Shares are being transferred to a Fund
account with a different owner or name, or o Shares are redeemed by
someone other than the owners (such as an Executor)
o Where Can I Have My Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association,
or by a foreign bank that has a U.S. correspondent bank, or by a U.S.
registered dealer or broker in securities, municipal securities or
government securities, or by a U.S. national securities exchange, a
registered securities association or a clearing agency. If you are signing
on behalf of a corporation, partnership or other business, or as a
fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special requirements or documents requested by the Transfer Agent to
assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Send courier or express mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day, your request must be received by the Transfer Agent or its 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. If your Shares are held in an
OppenheimerFunds-sponsored retirement plan or are held under a share
certificate, you may not redeem your shares by telephone.
o To redeem shares through a service representative, call 1-800-852-8457,
or o To redeem shares automatically on PhoneLink, call 1-800-533-3310.
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
through AccountLink, you may have the proceeds sent to that bank account.
o Telephone Redemptions Paid by Check. You may redeem up to $50,000 by
telephone, once 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.
o 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.
Checkwriting. To be able to write checks against your Fund account, you may
request that privilege on your account Application or you can contact the
Transfer Agent for signature cards, which must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish checkwriting in one of the other
Oppenheimer funds, you may call 1-800-525-7048 to request checkwriting for an
account in this Fund that has the same registration as that other fund account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the Fund's bank or custodian.
o Checkwriting privileges are not available for accounts holding Class B or
Class C shares, or Class A shares that are subject to a contingent deferred
sales charge. o Checks must be written for at least $100. o Checks cannot
be paid if they are written for more than your account value. Remember:
your shares fluctuate in value and you should not write a check close to
the total account value. o You may not write a check that would require the
Fund to redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.
o Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. Please call your dealer for more
information about this procedure. Please refer to "Special Arrangements for
Repurchase of Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence; o The prospectuses of this Fund and the fund whose
shares you want to buy must offer the exchange privilege;
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares every regular business day;
o You must meet the minimum purchase requirements for the fund you purchase
by exchange; and o Before exchanging into a fund, you should obtain and
read its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At present,
Oppenheimer Money Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases, sales charges
may be imposed on exchange transactions. Please refer to "How to Exchange
Shares" in the Statement of Additional Information for more details.
Exchanges may be requested in writing or by telephone:
o Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
addresses listed in "How to Sell Shares."
o 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
names and address. If you hold your shares in certificated for, they may not be
exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
There are certain exchange policies you should be aware of:
o Shares are normally redeemed from one fund and purchased into the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that is in proper form by the close
of The New York Stock Exchange that day, which is normally 4:00 P.M., but may be
earlier on some days. However, either fund may delay the purchase of shares of
the fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might require the disposition of securities at a time or price
disadvantageous to the Fund.
o Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that
will disadvantage it, or to refuse multiple exchange requests submitted by a
shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
o For tax purposes, exchanges of shares involve a redemption of the shares
of the Fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. For more information about taxes affecting
exchanges, please refer to "How to Exchange Shares" in the Statement of
Additional Information.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will be
exchanged.
Shareholder Account Rules and Policies
o Net Asset Value Per Share is determined for each class of shares as of
the close of The New York Stock Exchange which is normally 4:00 P.M., but may be
earlier on some days, on each day the Exchange is open by dividing the value of
the Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has established
procedures to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are special
procedures for valuing illiquid and restricted securities and obligations for
which market values cannot be readily obtained. These procedures are described
more completely in the Statement of Additional Information.
o 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.
o 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 and until
the Transfer Agent receives cancellation instructions from an owner of the
account.
o The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not use
reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will be
liable for losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent during
periods of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
o 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.
o 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.
o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates, and the redemption
price, which is the net asset value per share, will normally be different for
Class A, Class B, Class C and Class Y shares. Therefore, the redemption value of
your shares may be more or less than their original cost.
o Payment for redeemed shares is made ordinarily in cash and forwarded by
check or through AccountLink (as elected by the shareholder under the redemption
procedures described above) within 7 days after the Transfer Agent receives
redemption instructions in proper form, except under unusual circumstances
determined by the Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer, payment will
be forwarded within 3 business days. The Transfer Agent may delay forwarding a
check or processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 10
days from the date the shares were purchased. That delay may be avoided if you
purchase shares by Federal Funds wire, certified check or arrange to have your
bank provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
o Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $1,000 for reasons other than the fact that the
market value of shares has dropped, and in some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of share
purchase orders.
o Under unusual circumstances shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.
o "Backup Withholding" of Federal income tax may be applied at the rate of
31% from dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund a correct and properly certified Social Security
or Employer Identification Number when you sign your application, or if you
under report your income to the Internal Revenue Service.
o The Fund does not charge a redemption fee, but if your dealer or broker
handles your redemption, they may charge a fee. That fee can be avoided by
redeeming your Fund shares directly through the Transfer Agent. Under the
circumstances described in "How To Buy Shares," you may be subject to a
contingent deferred sales charge when redeeming certain Class A, Class B or
Class C shares.
o 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 declares dividends separately for Class A, Class B, Class C
and Class Y shares from net investment income on each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are paid on
the last business day of every month, but the Board of Trustees can change that
date. Distributions may be made monthly from any net short-term capital gains
the Fund realizes in selling securities. It is expected that distributions paid
with respect to Class A and Class Y shares will generally be higher than for
Class B or Class C shares because expenses allocable to Class B and Class C
shares will generally be higher.
From time to time, the Fund may adopt the practice, to the extent
consistent with the amount of the Fund's net investment income and other
distributable income, of attempting to pay dividends on Class A shares at a
constant level, although the amount of such dividends may be subject to change
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 that Class. A
practice of attempting to pay dividends on Class A shares at a constant level
would require the Manager, consistent with the Fund's investment objective,
investment policies and investment restrictions, to monitor the Fund's portfolio
and select higher yielding securities when deemed appropriate to maintain
necessary net investment income levels. If the Fund, from time to time, seeks to
pay dividends on Class A shares at a target level, the Fund anticipates it would
pay dividends at the targeted dividend level from net investment income and
other distributable income without any impact on the Fund's Class A net asset
value per share. The Board of Trustees could change the Fund's targeted dividend
level at any time, without prior notice to shareholders. The Fund would not
otherwise have a fixed dividend rate. Regardless, there can be no assurance as
to the payment of any dividends or the realization of any capital gains.
Capital Gains. The Fund may make distributions annually in December out of any
net short-term or long-term capital gains, and the Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. Long-term capital gains will be separately identified in the tax
information the Fund sends you after the end of the year. Short-term capital
gains are treated as dividends for tax purposes. There can be no assurance that
the Fund will pay any capital gains distributions in a particular year. So that
the Fund will not have to pay taxes on the amount it distributes to shareholders
as dividends and capital gains, the Fund intends to manage its investments so
that it will qualify as a "regulated investment company" under the Internal
Revenue Code, although the Fund reserves the right not to qualify in a
particular year.
Distribution Options. When you open your account, specify on your application
how you want to receive your distributions. For OppenheimerFunds-sponsored
retirement accounts, all distributions are reinvested. For other accounts, you
have four options:
o Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and long- term capital gains distributions in additional shares of the
Fund.
o Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or you
can have them sent to your bank account on AccountLink.
o Receive All Distributions in Cash. You can elect to receive a check for
all dividends and long-term capital gains distributions or have them sent to
your bank through AccountLink.
o Reinvest Your Distributions in Another Oppenheimer Fund Account. You can
reinvest all distributions in the same class of shares of another Oppenheimer
fund account you have
established.
Taxes. If your account is not a tax-deferred retirement account, you should be
aware of the following tax implications of investing in the Fund. Long-term
capital gains are taxable as long-term capital gains when distributed to
shareholders. It does not matter how long you held your shares. Dividends paid
from short-term capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be subject to
state or local taxes. Your distributions are taxable when paid, whether you
reinvest them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
o "Buying a Dividend:" If you buy shares on or just before the ex-dividend
date, or just before the Fund declares a capital gains distribution, you will
pay the full price for the shares and then receive a portion of the price back
as a taxable dividend or capital gain.
o Taxes on Transactions: Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. A capital gain or loss is the
difference between the price you paid for the shares and the price you received
when you sold them.
o Returns of Capital: In certain cases, distributions made by the Fund may
be considered a non-taxable return of capital to shareholders. If that occurs,
it will be identified in notices to shareholders. A non-taxable return of
capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
-2-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER BOND FUND
Graphic material included in Prospectus of Oppenheimer Bond Fund:
"Comparison of Total Return of Oppenheimer Bond Fund and The Lehman Brothers
Corporate Bond Index - Change in Value of a $10,000 Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer Bond Fund
(the "Fund") depicting the initial account value and subsequent account value of
a hypothetical $10,000 in the Fund. In the case of the Fund's Class A shares,
that graph will cover each of the Fund's fiscal years since the inception of the
class on April 15, 1988 through December 31, 1997, in the case of Class B shares
the graph will cover the period from the inception of the class on May 1, 1993
through December 31, 1997 and in the case of Class C shares the graph will cover
the period from inception on July 11, 1995 through December 31, 1997. The graphs
will compare such values with the same investments over the same time periods
with The Lehman Brothers Corporate Bond Index. Set forth below are the relevant
data points that will appear on the linear graphs. Additional information with
respect to the foregoing, including a description of The Lehman Brothers
Corporate Bond Index, is set forth in the Prospectus under "Performance of the
Fund -- Comparing the Fund's Performance to the Market"
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund A Bond Index
04/15/88 $9,525 $10,000(1)
12/31/88 $9,952 $10,458
12/31/89 $11,077 $11,931
12/31/90 $11,602 $12,773
12/31/91 $13,723 $15,137
12/31/92 $14,653 $16,452
12/31/93 $16,163 $18,452
12/31/94 $15,583 $17,727
12/31/95 $18,169 $21,670
12/31/96 $19,053 $22,382
12/31/97 $20,983 $24,673
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund B(1) Bond Index
05/01/93 $10,000 $10,000(2)
12/31/93 $10,391 $10,596
12/31/94 $9,920 $10,179
12/31/95 $11,513 $12,443
12/31/96 $11,972 $12,852
12/31/97 $12,900 $14,167
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund C(2) Bond Index
07/11/95 $10,000 $10,000
12/31/95 $10,376 $10,742
12/31/96 $10,792 $11,095
12/31/97 $11,805 $12,230
- ----------------------
(1) Index value as of March 31, 1988. (2) Index value as of April 30, 1993 (3)
Index value as of June 30, 1995.
Note: Index performance plotting points are calculated from month end values.
-3-
<PAGE>
Appendix A
Description of Securities Ratings
o Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, the changes that can be
expected are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as "high-grade" bonds. They are rated lower than the best bonds because margins
of protection may not be as large as with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future. The
investments in which the Fund will principally invest will be in the lower-rated
categories described below.
Baa: Bonds which are rated "Baa" are considered medium grade obligations, i. e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked shortcomings.
C: Bonds which are rated "C" are the lowest rated class of bonds and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
o Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and indicates an
extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions. The investments in which the Fund will
principally invest will be in the lower-rated categories, described below.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C: Bonds on which no interest is being paid are rated "C".
D: Bonds rated "D" are in payment default and payment of interest and/or
repayment of principal is in arrears.
o Fitch Investors Service, Inc.
Investment Grade Bond Ratings
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
Speculative Grade Bond Ratings
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflect the obligor's limited margin of safety
and the need for reasonable business and economic activity through out the life
of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA," "DDD," "DD," or "D" categories.
o Duff & Phelps' Ratings
Long-Term Debt and Preferred Stock
AAA Highest credit quality. The risk factors are negligible, being only slightly
more than for risk- free US Treasury debt.
AA+, AA & AA- High credit quality protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A- Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB & BBB- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB- Below investment grade but deemed to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic
industry conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
-4-
<PAGE>
APPENDIX B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment advisor to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain Former Quest
Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement Plans. The
following table sets forth the initial sales charge rates for Class A shares
purchased by a "Qualified Retirement Plan" through a single broker, dealer or
financial institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement Plan or that
Association purchased shares of any of the Former Quest for Value Funds or
received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
- ------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Qualified Retirement Plans and Associations having 50 or
more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages 33 to 37 of this Prospectus.
Purchases made under this arrangement qualify for the lower of the sales
charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Waiver of Class A Sales Charges for Certain Shareholders. Class A shares of
the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased shares of any
of the Former Quest For Value Funds pursuant to a special "strategic alliance"
with the distributor of those funds. The Fund's Distributor will pay a
commission to the dealer for purchases of Fund shares as described above in
"Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
o 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, B or C shares of the Fund acquired by 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, if those
shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the Internal Revenue Code or from custodial accounts under Section
403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation
plans under Section 457 of the Code, and other employee benefit plans, and
returns of excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or C shares if
the annual withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum value of
such accounts.
o 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, B or C shares of the
Fund acquired by 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, if those shares were purchased on or after March 6,
1995, but prior to November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under Section 408(a) of the
Internal Revenue Code or retirement plans under Section 401(a), 401(k), 403(b)
and 457 of the Code, if those distributions are made either (a) to an individual
participant as a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or beneficiary; (2)
returns of excess contributions to such retirement plans; (3) redemptions other
than from retirement plans following the death or disability of the
shareholder(s) (as evidenced by a determination of total disability by the U.S.
Social Security Administration); (4) withdrawals under an automatic withdrawal
plan (but only for Class B or C shares) where the annual withdrawals do not
exceed 10% of the initial value of the account; and (5) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum account value. A shareholder's account
will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, B or C shares of the Fund described in this
section if within 90 days after that redemption, the proceeds are invested in
the same Class of shares in this Fund or another Oppenheimer fund.
B-1
<PAGE>
APPENDIX C
Special Sale Charge Arrangements for Fund Shareholders of the Fund Who Were
Shareholders of the Former Connecticut Mutual Investment Accounts, Inc. The
initial and contingent sales charge rates and waivers for Class A and Class B
shares described elsewhere in this Prospectus are modified as described below
for those shareholders of the Fund who were shareholders of Connecticut Mutual
Investment Accounts, Inc. on March 17, 1996 ("former CMIA shareholders").
o Prior Class A CDSC and Class A Sales Charge Waivers
o Class A Contingent Deferred Sales Charge. Certain former CMIA
shareholders are entitled to continue to make additional purchases of Class A
shares of the Fund at net asset value without the 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 former CMIA shareholders who are eligible for the prior Class A CDSC
are: (1) persons whose purchases of Class A shares of the former CMIA funds were
$500,000 prior to March 18, 1996, as a result of direct purchases or purchases
pursuant to the CMIA funds' policies on Combined Purchases or Rights of
Accumulation, who still hold those shares in any of the Oppenheimer funds, and
(2) persons whose intended purchases under a Statement of Intention entered into
prior to March 18, 1996, with the CMIA funds' former general distributor 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.
Class A shares of the former CMIA funds that were purchased at net asset
value prior to March 18, 1996, remain subject to the prior Class A CDSC. If any
additional Class A shares are purchased by those shareholders at net asset value
pursuant to this arrangement they will be subject to the prior Class A CDSC.
o Class A Sales Charge Waivers. Additional Class A shares of the Fund may
be purchased without a sales charge by a person who was in one or more of the
categories described below and acquired Class A shares of the CMIA funds prior
to March 18, 1996 and still holds Class A shares of any Oppenheimer funds: (1)
any purchaser, provided the total initial amount invested in the former CMIA
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 Oppenheimer funds; (2) any participant in a qualified
plan, provided that the total initial amount invested by the plan in any one or
more of the former CMIA funds totaled $500,000 or more; (3) Directors of the
former CMIA funds and members of their immediate families; (4) employee benefit
plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the
CMIA funds' prior distributor, and its affiliated companies; (5) one or more
members of a group of a 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; (6) any
holder of a variable annuity contract issued in New York State by Connecticut
Mutual Life Insurance Company through the Panorama Separate Account which was
beyond the applicable surrender charge period and which was used to fund a
qualified plan, if that holder exchanges the variable annuity contract for Class
A shares of the Fund; and (7) 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 CMIA 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 applicable Class A
CDSC.
o Class A and Class B Contingent Deferred Sales Charge Waivers. In addition
to the waivers set forth above under the caption "How to Buy Shares," the
contingent deferred sales charge will be waived for redemptions of Class A and
Class B shares of the Fund and acquired through the reorganization of the
Connecticut Mutual Income Account Series of CMIA with the Fund and the shares of
that series were acquired prior to March 18, 1996, (ii) were acquired by
exchange from another CMIA fund and the shares of that fund were purchased prior
to March 18, 1996 and (iii) were exchanged or redeemed in the following cases:
(1) by the estate of the deceased shareholder; (2) upon the disability of
the shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended (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) in
whole or in part, in connection with shares sold by 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; (5) in connection with the former CMIA fund's
right to involuntarily redeem or liquidate a Fund; (6) 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; and (7) as involuntary redemptions of
shares by operation of law, or under procedures set forth in the former CMIA
fund's Articles of Incorporation, or as adopted by the Board of Directors of the
former CMIA funds.
C-1
<PAGE>
Oppenheimer Bond Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OppenheimerFunds Internet Web Site:
http://www.oppenheimerfunds.com
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given or
made, such information and representations must not be relied upon as having
been authorized by the Fund, OppenheimerFunds, Inc., OppenheimerFunds
Distributor, Inc., or any affiliate thereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make such
offer in such state.
PR0285.004.0498 *Printed on recycled paper 285PSP.B98
C-2
<PAGE>
OPPENHEIMER BOND FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated April 27, 1998.
This Statement of Additional Information of Oppenheimer Bond Fund is not a
Prospectus. This document contains additional information about the Fund and
supplements information in the Prospectus dated April 27, 1998. It should be
read together with the Prospectus which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies......................................2
Investment Policies and Strategies..................................2
Other Investment Techniques and Strategies..........................8
Other Investment Restrictions......................................21
How the Fund is Managed...............................................23
Organization and History..............................................23
Trustees and Officers of the Fund.....................................24
The Manager and Its Affiliates........................................29
Brokerage Policies of the Fund........................................31
Performance of the Fund...............................................33
Distribution and Service Plans........................................39
About Your Account
How to Buy Shares.....................................................42
How to Sell Shares....................................................50
How to Exchange Shares................................................55
Dividends, Capital Gains and Taxes....................................57
Additional Information About the Fund.................................58
Financial Information About the Fund
Independent Auditors' Report..........................................60
Financial Statements..................................................61
Appendix A: Corporate Industry Classification........................A-1
-1-
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objectives and policies of
the Fund are discussed in the Prospectus. Set forth below is supplemental
information about those policies, and the types of securities in which the Fund
invests as well as the strategies the Fund may use to try to achieve its
objective. Certain capitalized terms used in this Statement of Additional
Information are defined in the Prospectus.
o Debt Securities. All debt securities are subject to two types of risk:
credit risk and interest rate risk (these are in addition to other investment
risks that may affect a particular security).
o Credit Risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Generally, higher
yielding bonds are subject to credit risk to a greater extent than higher
quality bonds.
o Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting solely from the inverse relationship
between price and yield of outstanding fixed-income securities. An increase in
interest rates will generally reduce the market value of fixed-income
investments, and a decline in interest rates will tend to increase their value.
In addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in the
market value of fixed-income securities subsequent to their acquisition will not
affect the interest payable on those securities, and thus the cash income from
such securities, but will be reflected in the valuations of those securities
used to compute the Fund's net asset values.
o Commercial Paper. The Fund's commercial paper investments, in addition to
those described in the Prospectus, include the following:
Variable Amount Master Demand Notes. Master demand notes are corporate
obligations which permit the investment of fluctuating amounts by the Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase the amount under the note at any time up to the
full amount provided by the note agreement, or to decrease the amount, and the
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit. Because these notes
are direct lending arrangements between the lender and borrower, it is not
generally contemplated that they will be traded. There is no secondary market
for these notes, although they are redeemable (and thus immediately repayable by
the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem such notes is dependent upon the ability
of the borrower to pay principal and interest on demand. The Fund has no
limitations on the type of issuer from whom these notes will be purchased;
however, in connection with such purchases and on an ongoing basis, the Manager
will consider the earning power, cash flow and other liquidity ratios of the
issuer, and its ability to pay principal and interest
on demand, including a situation in which all holders of such notes made demand
simultaneously. Some investments in master demand notes may be subject to the
limitation on investments by the Fund in illiquid securities, described in the
Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund may purchase
may have variable or floating interest rates. Variable rates are adjustable at
stated periodic intervals; floating rates are automatically adjusted according
to a specified market rate for such investments, such as the percentage of the
prime rate of a bank, or the 91-day U.S. Treasury Bill rate. Such obligations
may be secured by bank letters of credit or other credit support arrangements.
o Participation Interests. The Fund may invest in participation interests,
subject to the limitation, described in "Illiquid and Restricted Securities" in
the Prospectus on investments by the Fund in illiquid investments. Participation
interests provide the Fund an undivided interest in a loan made by the issuing
financial institution in the proportion that the Fund's participation interest
bears to the total principal amount of the loan. No more than 5% of the Fund's
net assets can be invested in participation interests of the same borrowers. The
issuing financial institution may have no obligation to the Fund other than to
pay the Fund the proportionate amount of the principal and interest payments it
receives. Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan, and there is a risk that such
borrowers may have difficulty making payments. In the event the borrower fails
to pay scheduled interest or principal payments, the Fund could experience a
reduction in its income and might experience a decline in the value of that
participation interest and in the net asset value of its shares. In the event of
a failure by the financial institution to perform its obligation in connection
with the participation agreement, the Fund might incur certain costs and delays
in realizing payment or may suffer a loss of principal and/or interest.
o Bank Obligations and Instruments Secured Thereby. The bank obligations
the Fund may invest in include time deposits, certificates of deposit, and
bankers' acceptances if they are: (i) obligations of a domestic bank with total
assets of at least $1 billion or (ii) obligations of a foreign bank with total
assets of at least U.S. $1 billion. The Fund may also invest in instruments
secured by such obligations (e.g., debt which is guaranteed by the bank). For
purposes of this section, the term "bank" includes commercial banks, savings
banks, and savings and loan associations which may or may not be members of the
Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified period
of time at a stated interest rate, whether or not subject to withdrawal
penalties. However, time deposits, other than those maturing in seven days or
less, that are subject to withdrawal penalties are subject to the limitation on
investments by the Fund in illiquid investments, set forth in the Prospectus
under "Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
|X| Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in debt obligations (which may be dominated in
U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary from time to time depending on, among other things, the
relative yields of foreign and U.S. securities, the economies of foreign
countries, the condition of such countries' financial markets, the interest rate
climate of such countries and the relationship of such countries' currency to
the U.S. dollar. The Manager will consider an issuer's affiliation, if any, with
a foreign government as one of the factors in determining whether to purchase
any particular foreign security. These factors are judged on the basis of
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies) as
well as technical and political data. The Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon market
conditions, those of a single country.
Investments in foreign securities offer potential benefits not available
from investments solely in securities of domestic issuers, by offering 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 bond or other markets that do not move in a manner parallel
to U.S. markets. From time to time, 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 reimposed.
Securities of foreign issuers that are represented by American depository
receipts, or that are only listed on a U.S. securities exchange, or are only
traded in the U.S. over-the-counter market are not considered "foreign
securities," because they are not subject to many of the special considerations
and risks (discussed below) that apply to foreign securities traded and held
abroad.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government. Obligations of
"supranational entities" include those of international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and of international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the Inter- American Development Bank. The governmental
members, or "stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital" contributed
by members at the entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible risks
not typically associated with investing in securities in the U.S. The values of
foreign securities will be affected by changes in currency rates or exchange
control regulations or currency blockage, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in the U.S. or abroad) or changed circumstances in dealings
between nations. There may be a lack of public information about foreign
issuers. Foreign countries may not have financial reporting, accounting and
auditing standards comparable to those that apply to U.S. issuers. Costs will be
incurred in connection with conversions between various currencies. Foreign
brokerage commissions are generally higher than commissions in the U.S., and
foreign securities markets may be less liquid, more volatile and less subject to
governmental regulation than in the U.S. They may have increased delays in
settling portfolio transactions. Investments in foreign countries could be
affected by other factors not generally thought to be present in the U.S.,
including expropriation or nationalization, confiscatory taxation and potential
difficulties in enforcing contractual obligations, and could be subject to
extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and its
income available for distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign currencies, the Fund
will be required to compute and distribute its income in U.S. dollars, and
absorb the cost of currency fluctuations. The Fund may engage in foreign
currency exchange transactions for hedging purposes to protect against changes
in future exchange rates. See "Other Investment Techniques and Strategies -
Hedging," below.
The values of foreign investments and the investment income derived from
them may also be affected unfavorably by changes in currency exchange control
regulations. Although the Fund will invest only in securities denominated in
foreign currencies that at the time of investment do not have significant
government-imposed restrictions on conversion into U.S. dollars, there can be no
assurance against subsequent imposition of currency controls. In addition, the
values of foreign securities will fluctuate in response to a variety of factors,
including changes in U.S. and foreign interest rates.
o U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its agencies
or instrumentalities, and include "zero coupon" Treasury securities and
mortgage-backed securities and CMOs.
o Mortgage-Backed Securities. These securities represent participation
interests in pools of residential mortgage loans which are guaranteed by
agencies or instrumentalities of the U.S. Government. Such securities differ
from conventional debt securities which generally provide for periodic payment
of interest in fixed or determinable amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Some mortgage-backed
securities in which the Fund may invest may be backed by the full faith and
credit of the U.S. Treasury (e.g., direct pass-through certificates of
Government National Mortgage Association); some are supported by the right of
the issuer to borrow from the U.S. Government (e.g., obligations of Federal Home
Loan Mortgage Corporation); and some are backed by only the credit of the issuer
itself. Those guarantees do not extend to the value of or yield of the
mortgage-backed securities themselves or to the net asset value of the Fund's
shares. Any of these government agencies may also issue collateralized
mortgage-backed obligations ("CMOs"), discussed below.
The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. The actual life of any particular
pool will be shortened by any unscheduled or early payments of principal and
interest. Principal prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to predict accurately
the average life of a particular pool. Yield on such pools is usually computed
by using the historical record of prepayments for that pool, or, in the case of
newly-issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield realized
by the Fund to differ from the yield calculated on the basis of the expected
average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as do the values of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise to the extent that the value of other debt securities rise,
because of the prepayment feature of pass-through securities. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments it
receives may occur at times when available investments offer higher or lower
rates than the original investment, thus affecting the yield of the Fund.
Monthly interest payments received by the Fund have a compounding effect which
may increase the yield to the Fund more than debt obligations that pay interest
semi-annually. Because of those factors, mortgage-backed securities may be less
effective than Treasury bonds of similar maturity at maintaining yields during
periods of declining interest rates. The Fund may purchase mortgage-backed
securities at par, at a premium or at a discount. Accelerated prepayments
adversely affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not have been fully
amortized at the time the obligation is repaid. The opposite is true for
pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in which the
principal and interest portions of the security are separated and sold. Stripped
mortgage-backed securities usually have at least two classes each of which
receives different proportions of interest and principal distributions on the
underlying pool of mortgage assets. One common variety of stripped
mortgage-backed security has one class that receives some of the interest and
most of the principal, while the other class receives most of the interest and
remainder of the principal. In some cases, one class will receive all of the
interest (the "interest-only" or "IO" class), while the other class will receive
all of the principal (the "principal-only" or "PO" class). Interest only
securities are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. An increase in principal payments
or prepayments will reduce the income available to the IO security. In other
types of CMOs, the underlying principal payments may apply to various classes in
a particular order, and therefore the value of certain classes or "tranches" of
such securities may be more volatile than the value of the pool as a whole, and
losses may be more severe than on other classes.
Mortgage-backed securities may be less effective than debt obligations of
similar maturity at maintaining yields during periods of declining interest
rates. As new types of mortgage-related securities are developed and offered to
investors, the Manager will, subject to the direction of the Board of Trustees
and consistent with the Fund's investment objective and policies, consider
making investments in such new types of mortgage-related securities.
o GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence an
undivided interest in a pool or pools of mortgages ("GNMA Certificates"). The
GNMA Certificates that the Fund may purchase are of the "modified pass-through"
type, which entitle the holder to receive timely payment of all interest and
principal payments due on the mortgage pool, net of fees paid to the "issuer"
and GNMA, regardless of whether the mortgagor actually makes the payments when
due.
The National Housing Act authorizes GNMA to guarantee the timely payment
of principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.
o FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest and principal on
FNMA Certificates. The FNMA guarantee is not backed by the full faith and credit
of the U.S. Government.
o FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
was created to promote development of a nationwide secondary market for
conventional residential mortgages. FHLMC issues two types of mortgage
pass-through certificates ("FHLMC Certificates"): mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble
GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owed on the underlying pool. FHLMC guarantees
timely monthly payment of interest on PCs and the ultimate payment of principal.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
Government.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
o Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. government instrumentality, or a
private issuer, which may be a domestic or foreign corporation. Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with different characteristics such
as varying maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed through to holders
of CMOs, CMOs of varying maturities may be secured by the same pool of
mortgages, the payments on which are used to pay interest on each class and to
retire successive maturities in sequence. Unlike other mortgage-backed
securities (discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the class of
CMO first to mature generally will be paid down. Therefore, although in most
cases the issuer of CMOs will not supply additional collateral in the event of
such prepayment, there will be sufficient collateral to secure CMOs that remain
outstanding.
o Asset-Backed Securities. The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been exhausted.
The risks of investing in asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The underlying
loans are subject to prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as
described above for the prepayments of a pool of mortgage loans underlying
mortgage-backed securities.
Other Investment Techniques And Strategies
o Hedging with Options and Futures Contracts. The Fund may employ one or
more types of Hedging Instruments for the purposes described in the Prospectus.
When hedging 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 may: (i) sell Futures, (ii) purchase puts on
such Futures or securities, or (iii) write calls on securities held by it or on
Futures. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase calls on
such Futures or on securities. Covered calls and puts may also be written on
debt securities to attempt to increase the Fund's income. When hedging to
protect against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) purchase puts on that foreign currency and on
foreign currency Futures, (b) write calls on that currency or on such Futures,
or (c) enter into Forward Contracts at a lower rate than the spot ("cash") rate.
The Fund's strategy of hedging will be incidental to the Fund's activities
in the underlying cash market. Additional Information about the Hedging
Instruments the Fund may use is provided below. At present, the Fund does not
intend to enter into Futures, Forward Contracts and options on Futures if, after
any such purchase, the sum of margin deposits on Futures and premiums paid on
Futures options exceeds 5% of the value of the Fund's total assets. In the
future, the Fund may employ Hedging Instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, legally permissible
and adequately disclosed.
o Writing Call Options. The Fund may write (i.e. sell) call options
("calls") on debt securities that are traded on U.S. and foreign securities
exchanges and over-the-counter markets, to enhance income through the receipt of
premiums from expired calls and any net profits from closing purchase
transactions. After any such sale up to 50% of the Fund's total assets may be
subject to calls. All such calls written by the Fund must be "covered" while the
call is outstanding (i.e. the Fund must own the securities subject to the call
or other securities acceptable for applicable escrow requirements). Calls on
Futures (discussed below) must be covered by deliverable securities or by liquid
assets segregated to satisfy the Futures contract. When the Fund writes a call
on a security it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call on the same security during the call
period (usually not more than 9 months) at a fixed exercise price (which may
differ from the market price of the underlying security), regardless of market
price changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call period,
which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered short-term
capital gains for Federal income tax purposes, and when distributed by the Fund
are taxable as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures contract
or a deliverable bond, provided that at the time the call is written, the Fund
covers the call by segregating an equivalent dollar amount of liquid assets. The
Fund will segregate additional liquid assets if the value of the segregated
assets drops below 100% of the current value of the Future. In no circumstances
would an exercise notice require the Fund to deliver a futures contract; it
would simply put the Fund in a short futures position, which is permitted by the
Fund's hedging policies.
o Writing Put Options. The Fund may write put options on debt securities or
Futures but only if such puts are covered by segregated liquid assets. The Fund
will not write puts if, as a result, more than 50% of the Fund's net assets
would be required to be segregated to cover such put obligations. In writing
puts, there is the risk that the Fund may be required to buy the underlying
security at a disadvantageous price. 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. Writing a
put covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The premium
the Fund receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price. However,
the Fund has also assumed the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise price, even
though the value of the investment may fall below the exercise price. If the put
lapses unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price, which
will usually exceed the market value of the investment at that time. In that
case, the Fund may incur a loss, equal to the sum of the current market value of
the underlying investment and the premium received minus the sum of the exercise
price and any transaction costs incurred.
When writing put options on securities, 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 put option. The Fund
therefore forgoes the opportunity of investing the segregated assets or writing
calls against those assets. As long as the obligation of the Fund as the put
writer continues, it may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring the Fund to take delivery of the
underlying security against payment of 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. This obligation terminates upon
expiration of the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is thereafter not
allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a profit on
an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit the Fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Fund. The Fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
As above for writing covered calls, any and all such profits described herein
from writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
The Trustees have adopted a non-fundamental policy that the Fund may only
purchase call options and put options with a value of up to 5% of its net
assets.
o Purchasing Puts and Calls. The Fund may purchase calls in order to
protect against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term debt securities
market. When the Fund purchases a call, it pays a premium (other than in a
closing purchase transaction) and, except as to calls on bond indices, has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price. In
purchasing a call, the Fund benefits only if the call is sold at a profit or if,
during the call period, the market price of the underlying investment is above
the sum of the call price, transaction costs, and the premium paid, and the call
is exercised. If the call is not exercised or sold (whether or not at a profit),
it will become worthless at its expiration date and the Fund will lose its
premium payment and the right to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and has the right to sell
the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns (a "protective put") enables the Fund to attempt to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and the
right to sell the underlying investment. However, the put may be sold prior to
expiration (whether or not at a profit).
Purchasing either a put on Interest Rate Futures or on debt securities it
does not own permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price, and as a result the
put is not exercised, the put will become worthless on the expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities. When the Fund purchases a put on an Interest
rate Future or debt security not held by it, the put protects the Fund to the
extent that the prices of the underlying Future or debt securities move in a
similar pattern of the debt securities in the Fund's portfolio.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may 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 may pay a brokerage commission each time it buys or
sells a call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher 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 and, consequently, put and call options offer large
amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
o Options on Foreign Currencies. The Fund intends to write and purchase
calls on foreign currencies. The Fund may purchase and write puts and calls on
foreign currencies that are traded on a securities or commodities exchange or
quoted by major recognized dealers in such options, for the purpose of
protecting against declines in the dollar value of foreign securities and
against increases in the dollar cost of foreign securities to be acquired. If a
rise is anticipated in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such securities
may be partially offset by purchasing calls or writing puts on that foreign
currency. If a decline in the dollar value of a foreign currency is anticipated,
the decline in value of portfolio securities denominated in that currency may be
partially offset by writing calls or purchasing puts on that foreign currency.
However, in the event of currency rate fluctuations adverse to the Fund's
position, it would lose the premium it paid and transactions costs.
A call written on a foreign currency by the Fund 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 for additional cash consideration identified to its custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call may be written by the Fund on a foreign currency to provide a hedge against
a decline due to an expected adverse change in the exchange rate 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. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes the
option by identifying liquid assets of any type, including equity and debt
securities of any grade, on its records as segregated, in an amount not less
than the value of the underlying foreign currency in U.S. dollars
marked-to-market daily.
o Futures. The Fund may buy and sell Futures. No price is paid or received
upon the purchase or sale of an Interest Rate Future or a foreign currency
exchange contract ("Forward Contract"), discussed below. An Interest Rate Future
obligates the seller to deliver and the purchaser to take a specific type of
debt security at a specific future date for a fixed price. That obligation may
be satisfied by actual delivery of the debt security or by entering into an
offsetting contract. A securities index assigns relative values to the
securities included in that index and is used as a basis for trading long-term
Financial Futures contracts. Financial Futures reflect the price movements of
securities included in the index. They differ from Interest Rate Futures in that
settlement is made in cash rather than by delivery of the underlying investment.
Upon entering into a Futures transaction, the Fund will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with the
futures commission merchant (the "futures broker"). The initial margin will be
deposited with the Fund's Custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to reflect changes
in its market value, subsequent margin payments, called variation margin, will
be made to or by the futures broker on a daily basis.
At any time prior to the expiration of the Future, if the Fund elects to
close out its position by taking an opposite position, a final determination of
variation margin is made, additional cash is required to be paid by or released
to the Fund, and any loss or gain is realized for tax purposes. Although
Interest Rate Futures by their terms call for settlement by delivery or
acquisition of debt securities, in most cases the obligation is fulfilled by
entering into an offsetting position. All futures transactions are effected
through a clearinghouse associated with the exchange on which the contracts are
traded.
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific amount of foreign currency at a specific future
date for a fixed price. A Forward Contract involves bilateral obligations of one
party to purchase, and another party to sell, a specific currency at a future
date (which may be any fixed number of days from the date of the contract agreed
upon by the parties), at a price set at the time the contract is entered into.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The Fund
may enter into a Forward Contract in order to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency. There is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between the U.S. dollar
and a foreign currency. Forward contracts include standardized foreign currency
futures contracts which are traded on exchanges and are subject to procedures
and regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign currency of
the forward contract and the foreign currency of the underlying investment than
between the U.S. dollar and the foreign currency of the underlying investment.
This technique is referred to as "cross hedging." The success of cross hedging
is dependent on many factors, including the ability of the Manager to correctly
identify and monitor the correlation between foreign currencies and the U.S.
dollar. To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
There is no limitation as to the percentage of the Fund's assets that may
be committed to foreign currency exchange contracts. The Fund does not enter
into such forward contracts or maintain a net exposure in such contracts to the
extent that the Fund would be obligated to deliver an amount of foreign currency
in excess of the value of the Fund's assets denominated in that currency, or
enter into a "cross hedge," unless it is denominated in a currency or currencies
that the Manager believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is denominated.
See "Tax Aspects of Covered Calls and Hedging Instruments," below for a
discussion of the tax treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when the Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). The Fund will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
currency exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar value
of portfolio positions ("position hedge"). In a position hedge, for example,
when the Fund believes that foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when the
Fund believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount. In this situation the Fund may, in
the alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount where the Fund believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund will identify liquid assets on its records of any type including
equity and debt securities of any grade having a value equal to the aggregate
net amount of the Fund's exposure under forward contracts entered into with
respect to position hedges and cross hedges. If the value of such securities
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Fund's
obligations with respect to such contracts. As an 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, or 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 contract price. Unanticipated changes in currency prices
may result in poorer overall performance for the Fund than if it had not entered
into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring the Fund to sell
a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
o Interest Rate Swap Transactions. Swap agreements entail both interest
rate risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the Fund
and that counterparty under that master agreement shall be regarded as parts of
an integral agreement. If on any date amounts are payable in the same currency
in respect of one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with respect
to each swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as
"aggregation."
o Additional Information About Hedging Instruments and Their Use. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written options
traded on exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release the securities
on the expiration of the option or upon the Fund's entering into a closing
transaction. An option position may be closed out only on a market which
provides secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause the sale
of related investments, increasing portfolio turnover. Although such exercise is
within the Fund's control, holding a put might cause the Fund to sell the
related investments for reasons which would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those which would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts of
leverage. The leverage offered by trading in options could result in the Fund's
net asset value being more sensitive to changes in the value of the underlying
investments.
When the Fund writes an over-the-counter ("OTC") option, it will enter into
an arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right to
repurchase that OTC option. That formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the extent to which the option is "in-the-money"). When the Fund writes an
OTC option, it will treat as illiquid (for purposes of the limit on its assets
that may be invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it unless subject to a buy-back
agreement with the executing broker. The Securities and Exchange Commission
("SEC") is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the outcome
of that evaluation.
o Regulatory Aspects of Hedging Instruments. The Fund is required to
operate within certain guidelines and restrictions with respect to its use of
Futures and options on Futures established by the Commodity Futures Trading
Commission ("CFTC"). In particular the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial futures margin and related option premiums
to no more than 5% of the Fund's net assets for hedging strategies that are not
considered bona fide hedging strategies under the Rule. Under the Rule, the Fund
also must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable provisions of
the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will identify liquid assets on its records as
segregated, of any type, including equity and debt securities of any grade in an
amount equal to the market value of the securities underlying such Future, less
the margin deposit applicable to it.
o Tax Aspects of Covered Calls and Hedging Instruments. The Fund intends
to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax).
Certain foreign currency exchange contracts ("Forward Contracts") in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
may be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent such loss exceeds any unrecognized gain
in the offsetting positions making up the straddle. Disallowed loss is generally
allowed at the point where there is no unrecognized gain in the offsetting
positions making up the straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, 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 generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
o Possible Risk Factors in Hedging. In addition to the risks with respect
to options discussed in the Prospectus and above, there is a risk when hedging
by selling Futures to attempt to protect against decline in value of the Fund's
portfolio securities (due to an increase in interest rates) that the prices of
such Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's securities. The ordinary spreads between
prices in the cash and futures markets are subject to distortions due to
differences in the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
out futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the liquidity
of the futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent participants
decide to make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions.
o Repurchase Agreements. The Fund may acquire securities that are subject
to repurchase agreements. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank, the U.S. branch of a foreign bank or a broker-dealer which has
been designated a primary dealer in government securities, which must meet the
credit requirements set by the Trust's Board of Trustees from time to time), 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. The majority of these
transactions run from day to day, and delivery pursuant to resale typically will
occur within one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all times
while the repurchase agreement is in effect, the collateral's value must equal
or exceed the repurchase price to fully collateralize the repayment obligation.
Additionally, the Manager will impose creditworthiness requirements to confirm
that the vendor is financially sound and will continuously monitor the
collateral's value.
o Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the Fund
may have to cause those securities to be registered. The expenses of
registration of restricted securities may be negotiated by the Fund with the
issuer at the time such securities are purchased by the Fund, if such
registration is required before such securities may be sold publicly. When
registration must be arranged because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price fluctuation during that period. The Fund
may also acquire, through private placements, securities having contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such securities and might lower the amount realizable upon the sale of such
securities.
The Fund has percentage limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
provided that those securities have been determined to be liquid by the Board of
Trustees of the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
o Loans of Portfolio Securities. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral on
each business day must at least equal the value of the loaned securities and
must consist of cash, bank letters of credit or securities of the U.S.
Government (or its agencies or instrumentalities). To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. When it lends securities, the Fund
receives amounts equal to the dividends or interest on loaned securities and
also receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, and (c) interest on short-term debt securities
purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and
administrative fees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of delay
in recovery of securities, or loss of rights in the collateral should the
borrower fail financially. 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.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. Although the Fund will enter into such transactions
for the purpose of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. When such
transactions are negotiated, the price (which is generally expressed in yield
terms) is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security for
which payment will be made on a future date may be deemed a separate security
and involve a risk of loss if the value of the security declines prior to the
settlement date. During the period between commitment by the Fund and settlement
(generally within two months but not to exceed 120 days), no payment is made for
the securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to market
fluctuation; the value at delivery may be less than the purchase price. The Fund
will identify liquid assets on its records as segregated, of any type, including
equity and debt securities of any grade at least equal to the value of purchase
commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure of the buyer or seller to do so may result
in the Fund losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase or sell a
security on a when-issued or forward commitment basis, it records the
transaction and reflects the value of the security purchased, or if a sale, the
proceeds to be received, in determining its net asset value. If the Fund chooses
to (i) dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies and not for the purposes
of investment leverage. The Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above), when- issued securities and forward commitments may be sold prior to
settlement date. In addition, changes in interest rates before settlement in a
direction other than that expected by the Manager will affect the value of such
securities and may cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling prices, the Fund might
sell securities in its portfolio on a forward commitment basis to attempt to
limit its exposure to anticipated falling prices. In periods of falling interest
rates and rising prices, the Fund might sell portfolio securities and purchase
the same or similar securities on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objective, cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
"majority" vote is defined as the vote of the holders of the lesser of (i) 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 (ii)
more than 50% of the outstanding shares.
Under these additional restrictions, the Trust may not, on behalf of the
Fund do any of the following:
o The Fund may not act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under applicable laws;
o The Fund may not invest in oil, gas or other mineral leases, rights,
royalty contracts or exploration or development programs, real estate or
real estate mortgage loans (this restriction does not prevent the Fund
from purchasing securities secured or issued by companies investing or
dealing in real estate and by companies that are not principally engaged
in the business of buying and selling such leases, rights, contracts or
programs);
o The Fund may not make loans other than by investing in obligations in
which the Fund may invest consistent with its investment objective and
policies and other than repurchase agreements and loans of portfolio
securities;
o The Fund may not pledge, mortgage or hypothecate its assets, except
that, to secure permitted borrowings, it may pledge securities having a
market value at the time of the pledge not exceeding 15% of the cost of
the Fund's total assets and except in connection with permitted
transactions in options, futures contracts and options on futures
contracts, and except for reverse repurchase agreements and securities
lending;
o The Fund may not purchase or retain securities of any issuer if, to the
knowledge of the Trust, more than 5% of such issuer's securities are
beneficially owned by officers and trustees of the Trust or officers and
directors of Massachusetts Mutual Life Insurance Company ("MassMutual")
who individually beneficially own more than 1/2 of 1% of the securities of
such issuer; and
o The Fund may not make loans to an officer, trustee or employee of the
Trust or to any officer, director or employee of MassMutual, or to
MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily adopted
certain policies and restrictions which are observed in the conduct of the
affairs of the Fund. These represent intentions of the Trustees based upon
current circumstances. They differ from fundamental investment policies in that
the following additional investment restrictions may be changed or amended by
action of the Trustees without requiring prior notice to or approval of
shareholders.
In accordance with such nonfundamental policies and guidelines, the Fund
may not: (1) invest for the purpose of exercising control over, or management
of, any company and (2) purchase any security of a company which (including any
predecessor, controlling person, general partner and guarantor) has a record of
less than three years of continuous operations or relevant business experience ,
if such purchase would cause more than 5% of the current value of the Fund's
assets to be invested in such companies.
For purposes of the Fund's policy not to concentrate investments as
described in the investment restrictions in the Prospectus, the Fund has adopted
the industry classifications set forth in Appendix A to this Statement of
Additional Information. This policy is not a fundamental policy.
How the Fund is Managed
Organization and History. The Fund is a series of Oppenheimer Integrity Funds
(the "Trust"). The Trust was established in 1982 as MassMutual Liquid Assets
Trust and changed its name to MassMutual Integrity Funds on April 15, 1988. The
Fund was reorganized from a closed-end investment company known as MassMutual
Income Investors, Inc. into a series of the Trust on April 15, 1988. On March
29, 1991, the Trust changed its name from MassMutual Integrity Funds to
Oppenheimer Integrity Funds and the Fund changed its name from MassMutual
Investment Grade Bond Fund to Oppenheimer Investment Grade Bond Fund. On July
10, 1995, the Fund changed its name to Oppenheimer Bond Fund.
Each share of the Fund represents an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitles the
holder to one vote per share (and a fractional vote for a fractional share) on
matters submitted to a vote at shareholders' meetings. Shareholders of all
classes vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of appointment of
auditors for the Trust. Shareholders of a particular class vote separately on
proposals which affect that class, and shareholders of a class which is not
affected by that matter are not entitled to vote on the proposal. For example,
only shareholders of a class vote on certain amendments to the Distribution
and/or Service Plans if the amendments affect only that class.
The Trustees are authorized to create new series and classes of series.
The Trustees may reclassify unissued shares of the Trust or its series or
classes into additional series or classes of shares. The Trustees may also
divide or combine the shares of a class into a greater or lesser number of
shares without thereby 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.
As a Massachusetts business trust, the Trust is not required to hold, and
does not plan to hold, regular annual meetings of shareholders. The Trust will
hold meetings when required to do so by the Investment Company Act or other
applicable law, or when a shareholder meeting is called by the Trustees or upon
proper request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds of the outstanding shares of the
Trust, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
of at least 10% of its outstanding shares. In addition, if the Trustees receive
a request from at least 10 shareholders (who have been shareholders for at least
six months) holding shares of the Trust valued at $25,000 or more or holding at
least 1% of the Trust's outstanding shares, whichever is less, stating that they
wish to communicate with other shareholders to request a meeting to remove a
Trustee, the Trustees will then either make the Trust's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicant's expense, or the Trustees may take such other
action as set forth under Section 16(c) of the Investment Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the Trust)
to be held personally liable as a "partner" under certain circumstances, the
risk of a Trust shareholder incurring financial loss on account of shareholder
liability is limited to the relatively remote circumstances in which the Fund
would be unable to meet its obligations described above. Any person doing
business with the Trust, and any shareholder of the Trust, agrees under the
Trust's Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any dealings with the
Trust, and the Trustees shall have no personal liability to any such person, to
the extent permitted by law.
Trustees And Officers of the Fund
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are set forth below. All of the
trustees are also trustees, directors or Managing General Partners of Centennial
America Fund, L.P., Centennial California Tax Exempt Trust, Centennial
Government Trust, Centennial Money Market Trust, Centennial New York Tax Exempt
Trust, Centennial Tax Exempt Trust, Oppenheimer Cash Reserves, Oppenheimer
Champion Income Fund, Oppenheimer Equity Income Fund, Oppenheimer High Yield
Fund, Oppenheimer International Bond Fund, Oppenheimer Limited-Term Government
Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Municipal Fund, Panorama
Series Fund, Inc., Oppenheimer Real Asset Fund, Oppenheimer Strategic Income
Fund, Oppenheimer Total Return Fund, Inc.,Oppenheimer Variable Account Funds,
and The New York Tax-Exempt Income Fund, Inc., (the "Denver-based Oppenheimer
funds"), except for Mr. Fossel who is not a trustee of Centennial New York Tax-
Exempt Trust nor a Managing General Partner of Centennial America Fund, L.P.,
and Ms. Macaskill and Mr. Bowen, who are not trustees or directors of
Oppenheimer Bond Fund (a series of Oppenheimer Integrity Funds), Panorama Series
Fund, Inc., Oppenheimer Strategic Income Fund, Oppenheimer Variable Account
Funds and Centennial New York Tax-Exempt Trust nor managing general partners of
Centennial America Fund, L.P. Messrs. Bishop, Bowen, Donohue, Farrar and Zack
hold similar positions as officers of all such funds. As of March 27, 1998, the
Trustees and officers of the Fund as a group owned less than 1% of the Fund's
outstanding Class A shares, none of the Fund's outstanding Class B, Class C or
Class Y shares. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager (for
which plan one of the Trustees and officers listed below, Ms. Macaskill and Mr.
Donohue are trustees), other than the shares beneficially owned under that plan
by the officers of the Fund listed below.
Robert G. Avis, Trustee*; Age: 66
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards,
Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G.
Edwards Trust Company (its affiliated investment adviser and trust company,
respectively).
------------------------
* A Trustee who is an "interested person" of the Fund and of the Manager.
William A. Baker, Trustee; Age: 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant. Treasurer of Oppenheimer Real Asset Management, Inc.;
Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc.
(a broker-dealer); an officer of other Oppenheimer funds.
Charles Conrad, Jr., Trustee; Age: 67
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, Trustee+; Age 55
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment companies), Chairman of the Investment Company
Institute Education Foundation; formerly Chairman and a director of the Manager,
President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager.
Sam Freedman, Trustee; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age: 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. a computer products training
company; formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was
a Senior Vice President.
C. Howard Kast, Trustee; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age: 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
------------------------
+ Not a Trustee of Centennial New York Tax-Exempt Trust nor a managing General
Partner of Centennial America Fund, L.P.
Ned M. Steel, Trustee; Age: 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of Van
Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 64
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager; formerly President and director of Centennial
Asset Management Corporation, an investment adviser subsidiary of the Manager
("Centennial") and Chairman of the Board of SSI.
Bridget A. Macaskill, President#; Age: 49
Two World Trade Center, New York, New York 10048
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996) ; President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of the Manager.
George C. Bowen, Vice President, Assistant Secretary and Treasurer#; Age: 61
6803 Tucson Way, Englewood, Colorado 80112 Senior Vice President (since
September 1987) and Treasurer (since March 1985) of the Manager; Vice President
(since June 1983) and Treasurer (since March 1985) of the Distributor; Vice
President (since October 1989) and Treasurer (since April 1986) of HarbourView;
Senior Vice President (since February 1992), Treasurer (since July 1991) and a
director (since December 1991) of Centennial; President, Treasurer and a
director of Centennial Capital Corporation (since June 1989); Vice President and
Treasurer (since August 1978) and Secretary (since April 1981) of SSI; Vice
President, Treasurer and Secretary of SFSI (since November 1989); Treasurer of
OAC (since June 1990); Treasurer of Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer, director or trustee of other
Oppenheimer funds.
------------------------
* A Trustee who is an "interested person" of the Fund or the Manager.
# Not a trustee or director of Oppenheimer Bond Fund (a series of Oppenheimer
Integrity Funds), Panorama Series Fund, Inc., Oppenheimer Strategic Income Fund,
Oppenheimer Variable Account Funds and Centennial New York Tax-Exempt Trust nor
a Managing General Partner of Centennial America Fund, L.P.
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048
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, SSI, SFSI and Oppenheimer Partnership Holdings, Inc.
(since September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President, 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 OAC; a director of OFIL and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager, Assistant
Secretary of SSI and SFSI; an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller of the Manager.
Scott Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds.
o Remuneration of Trustees. The officers of the Fund and one Trustee of the Fund
( Mr. Swain) who is affiliated with the Manager receives no salary or fee from
the Fund. The remaining Trustees of the Fund received the compensation shown
below. The compensation from the Fund was paid during its fiscal year ended
December 31, 1997. The compensation from all of the Denver-based Oppenheimer
funds includes the Fund and is compensation received as a director, trustee,
managing general partner or member of a committee of the Board during the
calendar year 1997.
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Robert G. Avis $693 $63,501
Trustee
------------------------
1 For the 1997 calendar year.
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
William A. Baker $846 $77,502
Audit and Review
Committee Ex-Officio
Member2 and Trustee
Charles Conrad, Jr. $786 $72,000
Trustee3
Jon S. Fossel $691 $63,277
Trustee
Sam Freedman $727 $66,501
Audit and Review Committee
Member2 and Trustee
Raymond J. Kalinowski $782 $71,561
Audit and Review Committee
Member2 and Trustee
C. Howard Kast $835 $76,503
Audit and Review Committee
Chairman2 and Trustee
Robert M. Kirchner $786 $72,000
Trustee3
Ned M. Steel $693 $63,501
Trustee
------------------------
1 For the 1997 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. None of the Trustees have elected to participate in this plan at this
time. 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 Trustee's 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 for the limited purpose of determining the value of the Trustee's
deferred fee account.
o Major Shareholders. As of March 27, 1998, the only entities that owned
of record or were known by the Fund to own beneficially 5% or more of any class
of the Fund's outstanding shares was (i)Merrill Lynch Fenner & Smith, 4800 Deer
Lake Drive E FL3, Jacksonville, FL 32246- 6484 who owned 431,624.172.000 Class B
shares on behalf of its clients (approximately 8.66% of the Fund's Class B
shares then outstanding) and (ii) Merrill Lynch Fenner & Smith, 4800 Deer Lake
Drive E FL3, Jacksonville, FL 32246-6484 who owned 217,416.200 Class C shares on
behalf of its clients (approximately 21.05% of the Fund's Class C shares then
outstanding).
The Manager and Its Affiliates. The Manager is wholly-owned by Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual
Life Insurance Company ("MassMutual"). OAC is also owned in part by certain of
the Manager's directors and officers, some of whom also serve as officers of the
Trust, and one of whom (Mr. James C. Swain) serve as Trustees of the Trust.
The Portfolio Managers of the Fund are David P. Negri and Jerry A. Webman,
who are principally responsible for the day to day management of the Fund's
portfolio. Messrs. Negri and Webman's backgrounds are described in the
Prospectus under "Portfolio Manager." Other members of the Manager's fixed
income portfolio department, particularly portfolio analysts, traders and other
portfolio managers having broad experience with government and corporate
fixed-income securities, provide the portfolio managers with support in managing
the Fund's portfolio.
The Manager and the Fund have a Code of Ethics. It is designed to detect
and prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced.
o The Investment Advisory Agreement. Under the investment advisory
agreement dated July 10, 1995 between the Trust on behalf of the Fund and the
Manager, the Fund pays a management fee to the Manager at the annual rate of:
0.75% of the first $200 million of average annual net assets; 0.72% of the next
$200 million; 0.69% of the next $200 million; 0.66% of the next $200 million;
0.60% of the next $200 million; and 0.50% of average annual net assets in excess
of $1 billion. Under the prior investment advisory agreement between the Trust
on behalf of the Fund and the Manager, the Fund paid a management fee to the
Manager at the annual rate of: 0.50% of the first $100 million of average annual
net assets; 0.45% of the next $200 million; 0.40% of the next $200 million; and
0.35% of average annual net assets in excess of $500 million. The investment
advisory agreement, dated July 10, 1995, between the Trust on behalf of the Fund
and the Manager requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment, and to provide and supervise
the activities of all administrative and clerical personnel required to provide
effective corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory agreement
or by the Distributor under the General Distributors Agreement are paid by the
Fund. The advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage commissions, fees
to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
reckless disregard for its obligations and duties under the 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 thereunder. The advisory
agreement permits the Manager to act as investment adviser for any other person,
firm or corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the right of the Fund to use the name "Oppenheimer" as part of its name
may be withdrawn. The advisory agreement is subject to annual approval by the
Board of Trustees, who may terminate the advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The Investment Advisory Agreement contains no expense limitation. However,
because of state regulations limiting fund expenses that previously applied, the
Manager had voluntarily undertaken that the Fund's total expenses in any fiscal
year (including the investment advisory fee but exclusive of taxes, interest,
brokerage commissions, distribution plan payments and any extraordinary
non-recurring expenses, including litigation) would not exceed the most
stringent state regulatory limitation applicable to the Fund. Due to changes in
federal securities laws, such state regulations no longer apply and the
Manager's undertaking is therefore inapplicable and has been withdrawn. During
the Fund's last fiscal year, the Fund's expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.
Prior to July 10, 1995, MassMutual served as investment sub-adviser (the
"Sub-Adviser") to the Fund pursuant to a sub-advisory agreement between the
Manager and MassMutual dated March 28, 1991. Under the sub-advisory agreement,
MassMutual was responsible for managing the Fund's portfolio of securities and
making investment decisions with respect to the Fund's investments, subject to
the Fund's investment objective, policies and restrictions. The Sub-Adviser's
fee was paid by the Manager. The sub-advisory agreement was subject to the same
renewal, termination and standard of care provisions as the investment advisory
agreement. On July 10, 1995, the Fund's shareholders approved a new investment
advisory agreement with the Manager, at the fee rate set forth in the
Prospectus, under which the Manager performs the investment decision-making
functions previously performed by the Sub-Adviser. The sub-advisory agreement
terminated effective July 10, 1995 after shareholders approved the investment
advisory agreement with the Manager.
For the fiscal years ended December 31, 1995, 1996 and 1997, the advisory
fees paid to the Manager were $820,507, $1,640,483 and $1,751,986 respectively,
of which $201,877, $0, and $0 respectively, were paid by the Manager to the
Sub-Adviser for the fiscal years ended December 31, 1995, 1996 and 1997.
o The Distributor. Under the General Distributor's Agreement between the
Trust and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A, Class B,
Class C and Class Y shares, but is not obligated to sell a specific number of
shares. Expenses normally attributable to sales (other than those paid under the
Class A, Class B and Class C Distribution and Service Plans), including
advertising and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders), are borne by the Distributor. During the
Fund's fiscal years ended December 31, 1995, 1996 and 1997, the aggregate amount
of sales charges on sales of the Fund's Class A shares was $166,065, $299,893
and $346,782, respectively, of which the Distributor and on an affiliate,
MassMutual Investor Services, Inc. ("MMLISI") retained in the aggregate $59,442
, $117,612 and $134,951 in those respective years. For the fiscal year ended
December 31, 1997, the Distributor paid $591,879 to broker-dealers on the sales
of the Funds' Class B shares, of which $39,149 went to MMLISI. In addition, the
Distributor collected $156,781 from contingent deferred sales charges assessed
on Class B shares. For the fiscal year ended December 31, 1997, the Distributor
paid $49,753 to broker-dealers on the sales of the Funds' Class C shares of
which $1,770 went to MMLISI. In addition, the Distributor collected $1,757 from
contingent deferred sales charges assessed on Class C shares. For additional
information about distribution of the Fund's shares, payment made by the Fund to
the Distributor, and expenses connected with such activities, refer to
"Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, an operating division of the
Manager which is the Fund's transfer agent, is responsible for maintaining the
Fund's shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory Agreements. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions of the Fund. In doing so, the Manager is authorized by the advisory
agreement to employ broker-dealers ("brokers"), including "affiliated" brokers,
as that term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions. The
Manager need not seek competitive commission bidding or base its selection on
"posted" rates, but is expected to be aware of the current rates of eligible
brokers and to minimize the commissions paid to the extent consistent with the
provisions of the advisory agreement and the interests and policies of the Fund
as established by the Trust's Board of Trustees. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid and
asked price.
Under the advisory agreement, the Manager is authorized to select brokers
and dealers which provide brokerage and/or research services for the Fund and/or
the other accounts over which it or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would have charged, if a good faith determination is made by the Manager that
the commission is fair and reasonable in relation to the services provided. Most
purchases made by the Fund are principal transactions at net prices, and the
Fund incurs little or no brokerage costs.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders upon recommendations from the Manager's portfolio managers. In certain
instances portfolio managers may directly place trades and allocate brokerage,
also subject to the provisions of the advisory agreement and the procedures and
rules described above. In either case, brokerage is allocated under the
supervision of the Manager's executive officers. Transactions in securities
other than those for which an exchange is the primary market are generally done
with principals or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed-income agency
trades in the secondary market, and are otherwise paid only if it appears likely
that a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the purchase or
sale of the option and any transaction in the securities to which the option
relates. When possible, concurrent orders to purchase or sell the same security
by more than one of the accounts managed by the Manager or its affiliates are
combined. The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase or sale
orders actually placed for each account.
Most purchases of money market instruments and 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 it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Most 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 research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the instance
of a broker, includes information and analyses on particular companies and
industries as well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information systems, computer
hardware and similar products and services. If a research service also assists
the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager in the investment decision-making process may be paid
in commission dollars. The Board of Trustees permits the Manager to use
concessions on fixed-price offerings to obtain research, in the same manner as
is permitted for agency transactions. The Board also permits the Manager to use
stated commissions on secondary fixed-income agency trades to obtain research
where the broker has represented to 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 research services provided by brokers broaden the scope and supplement
the research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase. The Manager provides information as to the
commissions paid to brokers furnishing such services, together with the
Manager's respresenation that the amount of such commissions was reasonably
related to the value or benfit of such services.
During the fiscal years ended December 31, 1995, 1996 and 1997, total
brokerage commissions paid by the Fund (not including spreads or concessions on
principal transactions on a net trade basis) were $3,742, $13,094 and $21,630,
respectively. During the fiscal year ended December 31, 1997, $568, in brokerage
commissions was paid by the Fund for research services; the aggregate dollar
amount of these transactions was $2,366,847. The transactions giving rise to
those commissions were allocated in accordance with the Manager's internal
allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "average annual total return",
"total return," "cumulative total return," "total return at net asset value" and
"cumulative total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those calculations
is set forth below.
The Fund's advertisement of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each class of shares of the Fund for the 1-, 5- and 10-year
periods (or the life of the class, if less) ending as of the most recently ended
calendar quarter prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of other funds for
the same periods. However, a number of factors should be considered before using
such information as a basis for comparison with other investments. An investment
in the Fund is not insured; its returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Returns for any given past
period are not a prediction or representation by the Fund of future returns on
its shares. The returns of Class A, Class B and Class C shares of the Fund are
affected by portfolio quality, the type of investments the Fund holds and its
operating expenses allocated to a particular class. Class Y shares were not
publicly offered during the Fund's fiscal year ended December 31, 1997 and
therefore no performance information is provided in any of the presentations
below.
Yields.
o Standardized Yield. The "standardized yield" (referred to as "yield") is
shown for a class of shares for a stated 30-day period. It is not based on
actual distributions paid by the Fund to shareholders in the 30-day period, but
is a hypothetical yield based upon the net investment income from the Fund's
portfolio investments for that period. It may therefore differ from the
"dividend yield" for the same class of shares, described below. It is calculated
using the following formula set forth in rules adopted by the Securities and
Exchange Commission designed to assure uniformity in the way that all funds
calculate their yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, using the current maximum sales charge rate adjusted
for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may differ
from the yield for other periods. The SEC formula assumes that the yield for a
30-day period occurs at a constant rate for a six-month period and is annualized
at the end of the six-month period. Additionally, because each class of shares
is subject to different expenses, it is likely that the standardized yields of
the Fund's classes of shares will differ for any 30 day period. For the 30-day
period ended December 31, 1997 the standardized yields for the Fund's class of
shares were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 6.36% 6.05%
Class B: 5.59% N/A
Class C: 5.60% N/A
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period from net investment income during a stated
period. To calculate dividend yield, the dividends of a class declared during a
stated 30-day period are added together and the sum is multiplied by 12 (to
annualize the yield) and divided by the maximum offering price on the last day
of the dividend period. The formula is shown below:
Dividend Yield of the Class =
Dividends of the Class
----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the current
maximum initial sales charge. The maximum offering price for Class B shares and
Class C shares is the net asset value per share, without considering the effect
of contingent deferred sales charges. The Class A dividend yield may also be
quoted without deducting the maximum initial sales charge.
The dividend yields for the 30-day dividend period ended December 31,
1997 were as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 7.40% 7.05%
Class B: 6.64% N/A
Class C: 6.63% N/A
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each advertised class of shares of the Fund for the 1-, 5- and
10-year periods (or the life of the class, if less) ending as of the most
recently-ended calendar quarter prior to the publication of the advertisement.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its returns and share
prices are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Returns for any given past period are not a prediction or representation
by the Fund of future returns. The returns of each class of shares of the Fund
are affected by portfolio quality, the type of investments the Fund holds and
its operating expenses allocated to the particular class.
o Average Annual Total Returns. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment, according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total returns" on an investment in Class A shares of
the Fund for the 1- and 5-year periods ended December 31, 1997 and for the
period from April 15, 1988 (commencement of operations) to December 31, 1997
were 4.90%, 6.41% and 7.93%, respectively.
The "average annual total returns" on an investment in Class B shares of
the Fund for the 1- year period ended December 31, 1997 was 4.41%, and for the
period May 1, 1993 (commencement of the Class) through December 31, 1997 was
5.61%.
The "average annual total returns" on an investment in Class C shares of
the Fund for the 1-year period ended December 31, 1997 was 8.39%, and for the
period July 11, 1995 (commencement of the Class) through December 31, 1997 was
6.94%.
o Cumulative Total Return. The "cumulative total return" calculation
measures the change in the 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} over P ~
=~Total~Return
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, the payment of the applicable contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year, 3.0%
for the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth year
and none thereafter) is applied to the investment result for the time period
shown (unless the total return is shown at net asset value, as described below).
For Class C shares, the payment of 1.0% contingent deferred sales charge is
applied to the investment result for the 1-year period (or less). Class Y shares
are not subject to a sales charge. Total returns also assume that all dividends
and capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment is
redeemed at the end of the period.
The "cumulative total return" on an investment in Class A shares of the
Fund (using the method described above) for the period April 15, 1988
(commencement of the Class) through December 31, 1997 was 109.84%.
The "cumulative total return" on an investment in Class B shares of the
Fund (using the method described above) for the period May 1, 1993 (commencement
of the Class) through December 31, 1997 was 29.01%.
The "cumulative total return" on an investment in Class C shares of the
Fund (using the method described above) for the period July 11, 1995
(commencement of the Class) through December 31, 1997 was 18.05%.
o Total Returns at Net Asset Value. From time to time the Fund may also
quote an "average annual total return at net asset value" or a cumulative "total
return at net asset value" for Class A, Class B and Class C shares. Each is
based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
The cumulative total returns at net asset value on the Fund's Class A
shares for the fiscal year ended December 31, 1997, and for the period from
April 15, 1988 to December 31, 1997 were 10.13% and 120.29%, respectively.
The cumulative total return at net asset value on the Fund's Class B
shares for the fiscal year- ended December 31, 1997 and for the period from May
1, 1993 through December 31, 1997 were 9.41% and 30.98%, respectively.
The cumulative total return at net asset value on the Fund's Class C
shares for the fiscal year- ended December 31, 1997 and for the period from July
11, 1995 through December 31, 1997 the cumulative total return on an investment
in Class C shares of the Fund were 9.39% and 18.05%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B, Class C and Class Y shares. However,
when comparing total return of an investment in Class A, Class B or Class C
shares of the Fund, a number of factors should be considered before using such
information as a basis for comparison with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B, Class C or Class Y shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated investment
companies, including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The performance of the
Fund's classes is ranked against (i) all other funds, excluding money market
funds, and (ii) all other general bond funds. The Lipper performance rankings
are based on total return that includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or taxes into
consideration.
For periods ending December 31, 1997 the Fund's performance may also be
compared to the performance of the Lipper General Bond Fund Index, which is a
net asset value weighted index of general bond funds compiled by Lipper. It is
calculated with adjustments for income dividends and capital gains distributions
as of the ex-dividend date.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper.
From time to time, the Fund may publish the star ranking of the
performance of its Class A, Class B, Class C or Class Y shares by Morningstar,
Inc., an independent mutual fund monitoring service. Morningstar ranks mutual
funds in broad investment categories; domestic stock funds, international stock
funds, taxable bond funds an municipal bond funds, based on risk-adjusted total
investment returns. The Fund is ranked among intermediate bond funds. Investment
return measures a fund's or class' 1- 3-, 5- and 10-year average annual total
returns (depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns. Risk and investment return are combined to produce
star rankings reflecting performance relative to the average fund in the fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
ranking is the fund's or class' 3-year ranking or its combined 3- and 5-year
ranking (weighted 60%/40%, respectively, or its combined 3-, 5- and 10- year
ranking (weighted 40%, 30% and 30% respectively), depending on the inception of
the fund or class. Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star ranking, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
The total return on an investment in the Fund's Class A, Class B, Class C
or Class Y shares may be compared with the performance for the same period of
one or more of the following indices: the Consumer Price Index, the Salomon
Brothers World Government Bond Fund Index, the Salomon Brothers High Grade
Corporate Bond Index, the Lehman Brothers Government/Corporate Bond Index, the
Lehman Brothers Aggregate Bond Index, and the J.P. Morgan Government Bond Index.
The Consumer Price Index is generally considered to be a measure of inflation.
The Salomon Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets throughout the
world, including the United States. The Salomon Brothers High Grade Corporate
Bond Index generally represents the performance of high grade long-term
corporate bonds, and the Lehman Brothers Government/Corporate Bond Index
generally represents the performance of intermediate and long-term government
and investment grade corporate debt securities. The Lehman Brothers Aggregate
Bond Index generally represents the performance of the general fixed-rate
investment grade debt market. The J.P. Morgan Government Bond Index generally
represents the performance of government bonds issued by various countries
including the United States. Each index includes a factor for the reinvestment
of interest but does not reflect expenses or taxes. The performance of the
Fund's Class A, Class B, Class C or Class Y shares may also be compared in
publications to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and (ii) to
averages, performance rankings or other benchmarks prepared by recognized mutual
fund statistical services.
Investors may also wish to compare the Fund's Class A, Class B, Class C
or Class Y shares return to the returns on fixed income investments available
from banks and thrift institutions, such as 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 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, and Treasury bills
are guaranteed as to principal and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings of
the Manager (or Transfer Agent) or the investor services provided by them to
shareholders of the OppenheimerFunds, other than performance rankings of the
OppenheimerFunds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the OppenheimerFunds' services to those of
other mutual fund families selected by the rating or ranking services and may be
based upon the opinions of the rating or ranking service itself, based on its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, and Distribution
and Service Plans for Class B and Class C shares under Rule 12b-1 of the
Investment Company Act, pursuant to which the Fund will make payments to the
Distributor in connection with the distribution and/or servicing of the shares
of that class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on that
Plan, and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of each class. (For the Distribution and Service Plan for the
Class C shares, that vote was cast by the Manager as the sole initial holder of
Class C shares of the Fund).
In addition, under the Plans, the Manager and the Distributor, in their
sole discretion, from time to time may use their own resources (which, in the
case of the Manager, may include profits from the advisory fee it receives from
the Fund) to make payments to brokers, dealers or other
financial institutions (each is referred to as a "Recipient" under the Plans)
for distribution and administrative services they perform. The Distributor and
the Manager may, in their sole discretion, increase or decrease the amount of
payments they make from their own resources to Recipients.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as its continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Independent Trustees by a
vote cast in person at a meeting called for the purpose of voting on such
continuance. 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.
None of the Plans may be amended to increase materially the amount of payments
to be made unless such amendment is approved by shareholders of the class
affected by the amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund is required
to obtain the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount to be
paid by Class A shareholders under the Class A Plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the Investment
Company Act), voting separately by class. All material amendments must be
approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall provide
separate written reports to the Trust's Board of Trustees at least quarterly
stating generally the amounts of all payments made pursuant to each Plan and the
purpose for which the payments were made. The Class A reports include the
identity of each Recipient that received any such payment. Those reports,
including the allocations on which they are based, will be subject to the review
and approval of the Independent Trustees in the exercise of their fiduciary
duty. Each Plan further provides that while it is in effect, the selection and
nomination of those Trustees of the Trust who are not "interested persons" of
the Trust is committed to the discretion of the Independent Trustees. This does
not prevent the involvement of others in such selection and nomination if the
final decision on selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any quarter
if the aggregate net asset value of all Fund shares held by the Recipient for
itself and its customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's Independent Trustees.
The Board of Trustees has set the fees at the maximum rate and set no minimum
amount.
For the fiscal year ended December 31, 1997, payments under the Class A
Plan totaled $461,146, all of which was paid by the Distributor to Recipients,
including $153,632 paid to MMLISI. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may not be
recovered in subsequent fiscal years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by the
Distributor.
The Class B and Class C Plans allow the service fee payments to be paid
by the Distributor to Recipients in advance for the first year Class B and Class
C shares are outstanding, and thereafter on a quarterly basis, as described in
the Prospectus. The services rendered by Recipients in connection with personal
services and the maintenance of Class B and Class C shareholder accounts may
include but shall not be limited to, the following: answering routine inquiries
from the Recipient's customers concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of accounts, as the Distributor or the Fund may reasonably request.
The advance payment is based on the net asset value of the Class B and Class C
shares sold. An exchange of shares does not entitle the Recipient to an advance
service fee payment. In the event Class B or Class C shares are redeemed during
the first year that the shares are outstanding, the Recipient will be obligated
to repay a pro rata portion of the advance payment for those shares to the
Distributor. Service fee payments made under the Class B Plan during the fiscal
year ended December 31, 1997 totaled $414,137, of which $5,726 the Distributor
paid to an affiliate, and $333,996 was retained by the Distributor. Service fee
payments made under the Class C Plan during fiscal year ended the December 31,
1997 totaled $61,208, of which $31,990 was retained by the Distributor.
Although the Class B and Class C Plans permit the Distributor to retain
both the asset-based sales charge and the service fee on Class B shares, or to
pay Recipients the service fee on a quarterly basis without payment in advance,
the Distributor intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from time to time
under the Class B or Class C Plan by the Board. The Board has set no minimum
holding period. All payments under the Class B and Class C Plans are subject to
the limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees. The Distributor anticipates that it will take a number of years for it to
recoup (from the Fund's payments to the Distributor under the Class B Plan and
recoveries of the contingent deferred sales charge collected on redeemed Class B
shares) the Class B sales commissions paid to authorized brokers or dealers.
Asset-based sales charge payments are designed to permit an investor to
purchase shares of the Fund without paying a front-end sales load and at the
same time permit the Distributor to compensate Recipients in connection with the
sale of Class B and Class C shares of the Fund. The Distributor retains the
asset-based sales charge on Class B shares. As to Class C shares, the
Distributor retains the asset-based sales charge during the first year shares
are outstanding, and pays the asset-based sales charge as an ongoing commission
to the dealer on Class C shares outstanding for a year or more. Under the Class
B and Class C Plans, the asset-based sales charge is paid to compensate the
Distributor for its services, described below, to the Fund.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution expenses are
more or less than the amounts paid by the Fund
during that period. Such payments are made in recognition that the Distributor
(i) pays sales commissions to authorized brokers and dealers at the time of sale
and pays service fees as described in the Prospectus, (ii) may finance such
commissions and/or the advance of the service fee payment to Recipients under
those Plans, or may provide such financing from its own resources or from an
affiliate, (iii) employs personnel to support distribution of shares, and (iv)
may bear the costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky" registration fees
and certain other distribution expenses.
Other distribution assistance rendered by the Distributor and Recipients
under the Class B and Class C Plans may include, but shall not be limited to,
the following: distributing sales literature and prospectuses other than those
furnished to current Class B or Class C shareholders, and providing such other
information and services in connection with the distribution of Class B or Class
C shares as the Distributor or the Fund may reasonably request. The Class B and
Class C Plans further provide that such other distribution assistance may
include distribution assistance and administrative support services rendered in
connection with Class B or Class C shares (i) sold in purchase transactions,
(ii) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (iii) issued pursuant
to a plan of reorganization to which the Fund is a party.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor normally will not accept (i) any order for $500,000 or more of Class
B shares or (ii) any order for $1 million or more of Class C shares, on behalf
of a single investor (not including dealer "street name" or omnibus accounts)
because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund instead. A Fourth Class of Shares may be purchased
only by certain institutional investors at net asset value per share ("Class Y
Shares").
The four classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B and Class C
shares and the dividends payable on Class B and Class C shares will be reduced
by additional expenses borne solely by that class, including the asset-based
sales charge to which Class B and Class C shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B, Class C and Class Y shares
recognizes two types of expenses. General expenses that do not pertain
specifically to any class are allocated pro rata to the shares of each class,
based on the percentage of the net assets of such class to the Fund's total
assets, and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses, (vi)
share issuance costs, (vii) organization and start-up costs, (viii) interest,
taxes and brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to a class are
allocated equally to each outstanding share within that class. Such expenses
include (i) Distribution and Service Plan fees, (ii) transfer and shareholder
servicing agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per share of
Class A, Class B, Class C and Class Y shares of the Fund are determined as of
the close of business of The New York Stock Exchange (the "Exchange") on each
day that the Exchange is open, by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M., New York time, but may
close earlier on some days (for example, in case of weather emergencies or on
days falling before or after a holiday). The Exchange's most recent annual
holiday schedule (which is subject to change) states that it will close on New
Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. Trading may occur in debt securities and in foreign
securities when the Exchange is closed, including weekends and holidays, or
after the close of the Exchange on a regular business day. The Fund may invest a
substantial portion of its assets in foreign securities primarily listed on
foreign exchanges or in foreign over-the-counter markets that may trade on
Saturdays or customary U.S. business holidays on which the Exchange is closed.
Because the Fund's net asset value will not be calculated on those days, the
Fund's net asset value per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the valuation
of the Fund's securities, generally, as follows: (i) equity securities traded on
a securities exchange or on the Automated Quotation System ("NASDAQ") of the
NASDAQ Stock Market, Inc. for which last sale information is regularly reported
are valued at the last reported sale price on the principal exchange for such
security or NASDAQ that day (the "Valuation Date") or, in the absence of sales
that day, 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, the closing "bid" price on the Valuation Date; (ii) equity
securities traded on a foreign securities exchange are generally valued at the
last sales price available to the pricing service approved by the Fund's Board
of Trustees or to the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately preceding the
valuation date, or, if unavailable, at the mean between "bid" and "asked" prices
obtained from the principal exchange or two active market makers in the security
on the basis of reasonable inquiry; (iii) a non-money market fund will value (x)
debt instruments that had a maturity of more than 397 days when issued, (y) debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity in excess of 60 days, and (z) non-money market type debt
instruments that had a maturity of 397 days or less when issued and have
remaining maturity of 60 days or less, at the mean between "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or, if unavailable, obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued and have a remaining maturity of 60 days or less, and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; and (v) securities (including restricted securities) not
having readily-available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate two market
makers willing to give quotes (see (ii) and (iii) above), the security may be
priced at the mean between the "bid" and "asked" prices provided by a single
active market maker (which in certain cases may be in "bid" price if no "asked"
price is available) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current market
value.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of the New York
Stock Exchange. Events affecting the values of foreign securities traded in
securities markets that occur between the time their prices are determined and
the close of the Exchange will not be reflected in the Fund's calculation of net
asset value unless the Board of Trustees, the Manager, under procedures
established by the Board of Trustees, determines that the particular event is
likely to effect a material change in the value of such security. Foreign
currency, including forward contracts, will be valued at the closing price in
the London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in foreign
currency will be converted to U.S. dollars in the London foreign exchange market
closing price that day, as provided by a reliable bank, dealer or pricing
service.
In the case of U.S. Government Securities and mortgage-backed securities,
where last sale information is not generally available, such pricing procedures
may include "matrix" comparisons to the prices for comparable instruments on the
basis of quality, yield, maturity and other special factors involved. The
Manager may use pricing services approved by the Board of Trustees to price U.S.
Government Securities or mortgage-backed securities for which last sale
information is not generally available. The pricing service, when valuing such
securities, may use "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved. The Manager will monitor the accuracy of such pricing services, which
may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchanges on which they are traded or on NASDAQ, as
applicable, or, if there are no sales that day, in accordance with (i) above.
When the Fund writes an option, an amount equal to the premium received by the
Fund is included in the Fund's Statement of Assets and Liabilities as an asset
and an equivalent deferred credit is included in the liability section. The
deferred credit is "marked-to- market" to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call 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 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.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25.00. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House transfer to
buy shares. Dividends will begin to accrue on shares purchased by 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 expenses realized by the
Distributor, dealers and brokers making such sales. No sales charge is imposed
in certain circumstances described in the Prospectus because the Distributor or
dealer or broker incurs little or no selling expenses. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, aunts,
uncles, nieces and nephews, parents, parents-in-law, sons- and daughters-in-law,
siblings, a sibling's spouse and a spouse's siblings. Relations by virtue of
remarriage (step-children, step-parents, etc.) are included.
o The Oppenheimer funds are those mutual funds for which the Distributor
acts as the distributor or the sub-distributor and include the following:
Oppenheimer Bond Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer California Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company
Fund
Oppenheimer Life Span Balanced Fund
Oppenheimer Life Span Growth Fund
Oppenheimer Life Span Income Fund
Limited Term
New York Municipal Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Municipal Bond Fund
Oppenheimer Mid-Cap Fund
Oppenheimer Main Street California Municipal
Fund
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Panorama Series Fund, Inc.
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value
Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Rochester Fund Municipals
Oppenheimer Series Fund, Inc.
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
and the following "Money Market Funds:"
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
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 money market funds (under certain
circumstances described herein, redemption proceeds of money market fund shares
may be subject to a contingent deferred sales charge).
o Letters of Intent. A Letter of Intent (referred to as a "Letter") 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"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's holdings of
shares of those funds, will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or distributions of capital gains
and purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to count the
Class A and Class B shares purchased under the Letter to obtain the reduced
sales charge rate on purchases of Class A 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 public offering price (including the sales charge) that
applies to a single lump-sum purchase of shares in the amount intended to be
purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of Intent
period, when added to the value (at offering price) of the investor's holdings
of shares on the last day of that period, do not equal or exceed the intended
purchase amount, the investor agrees to pay the additional amount of sales
charge applicable to such purchases, as set forth in "Terms of Escrow," below
(as those terms may be amended from time to time). The investor agrees that
shares equal in value to 5% of the intended purchase amount will be held in
escrow by the Transfer Agent subject to the Terms of Escrow. Also, the investor
agrees to be bound by the terms of the Prospectus, this Statement of Additional
Information and the Application used for such Letter of Intent, and if such
terms are amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the Transfer
Agent will not hold shares in escrow. If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period
do not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
o Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value 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 specified under the Letter
is $50,000, the escrow shall be shares valued in the amount of $2,500 (computed
at the public offering price adjusted for a $50,000 purchase). Any dividends and
capital gains distributions on the escrowed shares will be credited to the
investor's account.
2. If the intended purchase amount specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. Such sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If such
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and appoints
the Transfer Agent as attorney-in-fact to surrender for redemption any or all
escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include (a) Class A shares
sold with a front-end sales charge or subject to a Class A contingent deferred
sales charge, (b) Class B shares of Oppenheimer funds acquired subject to a
contingent deferred sales charge, and (c) Class A shares or Class B shares
acquired in exchange for either (i) Class A shares of one of the other
Oppenheimer funds that were acquired subject to a Class A initial or contingent
deferred sales charge or (ii) Class B shares of one of the other Oppenheimer
funds that were acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares," and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank account, a
check (minimum $25) for the initial purchase must accompany the application.
Shares purchased by Asset Builder Plan payments from bank accounts are subject
to the redemption restrictions for recent purchases described in "Shareholder
Account Rules and Policies," in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use those accounts for monthly
automatic purchases of shares of up to four other Oppenheimer funds. If you make
payments from your bank account to purchase shares of the Fund, your bank
account will be automatically debited normally four to five business days prior
to the investment dates selected in the Account Application. Neither the
Distributor, the Transfer Agent nor the Fund shall be responsible or any delays
in purchasing shares resulting from delays in ACH transmission.
There is a front-end sales charge on the purchase of certain Oppenheimer
funds or a contingent deferred sales charge may apply to shares purchased by
Asset Builder payments. An application should be obtained from the Distributor,
completed and returned, and a prospectus of the selected fund(s) should be
obtained from the Distributor or your financial advisor before initiating Asset
Builder payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required after
the Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans at any
time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent deferred
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans other than
public school 403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or association or
other organized group of persons (the members of which may include other
groups), if the group or association has made special arrangements with the
Distributor and all members of the group or association participating in or who
are eligible to participate in the plan(s) purchase Class A shares of the Fund
through a single investment dealer, broker, or other financial institution
designated by the group. "Group retirement plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that
purchase Class A shares of the Fund through a single investment dealer, broker,
or other financial institution, if that broker-dealer has made special
arrangements with the Distributor enabling those plans to purchase Class A
shares of the Fund at net asset value but subject to a contingent deferred sales
charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the record keeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the record keeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more is assets, excluding assets
held in Money Market Funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less the
$3 million in assets, excluding Money Market Funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B
contingent deferred sales charge.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below supplements the terms and conditions for redemptions set
forth in the Prospectus.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue receiving dividends on those shares until
the check is presented to the Fund. Checks may not be presented for payment at
the offices of the Bank or the Fund's Custodian. This limitation does not affect
the use of checks for the payment of bills or to obtain cash at other banks. The
Fund reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
By choosing the Checkwriting privilege, whether you do so by signing the
Account Application or by completing a Checkwriting card, the individual(s)
signing (1) represent that they are either the registered owner(s) of the shares
of the Fund, or are an officer, general partner, trustee or other fiduciary or
agent, as applicable, duly authorized to act on behalf of such registered
owner(s); (2) authorize the Fund, its Transfer Agent and any bank through which
the Fund's drafts ("checks") are payable (the "Bank"), to pay all checks drawn
on the Fund account of such person(s) and to effect a redemption of sufficient
shares in that account to cover payment of such checks; (3) specifically
acknowledge(s) that if you choose to permit a single signature on checks drawn
against joint accounts, or accounts for corporations, partnerships, trusts or
other entities, the signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from an account even if that
account is registered in the names of more than one person or even if more than
one authorized signature appears on the Checkwriting card on the Application, as
applicable; and (4) understand(s) that the Checkwriting privilege may be
terminated or amended at any time by the Fund and/or the Bank and neither shall
incur any liability for such amendment or termination or for effecting
redemptions to pay checks reasonably believed to be genuine, or for returning or
not paying checks which have not been accepted for any reason.
o 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 Trust may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Value Per Share" and that valuation will be made as
of the time the redemption price is determined.
o Involuntary Redemptions. The Trust'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 $1,000 or such lesser
amount as the Board may fix. The Board of Trustees will not cause the
involuntary redemption of shares in an account if the aggregate net asset value
of the shares has fallen below the stated minimum solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment Company Act, the requirements for any notice to
be given to the shareholders in question (not less than 30 days), or the Board
may set requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would not be
involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (i) Class A shares that you
purchased subject to an initial sales charge, or the Class A contingent deferred
sales charge when you redeemed them or (ii) Class B shares that were subject to
the Class B contingent deferred sales charge when you redeemed them, without
sales charge. This privilege does not apply to Class C shares. The reinvestment
may be made without sales charge only in Class A shares of the Fund or any of
the other Oppenheimer funds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer Agent
receives the reinvestment order. The shareholder must ask the Distributor for
such privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter any
capital gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. 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 (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class A, 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: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants (other than self-employed
persons maintaining a plan account in their own name) in
OppenheimerFunds-sponsored prototype pension, profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their account under those plans.
The employer or plan administrator must sign the request. Distributions from
pension and profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer Agent)
must be completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the Internal
Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be
submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal Revenue Code
requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. The shareholder should contact the
broker or dealer to arrange their type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
the order placed by the dealer or broker, except that if the Distributor
receives a repurchase order from a dealer or broker after the close of The New
York Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from its
customers prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners guaranteed on the
redemption document as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(minimum $50) automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Withdrawal Plan. Shares will be redeemed three business days
prior to the date requested by the shareholder for receipt of the payment.
Automatic withdrawals of up to $1,500 per month may be requested by telephone if
payments are to be made by check payable to all shareholders of record and sent
to the address of record for the account (and if the address has not been
changed within the prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or signature-guaranteed instructions. Shares are
normally redeemed pursuant to an Automatic Withdrawal Plan three business days
before the date you select in the Account Application. If a contingent deferred
sales charge applies to the redemption, the amount of the check or payment will
be reduced accordingly. The Fund cannot guarantee receipt of a payment on the
date requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans because of the imposition of the contingent deferred sales
charge on such withdrawals (except where the Class B or Class C contingent
deferred sales charge is waived as described in the Prospectus under "Waivers of
Class B and Class C Contingent Deferred Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below as
well as the Prospectus. These provisions may be amended from time to time by the
Fund and/or the Distributor. When adopted, such amendments will automatically
apply to existing Plans.
o Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
(on the OppenheimerFunds Application or signature-guaranteed instructions) to
exchange a pre-determined amount of shares of the Fund for shares (of the same
class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth
in "How to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary to
meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first and thereafter shares acquired with reinvested dividends and
capital gains distributions will be redeemed next, followed by shares acquired
with a sales charge, to the extent necessary to make withdrawal payments.
Depending upon the amount withdrawn, the investor's principal may be depleted.
Payments made under withdrawal plans should not be considered as a yield or
income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent and the Fund shall incur no liability to the Planholder for any action
taken or omitted by the Transfer Agent in good faith to administer the Plan.
Certificates will not be issued for shares of the Fund purchased for and held
under the Plan, but the Transfer Agent will credit all such shares to the
account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made at
the net asset value per share determined on the redemption date. Checks or
AccountLink payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (the receipt of payment on the date selected cannot be guaranteed),
according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time in mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in accordance with
the requirements of the then-current Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan. In that case, the Transfer Agent
will redeem the number of shares requested at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to the
Transfer Agent. A Plan may also be terminated at any time by the Transfer Agent
upon receiving directions to that effect from the Fund. The Transfer Agent will
also terminate a Plan upon receipt of evidence satisfactory to it of the death
or legal incapacity of the Planholder. Upon termination of a Plan by the
Transfer Agent or the Fund, shares that have not been redeemed from the account
will be held in uncertificated form in the name of the Planholder, and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use Class A shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated form.
Share certificates are not issued for Class B or Class C shares. Upon written
request from the Planholder, the Transfer Agent will determine the number of
shares for which a certificate may be issued without causing the withdrawal
checks to stop because of exhaustion of uncertificated shares needed to continue
payments. However, should such uncertificated shares become exhausted, Plan
withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of the Oppenheimer funds that
have a single class without a class designation are deemed "Class A" shares for
this purpose. All Oppenheimer funds offer Class A, Class B and Class 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 and Oppenheimer Main Street
California Municipal Fund, which only offers Class A and Class B shares (Class B
and Class C shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer Funds or through
OppenheimerFunds-sponsored 401(k) plans). A current list showing which funds
offer which class can be obtained by calling the Distributor at 1-800-525-7048.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted for Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange from Class M shares. Otherwise no exchanges of any class of
any Oppenheimer fund into Class M shares are permitted.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge (or, if applicable, may be
used to purchase shares of Oppenheimer funds subject to a contingent deferred
sales charge). However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 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,
whichever is applicable. To qualify for that privilege, the investor or the
investor's dealer must notify the Distributor of eligibility for this privilege
at the time the shares of Oppenheimer Money Market Fund, Inc. are purchased,
and, if requested, must supply proof of entitlement to this privilege. Shares of
this Fund acquired by reinvestment of dividends or distributions from any other
of the OppenheimerFunds 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 OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge. However,
when Class A shares acquired by exchange of Class A shares of other
OppenheimerFunds purchased subject to a Class A contingent deferred sales charge
are redeemed within 12 months (18 months for shares purchased prior to May 1,
1997) 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 (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
When Class A, 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 A, Class B or Class C contingent deferred sales charge
will be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might be
imposed in the subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to exchange Class
A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of more than one account. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this Statement of
Additional Information or would include shares covered by a share certificate
that is not tendered with the request. In those cases, only the shares available
for exchange without restriction will be exchanged.
When exchanging shares by telephone, a shareholder must either have an
existing account in, or obtain, open an account in, and acknowledge receipt of a
prospectus for, the fund to which the exchange is to be made. For full or
partial exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer Agent is
instructed otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations), shareholders might
not be able to request exchanges by telephone and would have to submit written
exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption
Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate
transfer of the redemption proceeds. The Fund reserves the right, in its
discretion, to refuse any exchange request that may disadvantage it (for
example, if the receipt of multiple exchange request from a dealer might require
the disposition of portfolio securities at a time or at a price that might be
disadvantageous to the Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure that
the Fund selected is appropriate for his or her investment and should be aware
of the tax consequences of an exchange. For federal 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. Dividends will be payable on shares held of record
at the time of the previous determination of net asset value, described in "How
to Buy Shares." Daily dividends on newly purchased shares will not be declared
or paid until such time as Federal Funds (funds credited to a member bank's
account at the Federal Reserve Bank) are available from the purchase payment for
such shares. Normally, purchase checks received from investors are converted to
Federal Funds on the next business day. Dividends will be declared on shares
repurchased by a dealer or broker for four business days following the trade
date (i.e., to and including the day prior to settlement of the repurchase). If
all shares in an account are redeemed, all dividends accrued on shares of the
same class in the account will be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent,
in order to enable the investor to earn a return on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends which the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on shares held for 45 days or less. To the extent
the Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or dividends
from foreign corporations, its dividends will not qualify for the deduction. It
is expected that for the most part the Fund's dividends will not qualify,
because of the nature of the investments held by the Fund in its portfolio.
The amount of a class's distributions may 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, as described in "Alternative
Sales Arrangements -- Class A, Class B and Class C," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower as a result of the asset-based sales charge on Class B and Class C
shares, and Class B and Class C dividends will also differ in amount as a
consequence of any difference in net asset value between Class A, Class B and
Class C shares.
Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Trust's
Board and the Manager might determine in a particular year that it would be in
the best interest of shareholders for the Fund not to make such distributions at
the required levels and to pay the excise tax on the undistributed amounts. That
would reduce the amount of income or capital gains available for distribution to
shareholders.
If the Fund 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, and intends to qualify in future
years, but reserves the right not to qualify. 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 must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies, shareholders
may have a non-taxable return of capital, which will be identified in notices of
shareholders. There is no fixed dividend rate and there can be no assurance as
to the payment of any dividends or the realization of any capital gains.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges"
above at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other OppenheimerFunds may be
invested in shares of this Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager and the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship
the Custodian may have with the Manager and its affiliates. 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. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
-2-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
Oppenheimer Bond Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Bond Fund as of December
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended December 31, 1997 and
1996, and the financial highlights for the period January 1, 1993 to December
31, 1997. 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 at December
31, 1997 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Bond
Fund at December 31, 1997, the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Denver, Colorado
January 23, 1998
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
======================== <S>
<C> <C> MORTGAGE-BACKED
OBLIGATIONS--55.6%
- ---------------------------------------------------------------------------------------------------------- GOVERNMENT AGENCY--36.7%
- ------------------------------------------------------------------------------------------------------- FHLMC/FNMA/SPONSORED--26.7%
Federal Home Loan Mortgage Corp.:
Certificates of Participation:
9%, 3/1/17 $ 445,202 $ 476,977
Series 17-039, 13.50%, 11/1/10 48,485
57,732 Series 17-094, 12.50%, 4/1/14 27,295
31,974 Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates:
Series 1343, Cl. LA, 8%, 8/15/22 1,600,000
1,751,426 Series 151, Cl. F, 9%, 5/15/21 1,000,000
1,085,287 Series 1712, Cl. B, 6%, 3/15/09 1,000,000
975,000 Series 1714, Cl. M, 7%, 8/15/23
1,000,000 1,005,000 Gtd. Multiclass Mtg. Participation Certificates:
Series 1460, Cl. H, 7%, 5/15/07 1,500,000
1,538,430 Series G056, Cl. H, 9%, 7/20/24 2,493,000
2,717,370 Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1914, Cl. G, 6.50%, 2/15/24 3,000,000
2,951,250 Interest-Only Stripped Mtg.-Backed Security,
Series 177, Cl. B, 9.335%-10.914%, 7/1/26(2) 16,225,514
4,743,428 Principal-Only Stripped Mtg.-Backed Security,
Series 1690, Cl. B, 3.748%, 11/15/23(3) 1,892,161
1,052,515
- ------------------------------------------------------------------------------------------ Federal National Mortgage Assn.:
11%, 7/1/16 4,322,515 4,926,317
7%, 1/1/09-11/1/25 956,476
972,909 7%, 1/1/13-1/25/28(4) 22,060,000
22,240,811 7.50%, 2/1/08-3/1/08 621,862
639,256 Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1992-34, Cl. G, 8%, 3/25/22 540,000
584,717 Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17
484,158 498,369 Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates: Trust 1991-170, Cl. E, 8%, 12/25/06 2,500,000
2,616,991 Trust 1992-162, Cl. C, 7%, 10/25/21
8,400,000 8,486,604 Trust 1995-4, Cl. PC, 8%, 5/25/25
869,210 952,053 Trust 1997-25, Cl. B, 7%, 12/18/22
510,000 516,345 Trust 1997-27, Cl. J, 7.50%, 4/18/27
844,594 898,896 Interest-Only Stripped Mtg.-Backed Security,
Trust 249, Cl. 2, 9.958%, 10/25/23(2)
11,029,757 3,367,523 Principal-Only Stripped Mtg.-Backed Security,
Trust 277-C1, 8.142%, 4/1/27(3) 1,508,371
1,180,301 -----------
66,267,481
</TABLE>
10 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
- ------------------------------------------------------------------------------------ GNMA/GUARANTEED--10.0%
Government National Mortgage Assn.:
<S> <C> <C> 7%,
1/1/28(4) $ 9,950,000 $10,021,540
10%, 11/15/09 244,986 271,774
10.50%, 12/15/17-5/15/21 249,447
280,187 11%, 10/20/19 928,361
1,064,710 12%, 1/15/99-5/15/14 9,380
9,701 13%, 12/15/14 27,374
32,789 6%, 7/20/27 248,188
251,718 7%, 1/1/28(4) 2,200,000
2,217,886 7%, 7/15/09-7/20/25 1,617,774
1,657,314 7.50%, 12/1/27(4) 6,900,000
7,068,222 8%, 6/15/05-10/15/06 1,413,602
1,468,716 9%, 2/15/09-6/15/09 422,630
456,835
- ----------- 24,801,392
- -------------------------------------------------------------------------------------------------------------------- PRIVATE--18.9%
- ------------------------------------------------------------------------------------------------------------------ COMMERCIAL--15.3%
Amresco Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through Certificates,
Series 1997-C1, Cl. E, 7%, 6/17/29(5) 150,000 138,656
- ------------------------------------------------------------------------------------------------------- Asset Securitization Corp.:
Commercial Mtg. Pass-Through Certificates:
Series 1996-D3, Cl. A5, 8.33%, 10/13/26(5)(6) 800,000
859,250 Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(6)
2,000,000 2,080,000 Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6)
333,000 329,878 Series 1997-D4, Cl. B2, 7.525%, 4/14/29(6)
333,000 321,709 Series 1997-D4, Cl. B3, 7.525%, 4/14/29(6)
334,000 309,524 Series 1997-D5, Cl. A6, 7.184%,
2/14/41 1,500,000 1,503,750 Series 1997-D5, Cl.
B1, 6.93%, 2/14/41 2,000,000 1,826,562 Series
1997-MD7, Cl. A6, 8.11%, 1/13/30(6) 200,000
211,219 Interest-Only Stripped Mtg.-Backed Security,
Series 1997-D5, Cl. PS1, 1.367%, 2/14/41(2) 6,250,000
678,711
- ---------------------------------------------- Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 9.55%, 6/22/24(2)(5) 13,750,315
657,265
- ---------------------------------------------------------- CBA Mortgage Corp., Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. E, 7.76%, 12/25/03(6) 250,000
252,675
- ------------------------------------------------------------ CMC Securities Corp. I, Collateralized Mtg. Obligation,
Series 1993-D, Cl. D-3, 10%, 7/25/23(5) 536,614
565,753
- -------------------------------------- Commercial Mortgage Acceptance Corp., Interest-Only Stripped Mtg.-Backed
Security, Series 1996-C1, Cl. X-2, 0.981%, 12/25/20(2)(5) 18,624,900
529,646
- ------------------------------------ FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1994-C1:
Cl. 2-D, 8.70%, 9/25/25(5) 1,000,000
1,037,500 Cl. 2-E, 8.70%, 9/25/25(5) 1,000,000
1,038,700
- ----------------------------------- First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series
1997-CHL1:
8.116%, 2/25/11(5)(6) 750,000
638,475 8.116%, 5/25/08(5)(6) 750,000
760,725
</TABLE>
11 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE 1
- ------------------------------------------------------------------------------------ COMMERCIAL (CONTINUED)
<S> <C> <C> General
Motors Acceptance Corp., Collateralized Mtg. Obligations: Series 1995-C2, Cl. D, 7.192%,
1/15/08 $1,500,000 $ 1,503,750 Series 1997-C2, Cl.
F, 6.75%, 4/16/29 1,000,000 857,187
- ---------------------------------- GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates,
Series 1997-CL1, Cl. F:
7.353%, 7/13/30 1,000,000
1,018,125 7.823%, 7/13/30 1,000,000
1,035,937
- --------------------------- Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates: Series
1996-C1, Cl. D, 7.42%, 4/25/28 1,500,000
1,529,648 Series 1997-C2, Cl. D, 7.075%, 12/10/29 1,000,000
997,188
- ----------------------------------- Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1:
Cl. D-1, 7.51%, 2/15/28(5)(6) 1,000,000
1,016,563 Cl. E, 7.51%, 2/15/28(5)(6) 1,100,000
1,051,359 Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5)
225,000 205,031
- ------------------------------- - NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC, Cl. B, 8.562%, 8/12/11(5) 3,000,000
3,181,875
- ------------------------------------------------ Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates,
Series 1, Cl. D, 7.683%, 12/21/26(5) 1,500,000 1,547,400
- ----------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates: Series
1993-C1, Cl. B, 8.75%, 5/25/24 322,008
321,127 Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000
1,530,900 Series 1995-C1, Cl. D, 6.90%, 2/25/27
2,500,000 2,489,266
- ----------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E, 9.187%, 1/20/06
700,000 736,094
- ----------------------------------------------------------- Structured Asset Securities Corp.:
Commercial Mtg. Pass-Through Certificates,
Series 1997-LLI, Cl. D, 7.15%, 4/12/12 2,500,000
2,538,281 Multiclass Pass-Through Certificates, Series 1996-C3, Cl. D, 8%, 6/25/30(5)
2,500,000 2,531,641
------------
37,831,370
- ---------------------------------------------------------------------------- MANUFACTURED HOUSING--0.1%
Green Tree Financial Corp., Series 1994-6, Cl. A3, 7.70%, 1/15/20 151,555
152,123
- ------------------------------------------------------------------------------------- MULTI-FAMILY--1.1%
Mortgage Capital Funding, Inc.:
Commercial Mtg. Pass-Through Certificates,
Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 254,890
242,783 Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%,
6/15/06(7) 2,250,000 2,138,203
- -------------------------------------------------------- Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates, Series
1991-M5, Cl. A, 9%, 3/25/17 391,747 396,419
------------
2,777,405
</TABLE>
12 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
- ----------------------------------------------------------------------------------------------------------------------- OTHER--0.7%
<S> <C> <C> GE Capital
Mortgage Services, Inc., Series 1994-14, Cl. A1, 6.50%, 4/25/24
$ 47,944 $ 47,780
- ----------------------------------------------- JHM Mtg. Acceptance Corp., Collateralized Mtg. Obligation Bonds, Series E, Cl. 5,
8.96%, 4/1/19 1,548,082 1,619,682
- ------------------------------------------------------------------------------- Salomon Brothers Mortgage Securities VI:
Interest-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 12.50%, 10/23/17(2) 105,837
30,180 Principal-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. A, 10/23/17(3) 154,135
131,255 ------------
1,828,897
- ----------------------------------------------------------------------------------------------------------- RESIDENTIAL--1.7%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C1:
Cl. E, 7.50%, 3/1/11(5) 1,000,000
1,035,300 Cl. F, 7.50%, 6/20/13(5) 150,000
145,500 Cl. G, 7.50%, 6/20/14(5) 150,000
138,705 Cl. H, 7.50%, 8/20/14(5) 105,000
82,908
- ------------------------------------------------------------------------------ NationsBank Trust, Lease Pass-Through Certificates,
Series 1997A-1, 7.442%, 1/10/11(6) 500,000
520,938
- --------------------------------------------- Residential Funding Corp., Mtg. Pass-Through Certificates, Series 1993-S10, Cl. A9,
8.50%, 2/25/23 490,776 507,340
- ------------------------------------------------------------------------ Ryland Mortgage Securities Corp. III, Sub. Bonds,
Series 1992-A, Cl. 1A, 8.268%, 3/29/30(6) 343,559
349,357
- ----------------------------------------------- Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26
1,965,016 1,387,793
------------
4,167,841
------------ Total Mortgage-Backed Obligations (Cost
$135,028,453) 137,826,509
============================================================================================================================= U.S.
GOVERNMENT OBLIGATIONS--12.5%
- ------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds:
10.375%, 11/15/09 5,500,000
6,876,721 11.625%, 11/15/04 2,375,000
3,151,331 12.75%, 11/15/10 1,000,000
1,427,501 8.875%, 8/15/17(8) 6,000,000
7,963,128 STRIPS, 6.374%, 2/15/07(9) 725,000
427,004 STRIPS, 6.52%, 8/15/22(9)
2,000,000 456,670
- ------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts.:
6%, 8/15/00 1,000,000 1,007,501
6.125%, 8/15/07 6,000,000
6,168,756 7.50%, 10/31/99 3,430,000
3,537,191 ------------
Total U.S. Government Obligations (Cost $29,886,433)
31,015,803 </TABLE>
13 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
================================================================================================================================
CORPORATE BONDS AND NOTES--
<S> <C> <C>
BASIC INDUSTRY--2.0%
- ------------------------------------------------------------------------------------------------------------------ CHEMICALS--1.4%
FMC Corp., 8.75% Sr. Nts., 4/1/99 $ 250,000 $
257,366
- ----------------------------------------------------------------------- Harris Chemical North America, Inc., 10.75% Gtd. Sr. Sub.
Nts., 10/15/03 100,000 107,250
- ---------------------------------------------------Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7)
150,000 148,500
- ----------------------------------------------------------------------- NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03
492,000 547,350
- -------------------------------------------------------------- Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07
200,000 202,500
- --------------------------------------------------------------------- Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03
900,000 944,395
- ---------------------------------------------------------------------------------------- Rohm & Haas Co., 9.50% Debs., 4/1/21
500,000 572,630
- ------------------------------------------------------------- Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(7)
175,000 180,250
- -------------------------------------------------------------------Sterling Chemicals, Inc., 11.75% Sr. Unsec. Sub. Nts., 8/15/06
470,000 481,750
-----------
3,441,991
- ---------------------------------------------------------------------------------------------------------------CONTAINERS--0.1%
U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06 250,000
266,250
- ---------------------------------------------------------------------------------------------------------------------- PAPER--0.3%
Repap New Brunswick, Inc., 9.063% First Priority Sr. Sec.
Nts., 7/15/00(6) 100,000 99,000
- ------------------------------------------------------------------- Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07
200,000 204,000
- ------------------------------------------------------------------------- Scotia Pacific Holding Co., 7.95% Timber Collateralized
Nts., 7/20/15 415,538 431,251
-----------
734,251
- ---------------------------------------------------------------------------------------------------------------------- STEEL--0.2%
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 350,000
360,500
- ------------------------------------------------------------ Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(7)
200,000 201,750
-----------
562,250
- ----------------------------------------------------------------------------------------------------------- CONSUMER RELATED--4.4%
- ---------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS--0.4%
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., Series B, 7/15/02 400,000
449,000
- ----------------------------------------------------------------------- TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5)
370,000 445,850
-----------
894,850
- --------------------------------------------------------------------------------------------------- FOOD/BEVERAGES/TOBACCO--0.9%
B.A.T. Capital Corp., 6.66% Medium-Term Nts., 3/22/00(7) 250,000
251,975
- ---------------------------------------------------------------------------- Coca-Cola Enterprises, Inc., 6.95% Debs., 11/15/26
2,000,000 2,030,054
-----------
2,282,029 </TABLE>
14 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
- ----------------------------------------------------------------------------------------------------------------- HEALTHCARE--0.5%
<S> <C> <C>
HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 $ 500,000
$ 525,000
- ------------------------------------------------------------------------------------ Imcera Group, Inc., 6% Nts., 10/15/03 500,000
492,542
- -------------------------------------------------- Integrated Health Services, Inc., 9.50% Sr. Sub. Nts., 9/15/07(7)
30,000 30,900
- ---------------------------------------------------------------------- Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(7)
220,000 226,600
-----------
1,275,042
- --------------------------------------------------------------------------------------------------HOTEL/GAMING---1.6%
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 150,000
155,250
- ------------------------------------ Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03
300,000 289,500
- -------------------------------------------------------------------- Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03
300,000 324,000
- ------------------------------------------------------------------------------------- Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07
1,000,000 1,076,652
- ----------------------------------------------------------------- HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07
800,000 834,000
- ------------------------------------------------------------------------------- HMH Properties, Inc., 8.875% Sr. Nts., 7/15/07
500,000 528,750
- ---------------------------------------------------------------------------- Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07
100,000 105,250
- ------------------------------------------------------------------------------ Mohegan Tribal Gaming Authority (Connecticut),
13.50% Sr. Sec. Nts., Series B, 11/15/02 310,000
398,350
- -------------------------------------------------------------------------- Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05
100,000 108,500
- ------------------------------------------------------------------------ Signature Resorts, Inc., 9.75% Sr. Sub. Nts., 10/1/07(7)
150,000 150,750
-----------
3,971,002
- ---------------------------------------------------------------------------------------------------------------- RESTAURANTS--0.7%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 160,000
168,800
- ----------------------------------------------------------------------------------------------------------------- Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 689,000
704,502 9.75% Sr. Sub. Nts., 6/1/02 750,000
774,375 -----------
1,647,677
- ------------------------------------------------------------------------------------------------------------ TEXTILE/APPAREL--0.3%
Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 100,000
107,375
- ---------------------------------------------------------------------------------------- Fruit of the Loom, Inc., 7% Debs., 3/15/11
500,000 492,877
- -------------------------------------------------------------------- William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06
200,000 211,000
-----------
811,252
- --------------------------------------------------------------------------------------------------------------------- ENERGY--5.4%
- ------------------------------------------------------------------------------ Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07
400,000 406,000
- ----------------------------------------------------------------- Chesapeake Energy Corp., 12% Gtd. Sr. Exchangeable Nts., 3/1/01
675,000 710,437
- ---------------------------------------------------------------------------------- Clark R&M, Inc., 8.375% Sr. Nts., 11/15/07(7)
200,000 201,750
- -------------------------- Cliffs Drilling Co., 10.25% Sr. Nts., 5/15/03 50,000
54,687
- --------------------------------------------------------------------------------- Coastal Corp., 8.75% Sr. Nts., 5/15/99 325,000
335,998
- --------------------------------------------------------------------------- Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(7)
2,000,000 2,013,104
- -------------------------------------------------------------------------- Enterprise Oil plc, 6.70% Sr. Nts., 9/15/07
1,000,000 1,027,105
</TABLE>
15 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENT (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
- ------------------------------------------------------------------------------------------------------------ ENERGY (CONTINUED)
<S> <C> <C> Global
Marine, Inc., 7.125% Nts., 9/1/07(5) $2,000,000 $
2,020,000
- ------------------------------------------------------------------------------- Gothic Energy Corp., 12.25% Sr. Nts., 9/1/04(5)
200,000 210,000
- -------------------------------------------------------------------------- J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06
600,000 645,750
- --------------------------------------------------------------------------- McDermott, Inc., 9.375% Nts., 3/15/02
100,000 106,485
- ----------------------------------------------------------------------- Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19
2,000,000 2,236,314
- ----------------------------------------------------------------- Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06
750,000 678,750
- ------------------------------------------------------------------------ Phillips Petroleum Co., 7.53% Pass-Through Certificates,
Series 1994-A1, 9/27/98 198,646
200,689
- --------------------------------------------------------------------------- Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07
400,000 409,000
- ------------------------------------------------------------------------------- TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21
1,500,000 1,995,000
- ------------------------------------------------------------------------------- Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07
65,000 64,025
-----------
13,315,094
- -----------------------------------------------------------------------------------------------------FINANCIAL SERVICES--10.4%
- ------------------------------------------------------------------------------------------------------ BANKS AND THRIFTS--1.4%
Banque Nationale de Paris, 9.875% Debs., 5/25/98 205,000
207,945
- -------------------------------------------------------------------------- Chase Manhattan Corp. (New), 6.625% Sr. Nts., 1/15/98
25,000 25,004
- -------------------------------------------------------------------------------- Citicorp Capital I, 7.933% Gtd. Bonds, 2/15/27
1,000,000 1,069,495
- ----------------------------------------------------------------------- First Fidelity Bancorp, 8.50% Sub. Capital Nts., 4/1/98
325,000 326,728
- ----------------------------------------------------------------------------------------------- First Nationwide Holdings, Inc.:
10.625% Sr. Sub. Nts., 10/1/03 150,000
168,750 9.125% Sr. Sub. Nts., 1/15/03 500,000
527,500
- ---------------------------------------------------------- National Westminster Bank plc, 9.375% Gtd. Capital Nts., 11/15/03
70,000 80,557 Royal Bank of Scotland Group (The) plc, 10.125% Gtd. Sub.
- ------------------------------------------------------------------------------------------------- Capital Nts., 3/1/04 500,000
591,194
- ------------------------------------------------------------------------------- Suntrust Banks, Inc., 8.875% Debs., 2/1/98
500,000 501,029
-----------
3,498,202
- -----------------------------------------------------------------------------------------------------DIVERSIFIED FINANCIAL--7.3%
Associates Corp. of North America, 7.40% Medium-Term Nts., 7/7/99
300,000 305,592
- ----------------------------------------------------------------------- Beneficial Corp., 12.875% Debs., 8/1/13 20,000
21,734
- ------------------------------------------------------------- BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12
1,500,000 1,756,584
- ------------------------------------------------------------- Enterprise Rent-A-Car USA Finance Co., 7.875% Nts., 3/15/98(7)
1,500,000 1,505,331
- ----------------------------------------------------------------------------- Ford Motor Credit Co., 6.75% Nts., 8/15/08
1,000,000 1,012,842
- ------------------------------------------------------------------------------ Merrill Lynch & Co., Inc., 6.875% Nts., 3/1/03
750,000 770,451
- ----------------------------------------------------------------- Midland American Capital Corp., 12.75% Gtd. Nts., 11/15/03
205,000 215,084
- -------------------------------------------------------------------------------- NationsBank Corp., 10.20% Sub. Nts., 7/15/15
1,300,000 1,748,590
- ------------------------------------------------------------------------- Ocwen Capital Trust I, 10.875% Gtd. Bonds, 8/1/27
300,000 327,000
- ------------------------------------------------------------------------- Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99
1,825,000 1,868,676
- ---------------------------------------------------------------------------Rank Group Finance plc, 6.75% Gtd. Nts., 11/30/04
1,000,000 1,003,500
- -------------------------------------------------------------------------Ryder System, Inc., 8.75% Debs., Series J, 3/15/17
1,600,000 1,671,586
- --------------------------------------------------------------------Salomon, Inc, 7.30% Nts., 5/15/02 1,000,000
1,035,115
</TABLE>
16 Oppenheimer Bond Fund
<PAGE>
<TABLE>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1
- - <S> <C> <C>
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts., Series B, 4/1/02
$1,125,000 $ 1,209,375
- ------------------------------------------------------------------------- Source One Mortgage Services Corp., 9% Debs., 6/1/12
1,250,000 1,379,060
- -------------------------------------------------------------------------- Washington Mutual Capital I, 8.375% Gtd. Bonds, 6/1/27
2,000,000 2,180,952
-----------
18,011,472
- ---------------------------------------------------------------------------------------------------------------INSURANCE--1.7%
Aetna Services, Inc., 8% Debs., 1/15/17 849,000
868,270
- ----------------------------------------------------------------------------------- Allmerica Capital I, 8.207% Debs., 2/3/27
2,000,000 2,209,596
- ---------------------------------------------------------------- Liberty Mutual Insurance Co., 7.697% Nts., 10/15/2097(5)
1,000,000 1,051,292
- -------------------------------------------------------------------------------Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03
200,000 214,000
-----------
4,343,158
- ----------------------------------------------------------------------------------------------------HOUSING RELATED--0.8%
- ------------------------------------------------------------------------------------------------------ BUILDING MATERIALS--0.1%
Nortek, Inc., 9.25% Sr. Nts., Series B, 3/15/07 250,000
256,250
- -------------------------------------------------------------------------------------------------- HOMEBUILDERS/REAL ESTATE--0.7%
Continental Homes Holding Corp., 10% Gtd. Unsec. Bonds, 4/15/06 50,000
54,750
- ------------------------------------------------------------------------- Greystone Homes, Inc., 10.75% Sr. Gtd. Nts., 3/1/04(5)
50,000 54,750
- --------------------------------------------------------------------------------- Nortek, Inc., 9.125% Sr. Nts., Series B, 9/1/07
250,000 255,000
- --------------------------------------------------------------------------- Trizec Hahn Corp., 7.95% Sr. Unsec. Debs., 6/1/07CAD
2,000,000 1,450,435
-----------
1,814,935
- -------------------------------------------------------------------------------------------------------------- MANUFACTURING--7.1%
- ----------------------------------------------------------------------------------------------------------------- AEROSPACE--2.3%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(7) 100,000
104,500
- ----------------------------------------------------------------------------------------------------------------- Atlas Air, Inc.:
10.75% Sr. Nts., 8/1/05 125,000
132,500 12.25% Pass-Through Certificates, 12/1/02 1,000,000
1,115,000
- -------------------------------------------------------------------- Boeing Co., 7.50% Debs., 8/15/42 2,000,000
2,254,914
- ------------------------------------------------------------------- Rolls-Royce Capital, Inc., 7.125% Gtd. Nts., 7/29/03
1,000,000 1,028,125
- -------------------------------------------------------------SC International Services, Inc., 9.25% Sr. Sub. Nts., 9/1/07(7)
250,000 260,000
- ------------------------------------------------------------------------------- Southwest Airlines Co., 9.25% Debs., 2/15/98
500,000 501,700
- -------------------------------------------------------------- Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04(7)
250,000 252,500
-----------
5,649,239
- --------------------------------------------------------------------------------------------------------------AUTOMOTIVE--2.7%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(7) 100,000
105,000
- ------------------------------------------------------------------------------------- Chrysler Corp., 7.40% Debs., 8/1/2097
3,000,000 3,212,247
- -------------------------------------------------------------------------------------- Ford Motor Co., 8.875% Debs., 11/15/22
2,000,000 2,267,818
- ------------------------------------------------------------------- Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06
200,000 224,000
- --------------------------------------------------------------------------------- Johnson Controls, Inc., 7.70% Debs., 3/1/15
500,000 564,073
- ------------------------------------------------------------------- Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07
200,000 213,500
-----------
6,586,638 </TABLE>
17 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
<S> <C> <C>
CAPITAL GOODS--2.1%
Caterpillar, Inc., 9.75% Debs., 6/1/19 $1,750,000
$1,895,626
- --------------------------------------------------------------------------------------------------------- Clark-Schwebel, Inc.:
10.50% Sr. Nts., 4/15/06 650,000
711,750 12.50% Debs., 7/15/07(7)(10) 137,982
148,331
- ----------------------------------------- Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05
500,000 560,000
- ---------------------------------------------------------- Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07
325,000 337,187
- ---------------------------------------------------------------------------Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07
150,000 150,375
- -------------------------------------------------------Roller Bearing Co. of America, Inc., 9.625% Gtd. Sr. Sub. Nts., 6/15/07(5)
200,000 202,500
- ------------------------------------------------------------------Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07
250,000 263,125
- -------------------------------------------------------------------------- Westinghouse Electric Corp., 8.375% Nts., 6/15/02
1,000,000 1,050,813
-----------
5,319,707
- ------------------------------------------------------------------------------------------------------------------ MEDIA--2.9%
- ----------------------------------------------------------------------------------------------------------- BROADCASTING--0.9%
Allbritton Communications Co., 11.50% Sr. Sub. Debs., 8/15/04 675,000
710,437
- ------------------------------------------------------------ Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07
175,000 179,812
- -------------------------------------------------------------- Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02
520,000 559,000
- ----------------------------------------------------------------- Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05
200,000 211,500
- ----------------------------------------------------------------------------------------------------- Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 300,000
298,500 9% Sr. Sub. Nts., Series B, 1/15/06 400,000
402,000
- ----------- 2,361,249
- ----------------------------------------------------------------------------------------------------------- CABLE TELEVISION--1.2%
Adelphia Communications Corp.:
9.25% Sr. Nts., 10/1/02 150,000
153,750 9.875% Sr. Nts., Series B, 3/1/07 200,000
212,500
- --------------------------------------------EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(11)
250,000 230,000
- ----------------------------------------------------------------------------- EchoStar DBS Corp., 12.50% Gtd. Nts., 7/1/02
525,000 569,625
- --------------------------------------------------- Knology Holdings, Inc., Units (each unit consists of $1,000 principal amount of
0%/11.875% sr. disc. nts., 10/15/07 and one warrant to purchase .003734 shares of preferred
stock)(5)(11)(12) 200,000 110,000
- ------------------------------------------------------------------ Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 100,000
106,500
- ----------------------------------------------------------------------- Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD
600,000 409,445
- ------------------------------------------------------------------------ TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07
1,000,000 1,111,644
-----------
2,903,464 </TABLE>
18 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
<S> <C> <C>
DIVERSIFIED MEDIA--0.6%
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 $ 500,000
$ 530,000
- ---------------------------------------------------------------- Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(7)
100,000 106,750
- ----------------------------------------------------------------------------------------------------------- Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 400,000
413,000 9.625% Sr. Sub. Nts., 12/1/06 150,000
162,188
- ------------------------------------------------------------------------ Outdoor Systems, Inc., 8.875% Sr. Sub. Nts., 6/15/07
200,000 209,000
-----------
1,420,938
- ---------------------------------------------------------------------------------------------- ENTERTAINMENT/FILM--0.1%
Blockbuster Entertainment Corp., 6.625% Sr. Nts., 2/15/98 250,000
250,090
- -------------------------------------------------------------------------------------------------------- PUBLISHING/PRINTING--0.1%
American Lawyer Media Holdings, Inc., 9.75% Sr. Nts., 12/15/07(7) 250,000
255,000
- ---------------------------------------------------------------------------------------------------------------------- OTHER--1.2%
- -------------------------------------------------------------------------------------------------------------- CONGLOMERATES--0.0%
Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03(11) 100,000
99,500
- -------------------------------------------------------------------------------------------------------------------- SERVICES--1.2%
Archer Daniels Midland Co., 7.125% Debs., 3/1/13 750,000
800,963
- ------------------------------------------------------------------------------------------------------- ENSCO International, Inc.:
6.75% Nts., 11/15/07 1,000,000
1,007,035 7.20% Nts., 11/15/27 1,000,000
1,018,462
- -------------------------------------------------------------- Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., 6/15/07
200,000 211,250
-----------
3,037,710
- ------------------------------------------------------------------------------------------------------------------ RETAIL--1.7%
- --------------------------------------------------------------------------------------------------------- DEPARTMENT STORES--0.3%
Sears Canada, Inc., 11.70% Debs., 7/10/00CAD 500,000
397,807
- ------------------------------------------------------------------------- Sears Roebuck & Co., 8.39% Medium-Term Nts., 3/23/99
300,000 308,082
-----------
705,889
- ------------------------------------------------------------------------------------------------------ SPECIALTY RETAILING--0.3%
May Department Stores Cos., 10.625% Debs., 11/1/10 405,000
545,305
- ----------------------------------------------------------- Specialty Retailers, Inc., 9% Gtd. Unsec. Sr. Sub. Nts., 7/15/07
100,000 102,500
-----------
647,805
- ------------------------------------------------------------------------------------------------------------- SUPERMARKETS--1.1%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(7) 550,000
583,000
- -------------------------------------------------------------------------------------- Kroger Co., 8.50% Sr. Sec. Debs., 6/15/03
1,000,000 1,050,837
- ------------------------------------------------------------------------------ Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04
300,000 337,500
- ------------------------------------------------------------------- Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(7)
500,000 520,000
- ----------------------------------------------------- Stater Brothers Holdings, Inc., 9% Unsec. Sr. Sub. Nts., 7/1/04
150,000 157,500
-----------
2,648,837 </TABLE>
19 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET
VALUE AMOUNT(1) SEE
NOTE (1)
- ----------------------------------------------------------------------------------------------------- TECHNOLOGY--3.1%
- --------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--2.7%
<S> <C> <C> Cellular
Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 11.198%, 8/15/00(9) $1,450,000
$1,167,250
- ------------------------------------------------------- Dial Call Communications, Inc., 0%/12.25% Sr. Disc. Nts., 4/15/04(11)
300,000 287,250
- ---------------------------------------------------------------------------------- Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07
250,000 255,000
- ------------------------------------------------------------------------ General Electric Capital Corp., 8.75% Debs., 5/21/07
1,000,000 1,172,150
- ----------------------------------------------------------------------------- Metrocall, Inc., 9.75% Sr. Sub. Nts., 11/1/07(7)
50,000 49,625
- ---------------------------------------------------------------------------------------------------- Nextel Communications, Inc.:
0%/10.65% Sr. Disc. Nts., 9/15/07(7)(11) 50,000
31,750 0%/11.50% Sr. Disc. Nts., 9/1/03(11) 250,000
250,000
- -------------------------------------------------------------------------------- Omnipoint Corp., 11.625% Sr. Nts., 8/15/06
70,000 74,200
- --------------------------------------------------- ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04
65,000 70,850
- -------------------------------------------------- Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(11)
200,000 149,500
- ---------------------------------------------------------------------------------------------------- PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(11) 200,000
206,000 0%/14% Sr. Sub. Disc. Nts., 11/15/01(11) 1,050,000
1,170,750 10.75% Sr. Nts., 11/1/04
520,000 565,500
- ---------------------------------------------------- Real Time Data, Inc., Units (each unit consists of $1,000 principal amount of
0%/13.50% sub. disc. nts., 8/15/06 and one warrant to purchase six ordinary shares)(5)(11)(12)
1,000,000 380,000
- ------------------------------------------- Star Choice Communications, Inc., Units (each unit consists of $1,000 principal
amount of 13% sr. sec. nts., 12/15/05 and one warrant to buy common stock)(12)
200,000 206,000
- --------------------------------------------------------------- Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 200,000
206,000
- ------------------------------------------------------------------------------- Unisys Corp., 11.75% Sr. Nts., 10/15/04
300,000 344,250
- ----------------------------------------------------------- USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04
100,000 98,000
-----------
6,684,075
- ------------------------------------------------------------------------------------------ TELECOMMUNICATIONS/TECHNOLOGY--0.4%
Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06(11) 145,000
116,725
- -------------------------------------------------- COLT Telecom Group plc, Units (each unit consists of $1,000 principal amount of
0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(11)(12)
350,000 273,000
- ---------------------------------------------------------------------------------------- GST Telecommunications, Inc., 0%/13.875%
Cv. Sr. Sub. Disc. Nts., 12/15/05(7)(11) 100,000
76,813
- -------------------------------------------------- McLeodUSA, Inc., 0%/10.50% Sr. Disc. Nts., 3/1/07(11)
65,000 47,125
- ------------------------------------------------------------------ NEXTLINK Communications, Inc., 9.625% Sr. Nts., 10/1/07
100,000 104,000
- ------------------------------------------------------------------------ NTL, Inc., 10% Sr. Nts., 2/15/07 100,000
105,750
- ------------------------------------------------------------------------------ Qwest Communications International, Inc., 0%/9.47%
Sr. Disc. Nts., 10/15/07(7)(11) 365,000
248,200
- ----------------------------------------------------------------------------------- Teleport Communications Group, Inc., 0%/11.125%
Sr. Disc. Nts., 7/1/07(11) 150,000
122,625 -----------
1,094,238
</TABLE>
20 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE (1)
- ------------------------------------------------------------------------------------------------- TRANSPORTATION--1.6%
- ------------------------------------------------------------------------------------------------------ RAILROADS--1.3%
<S> <C> <C> Canadian
Pacific Ltd., 9.45% Debs., 8/1/21 $1,000,000 $
1,278,950
- ---------------------------------------------------------- Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05
750,000 758,272
- ---------------------------------------------------------------------- Transtar Holdings LP/Transtar Capital Corp., 0%/13.375%
Sr. Disc. Nts., Series B, 12/15/03(11) 1,100,000
968,000
- ---------------------------- Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 107,286
------------
3,112,508
- --------------------------------------------------------------------------------------------------------------- SHIPPING--0.2%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(7) 400,000
426,000 Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg.
nts., 6/30/07 and 7.66 warrants)(7)(12) 100,000 113,000
-----------
539,000
- ----------------------------------------------------------------------------------------------------------------- TRUCKING--0.1%
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., Series B, 7/1/07 350,000
362,250
- ---------------------------------------------------------------------------------------------------------------- UTILITIES--2.8%
- ------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES--0.7%
California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 300,000
324,000
- ------------------------------------------------------------------------- Calpine Corp., 8.75% Sr. Nts., 7/15/07(7)
185,000 189,625
- -------------------------------------------------------------------- Consumers Energy Co., 8.75% First Mtg. Nts., 2/15/98
250,000 250,597
- ------------------------------------------------------------------------ First PV Funding Corp., 10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16(5) 197,000
209,063
- --------------------------------------------------- Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22
250,000 276,115
- ------------------------------------------------------------------ South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06
500,000 583,366
------------
1,832,766
- ---------------------------------------------------------------------------------------------------------- GAS UTILITIES--0.8%
Laclede Gas Co., 8.50% First Mtg. Bonds, 11/15/04 500,000
557,739
- ---------------------------------------------------------------------------------- National Fuel Gas Co., 7.75% Debs., 2/1/04
500,000 532,226
- ------------------------------------------------------------------------- Texas Gas Transmission Corp., 8.625% Nts., 4/1/04
500,000 555,629
- -------------------------------------------------------------------------- Union Gas Ltd., 13% Debs., 6/30/03CAD
464,000 338,197
------------
1,983,791
- ------------------------------------------------------------------------------------------------------ TELEPHONE UTILITIES--1.3%
GTE Corp., 8.85% Debs., 3/1/98 300,000
301,217
- --------------------------------------------------------------------------- New York Telephone Co., 9.375% Debs., 7/15/31
2,500,000 2,817,648
------------
3,118,865 ------------
Total Corporate Bonds and Notes (Cost $103,314,823)
107,739,264 </TABLE>
21 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF INVESTMENT (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE (1)
============================================================================================================== COMMON
STOCKS-
<S> <C> <C>
Optel, Inc. (Cost $0)(5)(13) 100 $ --
====================================================================================================== PREFERRED
STOCKS--1.4%
- --------------------------------------- Allstate Financing I, 7.95% Gtd. Quarterly Income Preferred Securities, Series A
80,000 2,075,000
- --------------------------------------------- CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock, Series B, Non-Vtg.
13,000 444,437
- -------------------------------------------------------------------------- EchoStar Communications Corp., 12.125% Sr. Redeemable
Exchangeable Preferred Stock, Series B(7)(10) 100
104,750
- --------------------------------------------------------------------- Fresenius Medical Care Trust, 9% Preferred Securities
505,000 530,250
- --------------------------------------------------------- NEXTLINK Communications, Inc., 14% Sr. Exchangeable Preferred(10)
3,381 210,467
- ------------------------------------------------------------- SFX Broadcasting, Inc., 12.625% Cum., Series E, Non-Vtg.(10)
53 60,554
----------- Total Preferred Stocks (Cost $3,165,304)
3,425,458
UNITS
========================================================================================================================== RIGHTS,
WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------ American Communications Services, Inc. Wts., Exp. 11/05(5)
300 28,650
- ---------------------------------------------------------------- Cellular Communications International, Inc. Wts., Exp. 8/03(5)
500 8,500
- ----------------------------------------------------------------------------- Gothic Energy Corp. Wts., Exp. 9/04 2,800
5,600
- --------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/05(5)
1,980 24,750
- ----------------------------------------------------------------------- NEXTLINK Communications, Inc. Wts., Exp. 2/09(5)
3,050 31 Orion Network Systems, Inc. Wts., Exp. 1/07(5)
200 2,500
----------- Total Rights, Warrants and Certificates (Cost $3,500)
70,031
FACE AMOUNT(1)
================================================================================================================================
STRUCTURED INSTRUMENTS--0.5%
- --------------------------------------------------------------------------- Bayerische Landesbank Girozentrale (New York Branch)
Lehman Brothers High Yield Bond Index Nts., 12.50%, 2/4/98 $ 500,000
499,200
- ---------------------------------------------------------- Shoshone Partners Loan Trust, 7.50% Sr. Nts., 5/31/02(5)(6)
742,000 786,944
------------ Total Structured Instruments (Cost $1,242,000)
1,286,144
================================================================================================================================
REPURCHASE AGREEMENTS--2.1%
- ------------------------------------------------- Repurchase agreement with First Chicago Capital Markets, 6.60%, dated 12/31/97,
to be repurchased at $5,201,907 on 1/2/98, collateralized by U.S. Treasury Bonds, 8%-10.625%,
8/15/15-11/15/21, with a value of $3,854,252, and U.S. Treasury Nts., 5.875%-7.50%,
9/30/01-12/31/01,
with a value of $1,452,554 (Cost $5,200,000) 5,200,000
5,200,000
- ------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $277,840,513)
115.5% 286,563,209
- -------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS
(15.5) (38,414,567)
- ----------- ------------ NET ASSETS
100.0% $248,148,642
=========== ============ </TABLE>
22 Oppenheimer Bond Fund
<PAGE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currency: CAD--Canadian Dollar.
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline and prepayment rates increase. Most
other fixed income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on which
current interest is calculated. The price of these securities is typically more
sensitive to changes in prepayment rates than traditional mortgage-backed
securities (for example, GNMA pass-throughs). Interest rates disclosed represent
current yields based upon the current cost basis and estimated timing and amount
of future cash flows.
3. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows. 4.
When-issued security to be delivered and settled after December 31, 1997. 5.
Identifies issues considered to be illiquid or restricted--See Note 8 of Notes
to Financial Statements.
6. Represents the current interest rate for a variable rate security.
7. 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 $10,623,957 or 4.28% of the Fund's net
assets as of December 31, 1997.
8. Securities with an aggregate market value of $929,032 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements. 9. For zero coupon
bonds, the interest rate shown is the effective yield on the date of purchase.
10. Interest or dividend is paid in kind.
11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
12. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
13. Non-income producing security.
See accompanying Notes to Financial Statements.
23 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1997
<TABLE>
=============================================== <S>
<C> ASSETS
Investments, at value (cost $277,840,513) $286,563,209
- - Cash 390,159
- -------------------------------------------------------------------------- Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 20,641
- -------------------------------------------------------------------------------------------------------------------- Receivables:
Investments sold 16,365,960 Interest
and principal paydowns 3,656,399 Shares of
beneficial interest sold 301,417 Daily variation on
futures contracts--Note 6 82,564
- ------------------------------------------------------------------------------------------------------ Other 5,691
------------ Total assets
307,386,040
=================================================================================================================== LIABILITIES
Payables and other liabilities:
Investments purchased (including $57,811,085 purchased on a when-issued basis)--Note 1
58,014,647 Dividends
631,775 Shares of beneficial interest redeemed
258,531 Distribution and service plan fees
150,358 Transfer and shareholder servicing agent fees
47,292 Other
134,795 ------------ Total
liabilities 59,237,398
=================================================================================================================== NET ASSETS
$248,148,642
============
============================================================================================================ COMPOSITION OF NET
ASSETS
Paid-in capital $241,988,295
- --------------------------------------------------------------------------------- Undistributed net investment income 6,579
- --------------------------------------------------------------------------------- Accumulated net realized loss on investments and
foreign currency transactions (2,819,276)
- --------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated
in foreign currencies 8,973,044
------------- Net assets
$248,148,642
============= </TABLE>
24 Oppenheimer Bond Fund
<PAGE>
<TABLE>
====================================== <S>
<C> NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $190,705,711 and 17,383,073 shares of beneficial interest outstanding)
$10.97 Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $11.52
- ---------------------------------------------------------------------------------------------------------------- Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $48,254,895 and 4,399,924 shares of beneficial
interest outstanding) $10.97
- ----------------------------------------------------------------------------------------------------------------- Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $9,188,036 and 837,017 shares of beneficial
interest outstanding) $10.98
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer Bond Fund
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1997
<TABLE>
================================================ <S>
<C> INVESTMENT INCOME
Interest $19,692,749
- ---------------------------------------------------------------------------------------------------------------
Dividends 196,995
----------- Total income
19,889,744
======================================================================================================== EXPENSES
Management fees--Note 4 1,751,986
- ---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 461,146 Class B
414,137 Class C
61,208
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 412,037
- ---------------------------------------------------------------------------------------------------------------
Shareholder reports 154,722
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 49,736
- ---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 18,708
- ---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 6,839
- ---------------------------------------------------------------------------------------------------------------
Other 15,848
----------- Total expenses
3,346,367
================================================================================================= NET INVESTMENT INCOME
16,543,377
======================================================================================================== REALIZED AND UNREALIZED
GAIN (LOSS) Net realized gain (loss) on: Investments
2,873,379 Closing of futures contracts--Note 6
(688,832) Closing and expiration of options written--Note 7
(29,905) Foreign currency transactions
42,729 ----------- Net realized
gain 2,197,371
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 3,870,507 Translation of
assets and liabilities denominated in foreign currencies (205,493)
----------- Net change
3,665,014
----------- Net realized and unrealized gain
5,862,385
=================================================================================== NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $22,405,762
===========
</TABLE>
See accompanying Notes to Financial Statements.
26 Oppenheimer Bond Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
================================================================================================= <S>
<C> <C> OPERATIONS
Net investment income $ 16,543,377 $
15,830,998
- --------------------------------------- Net realized gain 2,197,371 313,209
- --------------------------------------------------------- Net change in unrealized appreciation or depreciation
3,665,014 (5,325,416)
- ------------ ------------ Net increase in net assets resulting from operations
22,405,762 10,818,791
===================================================================================================================== DIVIDENDS
AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (13,459,796) (12,577,460)
Class B (2,655,088) (2,405,982)
Class C (389,245) (214,115)
- --------------------------------------------------------------------------------------------- Tax return of capital distribution:
Class A -- (517,955) Class
B -- (103,919) Class C
-- (11,567)
==================================================================================================================== BENEFICIAL
INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (7,491,024) 28,392,776
Class B 8,379,500 659,280
Class C 4,696,745 404,645
======================================================================================================================= NET ASSETS
Total increase 11,486,854 24,444,494
- -------------------------------------------------------------------- Beginning of period 236,661,788
212,217,294 ------------
- ------------ End of period (including undistributed net investment
income of $6,579 for the year ended 12/31/97) $248,148,642
$236,661,788 ============
============ </TABLE>
See accompanying Notes to Financial Statements.
27 Oppenheimer Bond Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
- -----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996
1995 1994 1993
============================================================================================================================== PER
SHARE OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.70 $10.98 $10.01 $11.12
$10.74
- --------------------------------------------------------------------------------------- Income (loss) from investment operations:
Net investment income .77 .78 .69 .65
.69 Net realized and unrealized gain (loss) .27 (.28) .96 (1.08)
.40 ---- ---- ----
- ---- Total income (loss) from
investment operations 1.04 .50 1.65 (.43)
1.09
- ------------------------------------------------------------------------------------ Dividends and distributions to shareholders:
Dividends from net investment income (.77) (.75) (.68) (.65)
(.71) Dividends in excess of net
investment income -- -- -- (.03) --
Tax return of capital -- (.03) -- -- --
---- ---- ---- ---- ---- Total
dividends and distributions
to shareholders (.77) (.78) (.68) (.68)
(.71)
- ------------------------------ Net asset value, end of period $10.97 $10.70 $10.98
$10.01 $11.12 ====== ======
====== ====== ======
=========================================================================================================================== TOTAL
RETURN, AT NET ASSET VALUE(3) 10.13% 4.87% 16.94%
(3.87)% 10.30%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $190,706 $193,515 $169,059 $ 96,640
$110,759
- --------------------------------------------- Average net assets (in thousands) $187,458 $178,130
$116,940 $102,168 $111,702
- ------------------------------------------------------------------------------------------------- Ratios to average net assets:
Net investment income 7.20% 7.35% 6.47% 6.25%
6.20% Expenses, before voluntary
reimbursement by the Manager 1.27% 1.30% 1.27%
1.06% 1.06% Expenses, net of voluntary
reimbursement by the Manager N/A N/A 1.26% N/A
N/A
- -------------------------------- Portfolio turnover rate(5) 50.5% 53.7% 175.4%
70.3% 110.1% </TABLE>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year. 4.
Annualized.
28 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------------------------------------------------------
- ------------------------------------------- YEAR ENDED DECEMBER 31,
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994
1993(2) 1997 1996 1995(1)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
<C> $10.69 $10.98 $10.01 $11.11 $11.10 $10.70
$10.99 $10.89
- ---------------------------------------------------------------------------------------------------------------------------------
.69 .70 .63 .58 .40 .69 .70 .28
.28 (.29) .94 (1.08) .03 .28 (.29) .10
- ---- ---- ----- ---- ---- ---- ---- ----
.97 .41 1.57 (.50) .43 .97 .41 .38
- ---------------------------------------------------------------------------------------------------------------------------------
(.69) (.67) (.60) (.57) (.42) (.69) (.67) (.28)
-- -- -- (.03) -- -- -- -- --
(.03) -- -- -- -- (.03) -- ---- ----
---- ---- ---- ---- ---- ----
(.69) (.70) (.60) (.60) (.42) (.69) (.70) (.28
- ------------------- $10.97 $10.69 $10.98 $10.01 $11.11 $10.98
$10.70 $10.99 ====== ====== ====== ====== ======
====== ====== ======
================================================================================================================= 9.41%
3.99% 16.06% (4.53)% 3.91% 9.39% 4.00% 3.76%
=================================================================================================================================
$48,255 $38,826 $39,187 $3,451 $1,809 $9,188 $4,322
$3,971
- -------------------------- $41,439 $38,068 $12,823 $2,747 $ 922 $6,134
$3,404 $ 979
- ---------------------------------------------------------------------------------------------------------------------------------
6.42% 6.59% 5.84% 5.53% 4.80%(4) 6.36% 6.60%
6.32%(4)
2.02% 2.05% 2.12% 1.78% 1.90%(4) 2.02% 2.05%
2.25%(4)
N/A N/A 2.08% N/A N/A N/A N/A
1.96%(4)
- ------------------------ 50.5% 53.7% 175.4% 70.3% 110.1% 50.5%
53.7% 175.4% </TABLE>
5. The lesser of purchases or sales of portfolio securities for a period, 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 and mortgage
$134,090,911, respectively. For the year ended December 31, 1995, purchases and
sales of investment securities included mortgage "dollar-rolls." See
accompanying Notes to Financial Statements.
29 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
==== 1.SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Bond Fund (the Fund) is a separate fund of Oppenheimer Integrity
Funds, a diversified, open-end management investment company registered under is
to seek a high level of current income by investing mainly in debt instruments.
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 with a
front-end sales charge. Class B and Class C shares may be identical rights to
earnings, assets and voting privileges, except that each attributable to that
class and exclusive voting rights with respect to matters affecting that class.
Class B shares will automatically convert to Class A shares six years after the
date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- ------------------------------------------------------- INVESTMENT VALUATION.
Portfolio securities are valued at the close of the New York Stock Exchange on
each trading day. Listed and unlisted securities for which such information is
regularly reported are valued at the last sale price of the day or, in the
absence of sales, at values based on the closing bid or the last sale price on
the prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board of
Trustees. Such securities which cannot be valued by an approved portfolio
pricing service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the quotes
reflect current market value, or are valued under consistently applied
procedures established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount. Forward
foreign currency contracts are valued based on the closing prices of the forward
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.
30 Oppenheimer Bond Fund
<PAGE>
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of December 31, 1997,
the Fund had entered into outstanding when-issued or forward commitments of
$57,811,085.
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Fund may enter into mortgage "dollar-rolls" in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records each dollar-roll as a sale and a new purchase
transaction.
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
31 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. At December 31, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $7,038,000 which expires between 2002 and 2004.
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
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 December 31, 1997, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $32,669, an increase in
accumulated net realized loss of $870,459 and an increase in paid-in capital of
$903,128.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Discount on securities purchased is amortized
over the life of the respective securities, in accordance with federal income
tax requirements. Realized gains and losses on investments and 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
32 Oppenheimer Bond Fund
<PAGE>
================================================================================
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 DECEMBER 31, 1997 YEAR ENDED
DECEMBER 31, 1996 -----------------------------------
- --------------------------------- SHARES AMOUNT
SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------- Class A:
<S> <C> <C> <C> <C> Sold
2,678,397 $ 28,887,221 1,955,093 $ 20,810,615 Dividends
reinvested 831,219 8,947,815 815,100 8,651,382
Issued in connection with
the acquisition of:
Connecticut Mutual Income
Account--Note 9 -- -- 3,020,216 31,863,280
Jefferson-Pilot Investment Grade
Bond Fund, Inc.--Note 9 -- -- 1,801,334
19,273,967 Redeemed (4,216,384) (45,326,060) (4,901,741)
(52,206,468) ----------- ------------- ----------
- ------------ Net increase (decrease) (706,768) $ (7,491,024) 2,690,002
$ 28,392,776 =========== =============
========== ============
- -------------------------------------------------------------------------------------------------------------------------- Class B:
Sold 1,711,754 $ 18,512,789 946,117 $
10,072,138 Dividends reinvested 168,332 1,813,048 163,467
1,735,740 Issued in connection with
the acquisition of
Connecticut Mutual Income
Account--Note 9 -- -- 8,156 86,045
Redeemed (1,110,660) (11,946,337) (1,057,712)
(11,234,643) ----------- ------------- ----------
- ------------ Net increase 769,426 $ 8,379,500 60,028
$ 659,280 =========== =============
========== ============
- -------------------------------------------------------------------------------------------------------------------------- Class C:
Sold 536,735 $ 5,809,737 279,925 $ 2,989,461
Dividends reinvested 25,947 280,265 17,112
181,810 Redeemed (129,410) (1,393,257) (254,743)
(2,766,626) ----------- ------------- ----------
- ------------ Net increase 433,272 $ 4,696,745 42,294
$ 404,645 =========== =============
========== ============ </TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1997, net unrealized appreciation on investments of $8,722,696
was composed of gross appreciation of $10,899,814, and gross depreciation of
$2,177,118.
33 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% of the first
$200 million of the Fund's average annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60%
of the next $200 million, and 0.50% of average annual net assets in excess of $1
billion.
For the year ended December 31, 1997, commissions (sales charges paid by
investors) on sales of Class A shares totaled $346,782, of which $134,951 was
retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares
and C totaled $591,879 and $49,753, respectively, of which $39,149 and $1,770,
respectively, was paid to an affiliated broker/dealer. During the year ended
December 31, 1997, OFDI received contingent deferred sales charges of $156,781
and $1,757, respectively, upon redemption of Class B and Class C shares as
reimbursement for sales commissions advanced by OFDI at the time of sale of such
shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer
and shareholder servicing agent for the Fund and for other registered investment
companies. OFS's total costs of providing such services are allocated ratably to
these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of shareholder accounts that hold Class A shares. Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average annual
net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the year ended December 31, 1997, OFDI paid $153,632 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B and Class C shares, determined as of
the close of each regular business day.
34 Oppenheimer Bond Fund
<PAGE>
= During the year ended December 31, 1997, OFDI paid $5,726 to an affiliated
broker/dealer as compensation for Class B personal service and maintenance
expenses and retained $333,996 and $31,990, respectively, as compensation for
Class B and Class C sales commissions and service fee advances, as well as
financing costs. If either Plan is terminated by the Fund, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to OFDI
distributing shares before the Plan was terminated. At December 31, 1997, OFDI
had incurred unreimbursed expenses of $1,268,141 for Class B and $120,021 for
Class C.
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge upon the purchase or sale of
a security denominated in a foreign currency. In addition, the Fund may enter
into such contracts as a hedge against changes in foreign currency exchange
rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily basis
as provided by a reliable bank or dealer. The Fund will realize a gain or loss
upon the closing or settlement of the forward transaction. Securities held in
segregated accounts to cover net exposure on outstanding forward contracts are
noted in the Statement of Investments where applicable. Unrealized appreciation
or depreciation on forward contracts is reported in the Statement of Assets and
Liabilities. Realized gains and losses are reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms
of the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At December 31, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION CONTRACT AMOUNT VALUATION AS OF
UNREALIZED DATE (000S) DECEMBER
31, 1997 APPRECIATION
- --------------------------------------------------------------------------------------------------- CONTRACTS TO SELL
<S> <C> <C> <C> <C> Canadian
Dollar (CAD) 1/21/98 600 CAD $419,758 $20,641
</TABLE>
35 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At December 31, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
VALUATION AS OF
UNREALIZED EXPIRATION NUMBER OF
DECEMBER 31, APPRECIATION DATE
CONTRACTS 1997 (DEPRECIATION)
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
U.S. Treasury Bonds, 30 yr. 3/98 233 $28,069,219 $
347,438 ----------
CONTRACTS TO SELL
- -----------------
U.S. Treasury Nts., 2 yr. 3/98 10 2,077,500
(4,531) U.S. Treasury Nts., 5 yr. 3/98 222 24,114,750
(109,406) U.S. Treasury Nts., 10 yr. 3/98 5 560,781
(2,969) ----------
(116,906)
----------
$ 230,532
========== </TABLE>
36 Oppenheimer Bond Fund
<PAGE>
================================================================================
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities. The Fund generally
purchases put options or writes covered call options to hedge against adverse
movements in the value of portfolio holdings. When an option is written, the
Fund receives a premium and becomes obligated to sell or purchase the underlying
securities at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
---------------------------- ---------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS
PREMIUMS
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1996 -- $ -- -- $
- -- Options written 10,100 59,063 9 2,618
Options closed or expired (10,100) (59,063) (9)
(2,618) -------- -------- --------- -------
Options outstanding at December 31, 1997 -- $ -- -- $
- -- ======== ======== =========
======= </TABLE>
37 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
8. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at December 31, 1997 was $22,939,865, which
represents 9.24% of the Fund's net assets.
=========================================================================== 9.
ACQUISITION OF CONNECTICUT MUTUAL INCOME ACCOUNT AND JEFFERSON-PILOT INVESTMENT
GRADE BOND FUND, INC.
On April 26, 1996, the Fund acquired all the net assets of Connecticut Mutual
Income Account, pursuant to an agreement and plan of reorganization approved by
the Connecticut Mutual Income Account shareholders on March 18, 1996. The Fund
issued 3,020,216 and 8,156 shares of beneficial interest for Class A and Class
B, respectively, valued at $31,863,280 and $86,045, in exchange for the net
assets, resulting in combined Class A net assets of $189,629,984 and Class B net
assets of $6,106,676 on April 26, 1996. The net assets acquired included net
unrealized depreciation of $633,177. The exchange qualified as a tax-free
reorganization for federal income tax purposes.
On December 20, 1996, the Fund acquired all the net assets of
Jefferson-Pilot Investment Grade Bond Fund, Inc. pursuant to an agreement and
plan of reorganization approved by the Jefferson-Pilot Investment Grade Bond
Fund, Inc. shareholders on December 3, 1996. The Fund issued 1,801,334 shares of
beneficial interest for Class A, valued at $19,273,967, in exchange for the net
assets, resulting in combined Class A net assets of $202,088,473 on December 20,
1996. The net assets acquired included net unrealized appreciation of
$1,288,511. The exchange qualified as a tax-free reorganization for federal
income tax purposes.
38 Oppenheimer Bond Fund
<PAGE>
================================================================================
10. 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 0.35%. 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
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended December 31, 1997.
39 Oppenheimer Bond Fund
<PAGE>
Appendix A:
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
Wireless Services
A-1
<PAGE>
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
285SAI.B98
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
1. Financial Highlights (See Parts A and B, Prospectus and Statement
of Additional Information): Filed herewith.
2. Independent Auditors' Reports (See Part B, Statement of
Additional Information): Filed herewith.
3. Statements of Investments (See Part B, Statement of Additional
Information): Filed herewith.
4. Statements of Assets and Liabilities (See Part B, Statement of
Additional Information): Filed herewith.
5. Statements of Operations (See Part B, Statement of Additional
Information): Filed herewith.
6. Statements of Changes in Net Assets (See Part B, Statement of
Additional Information): Filed herewith.
7. Notes to Financial Statements (See Part B, Statement of
Additional Information): Filed herewith.
(b) Exhibits:
--------
1. Amended and Restated Declaration of Trust dated June 26, 1995:
Filed with Registrant's Post-Effective Amendment No. 25, 7/10/95; amendment
dated April 17, 1998 to establish and designate Class Y shares, filed herewith.
2. Registrant's By-Laws dated 6/25/91: Filed with Registrant's
Post-Effective Amendment No. 16, 5/1/92, and refiled pursuant to Item 102 of
Regulation S-T with Registrant's Post-Effective Amendment No. 23, 4/28/95, and
incorporated herein by reference.
3. Not applicable.
4. (i) Specimen Class A Share Certificate for Oppenheimer Bond Fund:
Filed with Registrant's Post-Effective Amendment No. 30, 4/29/97, and
incorporated herein by reference.
(ii) Specimen Class B Share Certificate for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 30, 4/29/97, and
incorporated herein by reference.
(iii) Specimen Class C Share Certificate for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 30, 4/29/97, and
incorporated herein by reference.
(iv) Specimen Class Y Share Certificate for Oppenheimer Bond
Fund: Filed Registrant's Post-Effective Amendment No. 32, 2/26/98, and
incorporated herein by reference.
5. Investment Advisory Agreement dated 7/10/95 for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 25, 7/10/95, and
incorporated herein by reference.
6. (i) General Distributor's Agreement dated 10/13/92: Filed with
Registrant's Post- Effective Amendment No. 17, 2/26/93, and refiled pursuant to
Item 102 of Regulation S-T with Registrant's Post-Effective Amendment No. 23,
4/28/95, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post- Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post- Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post- Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94,
and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management, Inc.
and Newbridge Securities, Inc. dated 10/1/86: Filed with Post-Effective
Amendment No. 25 to the Registration Statement of Oppenheimer Growth Fund (Reg.
No. 2-45272), 11/1/86, and refiled with Post-Effective Amendment No. 45 to the
Registration Statement of Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference.
7. Not applicable.
8. (i) Custody Agreement dated 11/12/92, between the Registrant and
The Bank of New York: Filed with Registrant's Post-Effective Amendment No. 17,
2/26/93, and refiled with Post-Effective Amendment No. 23, 4/28/95 pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(ii) Form of Foreign Custody Manager Agreement dated October 9, 1997:
Filed with Pre-Effective Amendment No. 2 to the Registration Statement of
Oppenheimer World Bond Fund (Reg. No. 333-48973), 4/23/98, and incorporated
herein by reference.
9. Not applicable.
10. Opinion and Consent of Counsel dated 2/11/91: Incorporated
herein by reference to Registrant's Rule 24f-2 Notice filed on 2/19/91 and
refiled pursuant to Item 102 of Regulation S-T with Registrant's Post-Effective
Amendment No. 23, 4/28/95, and incorporated herein by reference.
11. Independent Auditors' Consent: Filed herewith.
12. Not applicable.
13. Not applicable.
14. (i) Form of Individual Retirement Account Trust Agreement:
Filed as Exhibit 14 of Post-Effective Amendment No. 21 of Oppenheimer U.S.
Government Trust (Reg. No. 2-76645), 8/25/93, and incorporated herein by
reference.
(ii) Form of prototype Standardized and Non-Standardized
Profit-Sharing Plan and Money Purchase Pension Plan for self-employed persons
and corporations: Filed with Post-Effective Amendment No. 3 of Oppenheimer
Global Growth & Income Fund (File No. 33-33799), 1/31/92, and refiled with
Post-Effective Amendment No. 7 to the Registration Statement of Oppenheimer
Global Growth & Income Fund (Reg. No. 33-33799), 12/1/94, pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody Agreement
for employees of public schools and tax-exempt organizations: Filed with
Post-Effective Amendment No. 47 to the Registration Statement of Oppenheimer
Growth Fund (Reg. No. 2-45272), 10/21/94, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed with
Post-Effective Amendment No. 42 to the Registration Statement of Oppenheimer
Equity Income Fund (Reg. No. 2-33043), 10/28/94, and incorporated herein by
reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA: Filed
with Registrant's Post- Effective Amendment No. 19, 3/1/94, and incorporated
herein by reference.
(vi) Form of Prototype 401(k) plan: Filed with Post-Effective
Amendment No. 7 to the Registration Statement of Oppenheimer Strategic Income &
Growth Fund (33-47378), 9/28/95, and incorporated herein by reference.
15. (i) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of Oppenheimer Bond Fund dated
6/22/93: Filed with Registrant's Post-Effective Amendment No. 19, 3/1/94, and
incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement under Rule
12b-1 of the Investment Company Act of 1940 for Class B shares of Oppenheimer
Bond Fund dated 7/10/95: Filed with Registrant's Post-Effective Amendment No.
25, 7/10/95, and refiled herewith.
(iii) Distribution and Service Plan and Agreement under Rule
12b-1 of the Investment Company Act of 1940 for Class C Shares of Oppenheimer
Bond Fund dated 7/10/95: Filed with Registrant's Post-Effective Amendment No.
25, 7/10/95, and refiled herewith.
16. Performance Computation Schedule for Oppenheimer Bond Fund (a
series of Oppenheimer Integrity Funds): Filed herewith.
17. (i) Financial Data Schedule for Class A Shares of Oppenheimer Bond
Fund (a series of Oppenheimer Integrity Funds) for fiscal year ended 12/31/97:
Filed herewith.
(ii) Financial Data Schedule for Class B Shares of Oppenheimer
Bond Fund (a series of Oppenheimer Integrity Funds)for fiscal year ended
12/31/97: Filed herewith.
(iii) Financial Data Schedule for Class C Shares of Oppenheimer Bond
Fund ( a series of Oppenheimer Integrity Funds) for fiscal year ended 12/31/97:
Filed herewith.
(iv) Financial Data Schedule for Class Y Shares of Oppenheimer Bond
Fund ( a series of Oppenheimer Integrity Funds) for fiscal year ended 12/31/97:
Not applicable.
18. Oppenheimer Funds Multiple Class Plan under Rule 18f-3 dated
10/24/95: Filed with Post-Effective Amendment No. 12 to the Registration
Statement of Oppenheimer California Tax-Exempt Fund (33-23566), 11/1/95, and
incorporated herein by reference.
-- Powers of Attorney: For all Trustees except, Sam Freedman, their
respective Power of Attorney and Certified Board Resolution were previously
filed with Registrant's Post-Effective Amendment No. 19, 3/1/94, and
incorporated herein by reference. For Sam Freedmen, previously filed with
Registrant's Post-Effective Amendment No. 30, 4/29/97, and incorporated herein
by reference. For George Bowen, previously filed with Registrant's
Post-Effective Amendment No. 32, 2/26/98, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
- ---------- ------------------------------------------------------------------
None
Item 26. Number of Holders of Securities
- ---------- ---------------------------------------
Number of
Record Holders as
Title of Class of March 27, 1998
- ----------------- -----------------------
Oppenheimer Bond Fund
Class A Shares of Beneficial Interest 13,363
Class B Shares of Beneficial Interest 3,027
Class C Shares of Beneficial Interest 537
Item 27. Indemnification
- ---------- --------------------
Article IV of Registrant's Declaration of Trust filed as Exhibit 24(b)(1)
to this Registration Statement, generally provides, among other things, for the
indemnification of Registrant's Trustees and officers in a manner consistent
with Securities and Exchange Commission Release No. IC-11330.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
C-1
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
- ---------- --------------------------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it
and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.
(a)(i) The directors and executive officers of Massachusetts Mutual Life
Insurance Company ("MassMutual") and David L. Babson Co., Inc. Capital
Management, Inc. ("David L. Babson"), their positions and their other business
affiliations and business experience for the past two years are listed in Item
28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
<S> <C>
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds
(since April 1998); a Chartered Financial Analyst; formerly, a
Vice President and portfolio manager for Guardian Investor
Services, the investment management subsidiary of The Guardian
Life Insurance Company (since 1972).
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset Management, Inc. ("ORAMI"); formerly, Vice
President of Equity Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered
Financial Analyst;
Senior Vice President of
HarbourView Asset Management
Corporation ("HarbourView"); prior
to March, 1996 he was the senior
equity portfolio manager for the
Panorama Series Fund, Inc. (the
"Company") and other mutual funds
and pension funds managed by G.R.
Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment
adviser, which was a subsidiary of
Connecticut Mutual Life Insurance
Company; was also responsible for
managing the common stock
department and common stock
investments of Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds. Formerly,
a Vice President
and Senior Portfolio Manager at First of America
Investment Corp.
John R. Blomfield, Formerly, Senior Product Manager (November, Vice Pr1996 - August, 1997) of
International Home Foods and American Home Products (March, 1994 -October, 1996).
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January 1992 - February, 1996) of Asian Equities for
Barclays de Zoete
Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of mutual fund accounting (since May 1996); an officer of other
Oppenheimer funds;
formerly, an Assistant Vice President of
OFI/mutual fund accounting (April 1994-May
1996), and a Fund Controller for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and Treasurer (since March 1985) of OppenheimerFunds
Distributor, Inc. (the "Distributor"); Vice President
(since October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President
(since February 1992), Treasurer (since July
1991)and a director (since December 1991) of
Centennial; President, Treasurer and a director of
Centennial Capital Corporation (since June 1989);
Vice President and Treasurer (since August 1978)
and Secretary (since April 1981) of Shareholder
Services, Inc. ("SSI"); Vice President, Treasurer
and Secretary of Shareholder Financial Services,
Inc. ("SFSI") (since November 1989); Treasurer of
Oppenheimer Acquisition Corp. ("OAC") (since
June 1990); Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989); Vice
President and Treasurer of ORAMI (since July
1996); Chief Executive Officer, Treasurer and a
director of MultiSource Services, Inc., a broker-
dealer (since December 1995); an officer of other
Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President
of Centennial.
John Cardillo,
Assistant Vice President None.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia College -Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Senior Vice President Formerly, Senior Vice President of Human Resources for Fidelity Investments-Retail
Division
(January, 1995 - January, 1996), Fidelity
Investments FMR Co. (January, 1996
- June, 1997) and Fidelity
Investments FTPG (June, 1997
-January, 1998).
Robert Doll, Jr.,
Executive Vice President & Director An officer and/or portfolio manager of certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September 1993), and a director (since January 1992)
of the
Distributor; Executive Vice
President, General Counsel and a
director of HarbourView, SSI, SFSI
and Oppenheimer Partnership
Holdings, Inc. since (September
1995) and MultiSource Services,
Inc. (a broker-dealer) (since
December 1995); President and a
director of Centennial (since
September 1995); President and a
director of ORAMI (since July
1996); General Counsel (since May
1996) and Secretary (since April
1997) of OAC; Vice President of
OppenheimerFunds International,
Ltd. ("OFIL") and Oppenheimer
Millennium Funds plc (since October
1997); an officer of other
Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
George Evans,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an
officer of other
Oppenheimer funds; formerly, an Assistant Vice
President of OFI/mutual fund accounting (April
1994-May 1996), and a Fund Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice
President and Secretary of the
Distributor; Secretary of
HarbourView, MultiSource and
Centennial; Secretary, Vice
President and Director of
Centennial Capital Corporation;
Vice President and Secretary of
ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager of certain Oppenheimer funds; Presently
he holds the
following other positions: Governor (since 1994) of
St. John's College;. Formerly, he held the following
positions: formerly, Chairman of the Board and
Director of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President
and Director of Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester Capital
Advisors, L.P., President and Director of Rochester
Fund Services, Inc. ("RFS"); President and Director
of Rochester Tax Managed Fund, Inc.; Director
(1993 - 1997) of VehiCare Corp.; Director (1993 -1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly, she held the following positions: An officer of certain former Rochester
funds (May, 1993 - January, 1996); Secretary of Rochester
Capital Advisors, Inc. and General Counsel (June,
1993 - January 1996) of Rochester Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based Oppenheimer Funds. Formerly, Vice President and General
Counsel of Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for Schroder Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the Institute of Chartered Accountants; formerly,
an accountant for
Arthur Young (London, U.K.).
Robert Grill,
Vice President Formerly, Marketing Vice President for Bankers Trust Company (1993-1996); Steering
Committee Member, Subcommittee Chairman for American
Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989 -January, 1997) of Bankers Trust Company.
Glenna Hale,
Vice President Formerly, Vice President (1994-1997) of Retirement Plans Services for OppenheimerFunds
Services.
Robert Haley
Assistant Vice President Formerly, Vice President of Information Services for Bankers Trust Company
(January, 1991 -November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of SFSI; President and Chief executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President and Portfolio Manager for Warburg, Pincus
Counsellors, Inc.
(1993-1997), Co-manager of Warburg, Pincus
Emerging Markets Fund (12/94 - 10/97), Co-
manager Warburg, Pincus Institutional Emerging
Markets Fund - Emerging Markets
Portfolio (8/96 -10/97), Warburg
Pincus Japan OTC Fund, Associate
Portfolio Manager of Warburg Pincus
International Equity Fund, Warburg
Pincus Institutional Fund -
Intermediate Equity Portfolio, and
Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Thomas W. Keffer,
Senior Vice President None.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain Oppenheimer funds; a Chartered
Financial Analyst;
a Vice President of HarbourView; prior to March
1996, the senior bond portfolio manager for
Panorama Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; also
responsible for managing the public fixed-income
securities department at Connecticut Mutual Life
Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995); President and director
(since June 1991) of
HarbourView; Chairman and a director of SSI
(since August 1994), and SFSI (September 1995);
President (since September 1995) and a director
(since October 1990) of OAC; President (since
September 1995) and a director (since November
1989) of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of OFI; a director of
ORAMI (since July 1996) ; President and a director
(since October 1997) of OFIL, an offshore fund
manager subsidiary of OFI and Oppenheimer
Millennium Funds plc (since October 1997);
President and a director of other Oppenheimer funds; a director of the NASDAQ
Stock Market,
Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly, an Executive Vice President
of OFI.
Wesley Mayer,
Vice President Formerly, Vice President (January, 1995 - June, 1996) of Manufacturers Life
Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager, Assistant Vice President (June 1995- October, 1997) of
Merrill Lynch Pierce Fenner & Smith.
Beth Michnowski, Formerly, Senior Marketing Manager (May, 1996 -
Assistant Vice President June, 1997).
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager of certain Oppenheimer funds (since April
1998); a
Certified Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the management subsidiary of
The Guardian Life Insurance Company (since
1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-
November 1996) for Chase Investment Services
Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
James Phillips
Assistant Vice President None.
Caitlin Pincus, Formerly, Manager (June, 1995 - December, 1997)
Vice President of McKinsey & Co.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice President (April, 1995 -January, 1998) of Van Kampen
American Capital.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
Adam Rochlin,
Vice President None.
Michael S. Rosen,
Vice President; President,
Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Scott Scharer
Assistant Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President None.
Richard Soper,
Vice President None.
Stuart J. Speckman
Vice President Formerly, Vice President and Wholesaler for Prudential Securities (December,
1990 - July,
1997).
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based Oppenheimer Funds; formerly,
Chairman of the
Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
John Stoma,
Senior Vice President, Director
Retirement Plans None.
Michael C. Strathearn,
Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; a Chartered
Financial Analyst; a Vice President
of HarbourView.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the Denver-based
Oppenheimer Funds;
President and a Director of Centennial; formerly,
President and Director of OAMC, and
Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; a Chartered
Financial Analyst; Vice President
of HarbourView.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President
of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President
of Centennial;
Vice President, Finance and
Accounting.; Point of Contact:
Finance Supporters of Children.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI
(since May 1985), and SFSI (since
November 1989); Assistant Secretary
of Oppenheimer Millennium Funds plc
(since October 1997); an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice President
of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver- based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds,
as set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Mid-Cap Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Funds
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, the Quest Funds, OppenheimerFunds Distributor,
Inc., HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World Trade
Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood, Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln Street,
Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
DIRECTORS OF MASSMUTUAL
Name & Current Position with
Massachusetts Mutual Life Insurance
Company and/or David L. Babson &Co., Inc. Other Business and Connections
During the Past Two Years
- ------------------------ ----------------------------------
<TABLE>
<CAPTION>
<S> <C>
Roger G. Ackerman,
Director and Member, Auditing
and Human Resources Committee Chairman and Chief Executive Officer (since 1996), President and Chief Operating Officer
(1990-1996),
Corning Incorporated (manufacturer of specialty
minerals, communication equipment and consumer
products), Director (since 1993), Dow Corning
Corporation (producer of silicone products), Director,
The Pittson Company (mining and marketing of coal
for electric utility and steel industries).
James R. Birle,
Director Chairman, Dividend Policy
Committee and Member, Investment
Committee President and Founder (since 1994), Resolute Partners, LLC (private merchant bank),
General
Partner (1988-1994), The Blackstone Group; Co-
Chairman and Chief Executive Officer, Wickes
Companies; Director (since 1996), Alco Standard
Corporation (diversified office products and papter
distributor); Director, Drexel Industries, Inc.,
Connecticut Health and Education Facilities Authority
and Transparency International; Trustee, Villanova
University and The Sea Research Foundation; Director
(1991-1996), Connecticut Mutual Life Insurance
Company.
Frank C. Carlucci, III,
Director and Member, Board Affairs
and Dividend Policy Committee Chairman (since 1993), Vice Chairman (1989-1993), The Carlyle Group (merchant banking
corporation);
Director: Ashland Inc. (producer of petroleum
products); BDM Iternational, Inc. (professional and
technical services to public and private sector); Bell
Atlantic Corporation (telecommunications); CB
Commercial Real Estate Group, Inc. (real estate
broker subsidiary of Carlyle Holding Corporation); General Dynamics Corporation
(manufacturer of
military equipment); Kaman Corporation (diversified
manufacturer); Neurogen Corporation; Northern
Telecom Ltd. (digital
telecommunications systems); The
Quaker Oats Company (manufacturer of
food products); The Rand Corporation;
Sun Resorts Ltd., NV; Westinghouse
Electric Corporation (electronic
systems, electric power generating
equipment and broadcasting); Director
(1989-1006) Connecticut Mutual Life
Insurance Company.
Gene Chao,
Director and Member, Auditing
and Dividend Policy Committee Chairman and Chief Executive Officer, Computer Projections, Inc. (computer graphics);
Chairman and
Chief Executive Officer, American
Leadership Forum (non-profit
leadership and community building
organization); Director (1990-1996),
Connecticut Mutual Life Insurance
Company.
Patricia Diaz Dennis,
Director and Member Auditing and
Human Resouces Committee Senior Vice President and Assistant General Counsel (since 1995), SBC Communications,
Inc.
(telecommunications); Special Counsel-
Communication Law Matters (1993-1995),
Sullivan & Cromwell (law firm);
Assistant Secretary of State for Human
Rights and Humanitarian Affairs
(1992-1993), U.S. Department of State;
Trustee (since 1995), Federal
Communications Bar Association
Foundation; Director (since 1993),
National Public Radio; Director,
Reading Is Fundamental and Foundation
for Women's Resouces; Trustee, Tomas
Rivera Center; Director (1995-1996),
Connecticut Mutual Life Insurance
Company.
Anthony Downs,
Director and Member, Dividend
Policy and Investment Committees Senior Fellow, The Brookings Institution (non-profit policy research center); Director:
The Pittway
Corporation (publications and security equipment);
National Housing Partnerships Foundation (non-profit
organization to own and manage rental housing);
Bedford Property Investors, Inc. (real estate
investment trust); NAACP Legal and Educational Defense Fund, Inc. (civil rights
organization); Trustee:
Urban Institute (public policy research organization);
and Urban Land Institute (educational and research
organization).
James L. Dunlap,
Director and Member, Human
Resources and Board Affairs
Committees President and Chief Executive Officer (since 1996), United Meridian Corporation (oil
exploration); Senior
Vice President (1987-1996), Texaco, Inc. (producer of
petroleum products), Vice President (1987-1994),
Texaco USA.
William B. Ellis,
Director and Member, Auditing
and Investment Committees Senior Fellow (since 1995), Yale University School of Forestry and Environmental Studies;
Chairman (1983-
1995) and Chief Executive Officer (1983-1993),
Northeast Utilities (electric utility); Director, The
Hartford Steam Boiler Inspection and Insurance
Company (property and casualty insurer); Director
(since 1996), Advest Group, Inc. (financial services
holding company); Director (since 1995) Catalyica
Combustion Systems, Inc.; Director The National
Museum of Natural History of the Smithsonian
Institution; Director (1985-1996), Connecticut Mutual
Life Insurance Company.
Robert M. Furek,
Director and Member, Dividend
Policy and Investment Committees Retired; President and Chief Executive Officer (1987-
1996) and President (1989-1996), The First National
Bank of Boston and Bank of Boston Corporation
(bank holding company); Director, Member of Audit
Committee, Boston Edison Co. (public utility electric
company).
Charles K. Gifford,
Director and Member, Investment
and Auditing Committees Chief Executive Officer (since 1995), Chairman (1995-1996) and President (1989-1996),
The First National Bank of Boston and Bank of Boston
Corporation (bank holding company);
Director, Member of Audit and
Compensation Committees, Boston Edison
Co.
William N. Griggs,
Director, Chairman, Auditing
Committee and Member,
Investment Committee Managing Director, Griggs & Santow Inc. (business consultants); Director, T/SF
Communications, Inc. (diversified publishing and communications
company).
George B. Harvey,
Director, Chairman Human Resources
Committee and Member, Board
Affairs Committee Retired; Chairman, President and Chief Executive Officer (1983-1996), Pitney Bowes, Inc.
(office machines manufacturer); Director, Merrill Lynch &
Co., Inc. (financial services holding company); The
McGraw Hill Companies (multimedia publishing and
information systems); Stamford Hospital; Pfizer, Inc.
(pharmaceutical and health-care products); The
Catalyst; Member Board of Overseers, Wharton
School of finance, University of Pennsylvania;
Director (1989-1996) Connecticut Mutual Life
Insurance Company.
Barbara B. Hauptfuhrer,
Director, Member Board Affairs and
Investment Committees Director and Member, Compensation, Nominating and Audit Committees, The Vanguard Group of
Investment Companies including among others the
following funds: Vanguard/Windsor Funds,
Vanguard/Wellington Fund, Vanguard/Morgan
Growth Fund, Vanguard/Wellesley Income Fund,
Vanguard/Gemini Fund, Vanguard/Explorer Fund,
Vanguard Municipal Bond Fund, Vanguard Fixed
Income Securities Fund, Vanguard Index Trust,
Vangard World Fund, Vanguard/Star Fund, Vanguard
Ginnie Mae Fund, Vanguard/Primecap Fund,
Vanguard Convertible Securities Fund, Vanguard
Quantitative Fund, Vanguard/Trustees Commingled
Equity Fund, Vanguard/Trustees Commingled Fund-
International, Vanguard Money Market Trust,
Vanguard/Windsor II, Vanguard Asset Allocation
Fund and Vanguard Equity Income Fund; Director,
Chairman of Retirement Benefits Committee and Pension Fund Investment Review - USA
and Canada and Member, Audit, Finance and Executive
Committees, The Great Atlantic and Pacific Tea
Company, Inc. (operator of retail foood stores);
Director, Chairman of Nominating Committee and
Member, Compensation Committee, Knight-Ridder,
Inc. (publisher of daily newspapers and operator of
cable television and business information systems);
Director and Member, Compensation Committee,
Raytheon Company (electornics manufacturer);
Director and Member, Executive Committee and
Chairman, Human Resources Committees, Alco
Standard Corp. (diversified office products and paper
distributor).
Sheldon B. Lubar,
Director, Chairman, Board Affairs
Committee and Member, Investment
Committee Chairman, Lubar & Co.Incorporated (investment management and advisory company); Chairman
and Director, The Christiana Companies, Inc. (real estate
development); Director: Firstar Bank, Firstar
Corporation (bank holding company), SLX Energy,
Inc. (oil and gas exploration); Member, Advisory
Committee, Venture Capital Fund, L.P.; Director:
Grey Wolf Drilling Co. (contract oil and gas drilling);
Marshall Erdman and Associates, Inc. (design,
engineering and construction firm); MGIC
Investment Corporation (investment company);
Director (since 1995) Energy Ventures, Inc.; Director,
(since 1993) Ameritech, Inc. (regional holding
company for telephone companies); Director, (1989-
1995), Prideco, Inc. (drill collar manufacturer);
Director (1989-1994),Schwitzer, Inc. (holding
company for engine parts manufacturers); and Briggs
& Stratton.
William B. Marx, Jr.,
Director and Member, Dividend
Policy and Board Affairs Committees Consultant (since 1996); Senior Executive Vice President (1996), Lucent Technologies, Inc.
(public telecommunications systems and software); Executive
Vice President and Chief Executive Officer,
Multimedia Products Group (1994-1995)and Network
Systems Group (1993-1994), AT&T (global communications and network computing company);
Group Executive and President (1989-1993), AT&T
Network Systems (manufacturer and marketer of
network telecommunications equipment); Member
(since 1996) Advisory Counsel Graduate School of
Business, Stanford University; Chairman, Executive
Committee (since 1996), National Minority Supplier
Development Council.
John F. Maypole,
Director and Member, Board Affairs
and Human Resources Committees Managing Partner, Peach State Real Estate Holding Company (real estate investment
company); Consultant to institutional ivnestors; Co-owner of
family business (including Maypole
Chevrolet-Geo, Inc. and South Georgia
Car Rentals, Inc.); Director,
Chairman, Finance Committee and
Member, Executive Committee and Human
Resources Committee on Directors, Bell
Atlantic Corporation
(telecommunications); Director and
Chairman, Compensation Committee,
Briggs Industries, Inc. (plumbing
fixtures); Director, Chairman,
Products Committee and Member,
Compensation and Audit Committee,
Igloo Corporation (portable coolers);
Director and Member, Senior Management
Committee, Dan River, Inc. (textile
manufacturer); Director, Davies,
Turner & Company; Director (1989-
1996), Connecticut Mutual Life
Insurance Company.
Donald F. McCullough,
Director and Member, Dividend
Policy and Auditing Committees Retired (since 1988); former Chairman and Chief Executive Officer, Collins & Aikman Corp.
(manufacturer of textile products); Director: Bankers
Trust New York Corp. (bank holding company) and
Bankers Trust Company; Melville Corporation
(specialty retailer).
John J. Pajak,
President, Chief Operating Officer,
Director and Member, Dividend Policy
and Investment Committies President, Director and Chief Operating Officer (since 1996), Vice Chairman and Chief
Administrative Officer (1996), Executive Vice President (1987-1996)
of MassMutual; Director (since 1994), MassMutual Holding Company (wholly-owned holding
company subsidiary of MassMutual); Trustee (since 1996)
MassMutual Holding Trust I (wholly-owned holding
company subsidiary of MassMutual Holding
Company); Director (since 1996), MassMutual
International, Inc. (wholly-owned subsidiary of
MassMutual Holding Company to act as service
provider for international insurance companies);
Director (1994-1996), MassMutual Holding Company
Two, Inc. (former wholly-owned holding company
subsidiary of MassMutual); MassMutual Holding
Company Two MSC, Inc. (former wholly-owned
holding company subsidiary of MassMutual Holding
Company Two, Inc.) and Mirus Insurance Company
(formerly MML Pension Insurance Company, a
wholly-owned insurance subsidiary of MassMutual
Holding Company Two MSC, Inc.).
Barbara S. Preiskel,
Director and Member, Auditing and
Human Resources Committees Attorney-at-Law; Director: Textron, Inc. (diversified manufacturing company); General
Electric Company (diversified manufacturer electrical products); The
Washington Post Company (publsiher of daily
newspaper); American Stores Company (operator of
supermarkets and drugstores).
Thomas B. Wheeler,
President, Director, Chief
Executive Officer, Chairman,
Investment Committee and Member,
Dividend Policy and Board Affairs
Committees Chairman (since 1996), Chief Executive Officer (since 1988), and President (198701996)
of MassMutual; Chairman (since 1996), MassMutual Holding Trust I
(wholly-owned holding company subsidiary of
MassMutual Holding Company); Director (since
1996), MassMutual International Inc. (wholly-owned
subsidiary of MassMutual Holding
Company to act as service provider for
international insurance companies);
Chairman and Chief Executive Officer
(since 1995), DLB Acquisition
Corporation (holding company for
investment advisers); Chairman of the
Board of Directors (1994-1996),Mirus
Insurance
Company (formerly MML Pension
Insurance Company, a wholly-owned
insurance subsidiary of MassMutual
Holding Company Two MSC, Inc.);
Director, The First National Bank of
Boston and Bank of Boston Corporation
(bank holding company); Chairman and
Director, Oppenheimer Acquisition
Corp. (parent of OppenheimerFunds,
Inc., an investment manager company);
Director (since 1993) Textron, Inc.
(diversified manufacturing company);
Chairman of the Board of Directors
(1992-1995), Concert Capital
Management, Inc. (wholly-owned
investment advisory subsidiary of DLB
Acquisition Corporation).
Alfred M. Zeien,
Director and Member Board Affairs
and Human Resources Committees Chairman and Chief Executive Officer, The Gillette Company (manufacturer of personal care
products), Director: Polaroid Corporation (manufacturer of
photographic products); Repligen Corporation
(biotechnology); BankBoston Corporation (bank
holding company); and Raytheon Corporation
(electronics manufacturer); Trustee, University
Hospital of Boston, Massachusetts; Trustee (since
1994) Marine Biology Laboratory and Woods Hole
Oceanographic Institute.
EXECUTIVE VICE PRESIDENTS OF MASSMUTUAL
Lawrence V. Burkett,
Executive Vice President
and General Counsel Executive Vice President and General Counsel (since 1993), Senior Vice President and
Deputy General Counsel (1988-1992) of MassMutual; President, Chief
Executive Officer and Director (since
1996), CM Assurance Company, CM
Benefit Insurance Company, CM Life
Insurance Company and MML Bay State
Life Insurance Company (wholly owned
insurance companies of MassMutual);
Director (since 1996), MassMutual
Holding MSC, Inc. and Trustee (since
1996), MassMutual Holding Trust I and
MassMutual Holding Trust II; Director
(since 1996): MassMutual International
Inc., GR Phelps ,Inc.
(wholly-owned broker-dealer subsidiary
of MassMutual Holding Company); CM
Advantage, Inc. (wholly-owned
subsidiary of MassMutual Holding Trust
II to act as general partner in real
estate limited partnerships); Director
(since 1994), MassMutual Holding
Company (wholly-owned holding company
subsidiary of MassMutual); Director
(1994-1996), MassMutual Holding
Company Two, Inc. (former wholly-owned
holding company subsidiary of
MassMutual), MassMutual Holding
Company Two MSC, Inc. (former
wholly-owned holding company
subsidiary of MassMutual Holding
Company Two, Inc)and Mirus Insurance
company (formerly MML Pension
Insurance Company, a wholly-owned
insurance subsidiary of MassMutual
Holding Company Two MSC, Inc.);
Chairman and Director (since 1996),
MML Investors Services, Inc.
(wholly-owned broker-dealer subsidiary
of MassMutual Holding Company);
Director (since 1994), Cornerstone
Real Estate Advisers, Inc.
(wholly-owned real estate investment
adviser subsidiary of MassMutal
Holding Comapny); Director (since
1993), Sargasso Mutual Insurance Co.,
Ltd.; MassMutual of Ireland, Ltd.
(wholly-owned subsidiary of MassMutual
to provide group insurance claim
services); Chairman (since 1994),
Director (1993- 1996), MML Reinsurance
(Bermuda) Ltd. (wholly-owned property
and casualty reinsurance subsidiary of
MassMutual Holding Company) and
Director (since 1995), MassMutual
International (Bermuda) Ltd.
(wholly-owned subsidiary of MassMutual
Holding Company that distributes
variable insurance products in
overseas markets).
John B. Davies,
Executive Vice President Executive Vice President (since 1994), Associate Executive Vice President (1993-1994),
General Agent (1982-1993) of MassMutual; Director (since 1996),
CM Assurance Company, CM Benefit Insurance
Company, CM Life Insurance Company and MML
Bay State Life Insurance Company (wholly-owned
insurance company subsidiaries of MassMutual);
Director (since 1996), MassMutual Holding MSC, Inc.
and Trustee (since 1996), MassMutual Holding Trust
II (wholly-owned holding company subsidiaries of
MassMutual Holding Company); Director (since 1994) MML Investors Services, Inc.
(wholly-owned broker dealer subsidiary of MassMutual Holding
Company), MML Insurance Agency, Inc. (wholly-
owned subsidiary of MML Investers Services, Inc.),
and MML Insurance Agency of Ohio, Inc. (subsidiary
of MML Insurance Agency ,Inc.); Director (since
1995), MML Insurance Agency of Nevada, Inc.
(subsidiary of MML Insurance Agency, Inc.); Director
(since 1996), MML Insurance Agency of Mississippi,
P.C. , Diversified Insurance Services Agency of
America, Inc. (Hawaii) (wholly-owned subsidiaries of
MML Insurance Agency , Inc.); Director (since 1994),
Cornerstone Real Estate Advisers, Inc. (wholly-owned
real estate investment adviser subsidiary of
MassMutual Holding Company); and Life
Underwriter Training Council.
Daniel J. Fitzgerald,
Executive Vice President,
Corporate Financial Operations Executive Vice President, Corporate Financial Operations (since 1994),
Senior Vice President (1991-1994) of MassMutual; Director (since 1996), CM
Assurance Company, CM Benefit Insurance
Company, and CM Life Insurance Company (wholly-
owned insurance company subsidiaries of
MassMutual); Antares Leveraged Capital Corp.
(finance company); CM Advantage Inc. and
Westheimer 355 Suites, Inc. (wholly-owned
subsidiaries of MassMutual Holding Trust II to act as
general partners in real estate limited partnerships);
HYP Management, Inc. (wholly-owned subsidiary of
MassMutual Holding Trust II to act as managing
member of MassMutual High Yield Partners LLC);
MMHC Investment, Inc. (wholly-owned subsidiary of
MassMutual Holding Trust II); MassMutual
International Inc. (wholly-owned subsidiary of
MassMutual Holding Company to act as service
provider for international insurance companies);
MassMutual Holding MSC, Inc. (wholly-owned
holding company of MassMutual Holding Company);
Trustee (since 1996), MassMutual Holding Trust I and
MassMutual Holding Trust II (wholly-owned holding
company subsidiaries of MassMutual Holding
Company); Director (since 1995), DLB Acquisition
Corporation (holding corporation for investment advisers); Director (since 1994)
MML Bay State Life
Insurance Company (wholly-owned insurance
subsidiary of MassMutual); Vice President (since
1994), Director (since 1993), MassMutual Holding
Company (wholly-owned holding company subsidiary
of MassMutual); Director (since 1993), MML Realty
Management Corporation (wholly-owned real estate
management subsidiary of MassMutual Holding
Company); Vice President and Director (1994-1996),
MassMutual Holding Company Two, Inc. and
MassMutual Holding Company Two MSC, Inc.
(former direct and indirect wholly-owned holding
company subsidiaries of MassMutual Holding
Company); Director (1994-1996), Mirus Insurance
Company (formerly MML Pension Insurance
Company, wholly-owned insurance subsidiary of
MassMutual Holding Company Two MSC, Inc.);
Director (1994-1995), MML Real Estate Corporation
(wholly-owned real estate management subsidiary of
MassMutual Holding Company); Director (1994-
1997), Concert Capital Management, Inc. (wholly-
owned investment advisory subsidiary of DLB
Acquisition Corporation); Director and Member,
Compensation Committee (since 1994), Cornerstone
Real Estate Advisers, Inc.; Director and Member,
Audit and Compensation Committees (since 1994),
MML Investors Services, Inc. and Director (since
1992), MML Insurance Agency, Inc.(wholly-owned
subsidiary of MML Investors Services, Inc.); Director
(since 1996), MML Insurance Agency of Ohio, Inc.,
MML Insurance Agency of Nevada, Inc., MML
Insurance Agency of Mississippi, P.C., Diversified
Insurance Services Agency of America, Inc.); Director
(since 1994), MassMutual of Ireland, Ltd. (wholly-
ownedsubsidiary of MassMutual to provide group
insurance claim services).
John V. Murphy,
Executive Vice President Executive Vice President (since 1997) of MassMutual, Executive Vice President,
Director and Chief Operating Officer (1995-1997), David L. Babson and
Company Incorporated (wholly-owned investment
advisory subsidiary of DLB Acquisition Corporation),
Chief Operating Officer (1993-1997), Concert Capital
Management, Inc. (wholly-owned investment advisory subsidiary of DLB Acquisition
Corporation); Senior Vice President and Chief Financial Officer (1985-
1993), Liberty Financial Companies (financial
services firm), Senior Vice President and Director
(since 1996), Potomac Babson Incorporated
(investment advisory subsidiary of David L. Babson
and Company Incorporated); Director and Senior Vice
President (since 1995), DLB Acquisition Corporation
(holding company for investment advisers) and
Trustee (since 1997), MassMutual Institutional Funds
(open-end investment company).
Gary E. Wendlandt,
Executive Vice President and
Chief Investment Officer Chief Investment Officer (since 1993) and Executive Vice President of MassMutual;
Chairman (since 1995), Trustee (since 1986) and President (1993-
1995), MassMutual Corporate Investors and Chairman
(since 1995), Trustee (since 1988) and President
(1988-1995), MassMutual Participation Investors
(closed-end investment companies); Chairman (since
1995), Vice Chairman and Trustee (1993-1995) and
President (1988-1993), MML Series Investment Fund
(open-end investment company); Chairman, Chief
Executive Officer and Member, Investment Pricing
Committee (since 1994), MassMutual Institutional
Funds (open-end investment company); Chairman and
President (since 1996), MassMutual Holding MSC,
Inc. and MassMutual Holding Trust II (wholly-owned
holding company subsidiaries of MassMutual Holding
Trust II to act as managing member of MassMutual
High Yield Partners LLC); MMHC Investment Inc.
(wholly-owned subsidiary of MassMutual Holding
Trust II); President and Trustee (since 1996),
MassMutual Holding Trust I; Vice Chairman and
Director (since 1996), MassMutual International Inc.
(wholly-owned subsidiary of MassMutual Holding
Company) to act as service provider for international
insurance companies); Director (since 1996), CM
Advantage Inc. (wholly-owned subsidiary of
MassMutual Holding Trust II to act as general partner
in real estate limited partnerships); President and
Director (since 1995), DLB Acquisition Corporation
(holding company for investment advisers); Chairman
and Chief Executive Officer (since 1994), President (since 1993) and Director,
MassMutual Holding Company; Chairman (since 1994), and Director (since
1993) MML Realty Management Corporation
(wholly-owned real estate subsidiary of MassMutual
Holding Company); Chairman, President and Chief
Executive Officer (1994-1996), MassMutual Holding
Company II; Chairman and President (1994-1996),
Chief Executive Officer (1995-1996), MassMutual
Holding Company Two MSC, Inc.; Chairman, Chief
Executive Officer and Member Executive and
Compensation Committees (since 1994), Cornerstone
Real Estate Advisers, Inc.; President and Chief
Executive Officer (1994-1997)and Director (1992-
1997), Concert Capital Management, Inc.(wholly-
owned investment advisory subsidiary of DLB
Acquisition Corporation); Director, Oppenheimer
Acquisition Corporation; Supervisory Director,
MassMutual/Carlson CBO N.V. (collateralized bond
fund); Director, Merrill Lynch Derivative Products,
Inc.; Director (since 1994), MassMutual Corporate
Value Partners Limited (investor in debt and equity
securities)and MassMutual Corporate Value Limited
(parent of MassMutual Corporate Value Partners
Limited); Director (since 1995), Mass Seguros de
Vida, S.A., International (Bermuda) Ltd. (wholly-
owned subsidiary of MassMutual Holding Company
that distributes variable insurance products in overseas
market.
DIRECTORS AND EXECUTIVE OFFICERS OF DAVID L. BABSON
Hani K. Findakly,
Director Director (since 1996), David L. Babson and Co., Inc. (wholly-owned investment advisory
subsidiary of DLB Acquisition Corporation); President (since
1996), Potomac Babson Inc. (investment advisory
subsidiary of David L. Babson and Co., Inc.);
President (1989-1996), Potomac Capital, Inc.
(investment manager).
Ronald E. Gwozdz,
Director and Executive Vice
President Director (since 1995), Executive Vice President (since 1996) and Senior Vice President
(1991-1996), David L. Babson and Co., Inc. (wholly-owned investment advisory subsidiary
of DLB Acquisition Corporation.
James W. MacAllen,
Director and Executive Vice
President Director, Executive Vice President and Chief Investment Officer (since 1996),
David L. Babson and Co., Inc.; Senior Vice President (1996-1997), Concert
Capital Management, Inc. (wholly-owned investment
advisory subsidiary of DLB Acquisition Corporation);
Principal (1994-1995), Hagler, Mastrovita & Hewitt
(investment counsel); President (1992-1994), Chief
Investment Officer (1991-1994), and Vice President
(1983-1992), Wilmington Capital Management Inc.
(investment counsel).
Edward Louis Marin,
Director and Executive Vice
President Director (since 1990), Executive Vice President (since 1995) and Senior Vice President
(1988-1995), David L. Babson & Co., Inc. wholly-owned investment
advisory subsidiary of DLB Acquisition Corporation).
Peter C. Schliemann,
Director and Executive Vice
President Director and Executive Vice President, David L. Babson and Co., Inc. (wholly-owned
investment advisory subsidiary of DLB Acquisition Corporation).
Peter C. Thompson,
Director and President President and Director, David L. Babson and Co., Inc. (wholly-owned investment advisory
subsidiary of DLB Acquisition Corporation).
Jonathon B. Treat,
Director and Senior Vice
President Director and Senior Vice President, David L. Babson & Co., Inc. (wholly-owned investment
advisory subsidiary of DLB Acquisition Corporation).
Roland W. Whitridge,
Director and Senior Vice
President Director and Senior Vice President, David L. Babson & Co., Inc. (wholly-owned investment
advisory subsidiary of DLB Acquisition Corporation).
</TABLE>
The address of MassMutual is 1295 State Street, Springfield, Massachusetts
01111 and the address of David L. Babson & Co., Inc. is One Memorial Drive,
Cambridge, MA 02142.
For information as to the business, profession, vocation or employment of
a substantial nature of the officers and trustees of MML Series Investment
Fund, reference is made to Part B of this registration statement and to
the registration on Form ADV filed by the Massachusetts Mutual Life
Insurance Company and David L. Babson & Co., Inc. under the Investment
Advisers Act of 1940, which are incorporated herein by reference.
Item 29. Principal Underwriter
- --------- ---------------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter
are:
<TABLE>
<CAPTION>
<S> <C> <C>
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
- ---------------- ------------------- -----------------
George C. Bowen(1) Vice President and Vice President and Treasurer
Treasurer of the Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1) Vice President None
E. Drew Devereaux(3) Assistant Vice
President None
Rhonda Dixon-Gunner(1) Assistant Vice
President None
Andrew John Donohue(2) Executive Vice Secretary of the Oppenheimer
President & Director funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President
/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice
President None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice
President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne a. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice
President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
</TABLE>
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
Item 30.
- --------
(c) Not applicable
Item 31. Management Services
- -------- -------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a)Not applicable.
(b)Not applicable.
(c)Not applicable.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 27th day of April, 1998.
OPPENHEIMER INTEGRITY FUNDS
By: /s/ James C. Swain*
---------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the April 27, 1998
- ---------------------- Board of Trustees
James C. Swain
/s/ George C. Bowen* Treasurer, April 27, 1998
- ---------------------- Chief Financial
George C. Bowen and Accounting
Officer and Trustee
/s/ Robert G. Avis* Trustee April 27, 1998
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee April 27, 1998
- ----------------------
William A. Baker
/s/ Charles Conrad Jr.* Trustee April 27, 1998
- ----------------------
Charles Conrad, Jr.
/s/ Sam Freedman * Trustee April 27, 1998
- ------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee April 27, 1998
- -------------------------
Raymond J. Kalinowski
/s/ Howard Kast* Trustee April 27, 1998
- ------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee April 27, 1998
- ------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee April 27, 1998
- ------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
C-3
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
Registration NO. 2-76547
POST-EFFECTIVE AMENDMENT NO. 33
EXHIBIT INDEX
Form N-1A
Item No. Description
- --------- -----------
24(b)(1) Amendment to Declaration of Trust dated April 17, 1998, to establish
and designate Class Y shares.
24(b)(11) Independent Auditors' Consent
24(b)(15)(ii)Amended and Restated Distribution and Service Plan and Agreement
for Class B Shares dated February 24, 1998.
24(b)(15)(iiiAmended and Restated Distribution and Service Plan and Agreement
for Class C Shares dated February 24, 1998.
24(b)(16) Performance Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A shares for fiscal year ended
12/31/97.
24(b)(17)(ii)Financial Data Schedule for Class B shares for fiscal year ended
12/31/97.
24(b)(17)(iiiFinancial Data Schedule for Class C shares for fiscal year ended
12/31/97.
C-4
AMENDMENT TO DECLARATION OF TRUST
OPPENHEIMER INTEGRITY FUNDS
for its OPPENHEIMER BOND FUND SERIES
To Establish and Designate Class Y Shares
April 17, 1998
The Board of Trustees, acting pursuant to the authority ranted them under
Section 5.1 of Article V of the Amended and Restated Declaration of Trust dated
June 26, 1995 (the "Declaration of Trust") executes this instrument to establish
and designate Class Y shares of the Oppenheimer Bond Fund series (the "Fund") of
Oppenheimer Integrity Funds as follows.
1. Under Section 5.1 of Article V of the Declaration of Trust, the shares
of the Fund shall be divided into four classes, Class a, Class B, Class C and
Class Y, and the Trustees hereby authorize the issuance of an unlimited number
of shares of Class Y. The Class A, Class B and Class C shares of the Fund
currently outstanding shall continue to be designated Class A, Class B and Class
C shares respectively; and Class Y shares authorized, established and designated
by authority of this instrument shall be designated Class Y shares; and
2. The board hereby determines that the relative rights and preferences as
to right of redemption and the price, terms and manner of redemption,
liabilities and expenses to be borne by Class Y shares, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversions on liquidation, conversion rights, and
conditions under which the shares of the Class shall have the right to vote
shall be substantially similar in all respects to each other Class of shares of
the Fund except as otherwise set forth or provided for in the Declaration of
Trust and as otherwise established by the Board in accordance with the
Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of this
17th day of April, 1998.
Signatures Title
- ------------ -----
/s/ C. Howard Kast
------------------------
C. Howard Kast Chairman of the
Board of Trustees
/s/ Robert G Avis
------------------------
Robert G. Avis Trustee
/s/ William A. Baker
------------------------
William A. Baker Trustee
/s/ Charles Conrad, Jr.
------------------------
Charles Conrad, Jr. Trustee
/s/ Jon S. Fossel
------------------------
Jon S. Fossel Trustee
/s/ Sam Freedman
------------------------
Sam Freedman Trustee
/s/ Raymond J. Kalinowski
------------------------
Raymond J. Kalinowski Trustee
/s/ Robert M. Kirchner
------------------------
Robert M. Kirchner Trustee
/s/ Ned M. Steel
------------------------
Ned M. Steel Trustee
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 32 to Registration
Statement No. 2- 76547 of Oppenheimer Integrity Funds on behalf of Oppenheimer
bond Fund of our report dated January 23, 1998, appearing in the Statement of
Additional Information, which is a port of such Registration Statement, and to
the reference to us under the heading "Financial Highlights" appearing in the
Prospectus, which is also a part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- ----------------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
April 23, 1998
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Integrity Funds
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 24th day of February, 1998, by and between
Oppenheimer Integrity Funds (the "Trust") on behalf of its Oppenheimer Bond Fund
series (the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Trust's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
1
<PAGE>
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party. If the Board believes
that the Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45) days
of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in connection
with the Shares may include, but shall not be limited to, the following: (i)
paying sales commissions to any broker, dealer, bank or other person or entity
that sells Shares, and/or paying such persons "Advance Service Fee Payments" (as
defined below) in advance of, and/or in amounts greater than, the amount
provided for in Section 3(b) of this Agreement; (ii) paying compensation to and
expenses of personnel of the Distributor who support distribution of Shares by
Recipients; (iii) obtaining financing or providing such financing from its own
resources, or from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; and (iv) paying
other direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those prospectuses
furnished to current holders of the Fund's shares ("Shareholders")) and state
"blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan to
pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
2
<PAGE>
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (i) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (ii) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, the Advance Service Fee Payments may be made more often than
quarterly, and sooner than the end of the calendar quarter. In the event Shares
are redeemed less than one year after the date such Shares were sold, the
Recipient is obligated to and will repay the Distributor on demand a pro rata
portion of such Advance Service Fee Payments, based on the ratio of the time
such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge) Payments.
In its sole discretion and irrespective of whichever alternative method of
making service fee payments to Recipients is selected by the Distributor, in
addition the Distributor may make distribution assistance fee payments to a
Recipient quarterly, within forty-five (45) days after the end of each calendar
quarter, at a rate not to exceed 0.1875% (0.75% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of Shares
computed as of the close of each business day constituting Qualified Holdings
owned beneficially or of record by the Recipient or its Customers for no more
than six years and for any minimum period that the Distributor may establish.
Distribution assistance fee payments shall be made only to Recipients that are
registered with the SEC as a broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period that are established
3
<PAGE>
and the rate of payments hereunder applicable to Recipients, and shall provide
each Recipient with written notice within thirty (30) days after any change in
these provisions. Inclusion of such provisions or a change in such provisions in
a revised current prospectus shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Trust's Independent Trustees at any time may
remove any broker, dealer, bank or other person or entity as a Recipient, where
upon such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Trust who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide written reports to the Trust's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such
4
<PAGE>
agreement; and (v) such agreement shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class B
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset- Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Trust and the Fund under this Plan are
not binding upon any Trustee or shareholder of the Trust or the Fund personally,
but bind only the Fund and the Fund's property. The Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder and Trustee liability for acts or obligations of the
Fund and the Trust.
Oppenheimer Integrity Funds
By: /s/ Andrew J. Donohue
---------------------------
Andrew J. Donohue
Vice President and Secretary
OppenheimerFunds Distributor, Inc.
By:/s/ George C. Bowen
---------------------------
George C. Bowen
Vice President and Treasurer
5
AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Integrity Funds
This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 24th day of February, 1998, by and between
Oppenheimer Integrity Funds (the "Trust") on behalf of its Oppenheimer Bond Fund
series (the "Fund") and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Trust's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan. 3. Payments for Distribution Assistance and Administrative Support
Services.
1
<PAGE>
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five (45) days
of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge).
Within ten (10) days of the end of each month, the Fund will make payments in
the aggregate amount of 0.0625% (0.75% on an annual basis) of the average during
the month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan to
pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following
2
<PAGE>
payments to Recipients:
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge) Payments.
Irrespective of whichever alternative method of making service fee payments to
Recipients is selected by the Distributor, in addition the Distributor shall
make distribution assistance fee payments to each Recipient quarterly, within
forty-five (45) days after the end of each calendar quarter, at a rate not to
exceed 0.1875% (0.75% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares computed as of the close of
each business day constituting Qualified Holdings owned beneficially or of
record by the Recipient or its Customers for a period of more than one (1) year.
Alternatively, at its sole option, the Distributor may make distribution
assistance fee payments to a Recipient quarterly, at the rate described above,
on Shares constituting Qualified Holdings owned beneficially or of record by the
Recipient or its Customers without regard to the 1-year holding period described
above. Distribution assistance fee payments shall be made only to Recipients
that are registered with the SEC as a broker-dealer or are exempt from
registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase
3
<PAGE>
or decrease the rate of fees to be paid to the Distributor or to any Recipient,
but not to exceed the rates set forth above, and/or (ii) direct the Distributor
to increase or decrease any Minimum Holding Period, any maximum period set by a
majority of the Independent Trustees during which fees will be paid on Shares
constituting Qualified Holdings owned beneficially or of record by a Recipient
or by its Customers (the "Maximum Holding Period"), or Minimum Qualified
Holdings. The Distributor shall notify all Recipients of any Minimum Qualified
Holdings, Maximum Holding Period and Minimum Holding Period that are established
and the rate of payments hereunder applicable to Recipients, and shall provide
each Recipient with written notice within thirty (30) days after any change in
these provisions. Inclusion of such provisions or a change in such provisions in
a supplement or amendment to or revision of the prospectus of the Fund shall
constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.
(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Trust who are not
"interested persons" of the Trust ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust shall
provide written reports to the Trust's Board for its review, detailing the
amount of all payments made under this Plan and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall state
whether all provisions of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that:
4
<PAGE>
(i) such agreement may be terminated at any time, without payment of any
penalty, by a vote of a majority of the Independent Trustees or by a vote of the
holders of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting Class C shares; (ii) such termination shall be on not more than sixty
days' written notice to any other party to the agreement; (iii) such agreement
shall automatically terminate in the event of its "assignment" (as defined in
the 1940 Act); (iv) such agreement shall go into effect when approved by a vote
of the Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such agreement; and (v) such agreement shall, unless
terminated as herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by a vote of the
Board and its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class C
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Trust and the Fund under this Plan are not binding
upon any Trustee or shareholder of the Trust or the Fund personally, but bind
only the Fund and the Fund's property. The Distributor represents that it has
notice of the provisions of the Declaration of Trust of the Fund disclaiming
shareholder and Trustee liability for acts or obligations of the Fund and the
Trust.
Oppenheimer Integrity Funds
By:/s/ Andrew J. Donohue
---------------------------
Andrew J. Donohue
Vice President and Secretary
OppenheimerFunds Distributor, Inc.
By:/s/ George C. Bowen
---------------------------
George C. Bowen
Vice President and Treasurer
5
Oppenheimer Bond Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares
06/30/88 0.2600000 0.0000000 10.360
09/30/88 0.2400000 0.0000000 10.370
12/30/88 0.2500000 0.0000000 10.110
03/31/89 0.2500000 0.0000000 10.020
06/30/89 0.2400000 0.0000000 10.450
09/29/89 0.2300000 0.0000000 10.360
12/29/89 0.2200000 0.0000000 10.290
01/31/90 0.0800000 0.0000000 10.120
02/28/90 0.0800000 0.0000000 9.930
03/30/90 0.0800000 0.0000000 9.930
04/30/90 0.0700000 0.0000000 9.840
05/31/90 0.0700000 0.0000000 10.060
06/29/90 0.0700000 0.0000000 9.960
07/31/90 0.0750000 0.0000000 9.900
08/31/90 0.0750000 0.0000000 9.810
09/28/90 0.0750000 0.0000000 9.690
10/31/90 0.0700000 0.0000000 9.790
11/30/90 0.0750000 0.0000000 9.930
12/31/90 0.0640000 0.0000000 9.780
01/31/91 0.0650000 0.0000000 10.030
02/28/91 0.0650000 0.0000000 9.970
04/03/91 0.0650000 0.0000000 9.980
05/01/91 0.0650000 0.0000000 10.040
05/29/91 0.0650000 0.0000000 10.030
06/26/91 0.0650000 0.0000000 9.930
07/24/91 0.0620000 0.0000000 9.980
08/21/91 0.0650000 0.0000000 10.250
09/18/91 0.0650000 0.0000000 10.290
10/16/91 0.0600000 0.0000000 10.370
11/20/91 0.0650000 0.0000000 10.470
12/18/91 0.0760000 0.0000000 10.550
01/15/92 0.0600000 0.0000000 10.670
02/19/92 0.0650000 0.0000000 10.470
03/18/92 0.0650000 0.0000000 10.380
04/15/92 0.0610000 0.0000000 10.530
05/20/92 0.0650000 0.0000000 10.610
06/17/92 0.0620000 0.0000000 10.600
07/15/92 0.0600000 0.0000000 10.800
08/19/92 0.0600000 0.0000000 10.990
09/16/92 0.0600000 0.0000000 11.050
10/21/92 0.0600000 0.0000000 10.830
11/18/92 0.0600000 0.0000000 10.790
12/16/92 0.0850000 0.0000000 10.730
01/20/93 0.0500000 0.0000000 10.790
02/17/93 0.0600000 0.0000000 10.990
03/17/93 0.0600000 0.0000000 11.060
04/21/93 0.0600000 0.0000000 11.160
05/19/93 0.0600000 0.0000000 11.050
06/16/93 0.0560000 0.0000000 11.110
07/29/93 0.0810000 0.0000000 11.180
<PAGE>
Oppenheimer Bond Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
08/30/93 0.0590000 0.0000000 11.350
09/30/93 0.0530000 0.0000000 11.350
10/29/93 0.0565332 0.0000000 11.340
11/30/93 0.0574140 0.0000000 11.130
12/31/93 0.0538857 0.0000000 11.120
01/31/94 0.0525032 0.0000000 11.210
02/28/94 0.0504297 0.0000000 10.920
03/31/94 0.0589669 0.0000000 10.610
04/29/94 0.0472313 0.0000000 10.450
05/31/94 0.0510183 0.0000000 10.390
06/30/94 0.0531201 0.0000000 10.310
07/29/94 0.0562604 0.0000000 10.430
08/31/94 0.0552602 0.0000000 10.390
09/30/94 0.0569318 0.0000000 10.190
10/31/94 0.0519490 0.0000000 10.110
11/30/94 0.0551407 0.0000000 10.040
12/30/94 0.0956482 0.0000000 10.010
01/31/95 0.0581961 0.0000000 10.130
02/28/95 0.0541779 0.0000000 10.310
03/31/95 0.0614796 0.0000000 10.330
04/28/95 0.0513689 0.0000000 10.420
05/31/95 0.0549710 0.0000000 10.790
06/30/95 0.0555805 0.0000000 10.810
07/31/95 0.0480139 0.0000000 10.680
08/31/95 0.0536231 0.0000000 10.730
09/29/95 0.0576012 0.0000000 10.750
10/31/95 0.0595075 0.0000000 10.820
11/30/95 0.0619609 0.0000000 10.890
12/29/95 0.0655338 0.0000000 10.980
01/31/96 0.0654815 0.0000000 11.000
02/29/96 0.0640825 0.0000000 10.780
03/29/96 0.0669652 0.0000000 10.640
04/30/96 0.0648995 0.0000000 10.530
05/31/96 0.0684487 0.0000000 10.460
06/28/96 0.0581429 0.0000000 10.500
07/31/96 0.0652212 0.0000000 10.470
08/30/96 0.0687926 0.0000000 10.410
09/30/96 0.0598033 0.0000000 10.540
10/31/96 0.0665365 0.0000000 10.670
11/29/96 0.0669609 0.0000000 10.790
12/31/96 0.0660580 0.0000000 10.700
01/31/97 0.0700652 0.0000000 10.660
02/28/97 0.0617648 0.0000000 10.680
03/31/97 0.0637297 0.0000000 10.490
04/30/97 0.0637357 0.0000000 10.560
05/30/97 0.0653980 0.0000000 10.630
06/30/97 0.0620307 0.0000000 10.700
07/31/97 0.0635444 0.0000000 10.950
08/29/97 0.0679275 0.0000000 10.770
09/30/97 0.0590848 0.0000000 10.890
10/31/97 0.0685525 0.0000000 10.960
<PAGE>
Oppenheimer Bond Fund
Page 3
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class A Shares (Continued)
11/28/97 0.0591200 0.0000000 10.950
12/31/97 0.0676810 0.0000000 10.970
Class B Shares
05/19/93 0.0540000 0.0000000 11.050
06/16/93 0.0490000 0.0000000 11.100
07/29/93 0.0740000 0.0000000 11.180
08/30/93 0.0520000 0.0000000 11.350
09/30/93 0.0460000 0.0000000 11.340
10/29/93 0.0489813 0.0000000 11.330
11/30/93 0.0493279 0.0000000 11.120
12/31/93 0.0466107 0.0000000 11.110
01/31/94 0.0460055 0.0000000 11.200
02/28/94 0.0434651 0.0000000 10.910
03/31/94 0.0480784 0.0000000 10.600
04/29/94 0.0410750 0.0000000 10.450
05/31/94 0.0448825 0.0000000 10.390
06/30/94 0.0466505 0.0000000 10.310
07/29/94 0.0495636 0.0000000 10.430
08/31/94 0.0487199 0.0000000 10.390
09/30/94 0.0500287 0.0000000 10.190
10/31/94 0.0461829 0.0000000 10.110
11/30/94 0.0486446 0.0000000 10.040
12/30/94 0.0891509 0.0000000 10.010
01/31/95 0.0526001 0.0000000 10.130
02/28/95 0.0485818 0.0000000 10.310
03/31/95 0.0540074 0.0000000 10.330
04/28/95 0.0451727 0.0000000 10.420
05/31/95 0.0479439 0.0000000 10.790
06/30/95 0.0480453 0.0000000 10.810
07/31/95 0.0415648 0.0000000 10.680
08/31/95 0.0470590 0.0000000 10.730
09/29/95 0.0496775 0.0000000 10.750
10/31/95 0.0525478 0.0000000 10.820
11/30/95 0.0554821 0.0000000 10.890
12/29/95 0.0584873 0.0000000 10.980
01/31/96 0.0584150 0.0000000 11.000
02/29/96 0.0575791 0.0000000 10.780
03/29/96 0.0597300 0.0000000 10.630
04/30/96 0.0582049 0.0000000 10.520
05/31/96 0.0613063 0.0000000 10.460
06/28/96 0.0521604 0.0000000 10.500
07/31/96 0.0586625 0.0000000 10.470
08/30/96 0.0622710 0.0000000 10.410
09/30/96 0.0537680 0.0000000 10.540
10/31/96 0.0597749 0.0000000 10.670
11/29/96 0.0601097 0.0000000 10.790
12/31/96 0.0594277 0.0000000 10.690
01/31/97 0.0628051 0.0000000 10.660
02/28/97 0.0554503 0.0000000 10.680
03/31/97 0.0573682 0.0000000 10.490
04/30/97 0.0572054 0.0000000 10.560
05/30/97 0.0582308 0.0000000 10.630
<PAGE>
Oppenheimer Bond Fund
Page 4
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
06/30/97 0.0556144 0.0000000 10.700
07/31/97 0.0565988 0.0000000 10.950
08/29/97 0.0607771 0.0000000 10.760
09/30/97 0.0526012 0.0000000 10.890
10/31/97 0.0610492 0.0000000 10.950
11/28/97 0.0527597 0.0000000 10.950
12/31/97 0.0606557 0.0000000 10.970
Class C Shares
07/31/95 0.0280101 0.0000000 10.680
08/31/95 0.0422630 0.0000000 10.730
09/29/95 0.0468798 0.0000000 10.760
10/31/95 0.0521141 0.0000000 10.830
11/30/95 0.0537598 0.0000000 10.900
12/29/95 0.0588323 0.0000000 10.990
01/31/96 0.0599348 0.0000000 11.010
02/29/96 0.0573965 0.0000000 10.790
03/29/96 0.0600500 0.0000000 10.640
04/30/96 0.0582691 0.0000000 10.530
05/31/96 0.0613245 0.0000000 10.470
06/28/96 0.0521399 0.0000000 10.500
07/31/96 0.0586151 0.0000000 10.480
08/30/96 0.0622800 0.0000000 10.420
09/30/96 0.0537796 0.0000000 10.550
10/31/96 0.0597671 0.0000000 10.680
11/29/96 0.0601007 0.0000000 10.800
12/31/96 0.0594223 0.0000000 10.700
01/31/97 0.0628379 0.0000000 10.670
02/28/97 0.0554404 0.0000000 10.690
03/31/97 0.0573403 0.0000000 10.500
04/30/97 0.0571942 0.0000000 10.560
05/30/97 0.0579496 0.0000000 10.640
06/30/97 0.0555847 0.0000000 10.710
07/31/97 0.0565737 0.0000000 10.950
08/29/97 0.0607192 0.0000000 10.770
09/30/97 0.0525560 0.0000000 10.900
10/31/97 0.0610001 0.0000000 10.960
11/28/97 0.0527470 0.0000000 10.960
12/31/97 0.0606249 0.0000000 10.980
<PAGE>
Oppenheimer Bond Fund
Page 5
1. Average Annual Total Returns for the Periods Ended 12/31/97:
The formula for calculating average annual total return is as follows:
1/number of years = n {(ERV/P)^n} - 1 = average annual total return
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
{($1,048.98/$1,000)^ 1} - 1 = 4.90% {($1,101.30/$1,000)^ 1} - 1 = 10.13%
Five Year Five Year
{($1,364.00/$1,000)^.2} - 1 = 6.41% {($1,432.00/$1,000)^.2} - 1 = 7.45%
Inception Inception
{($2,098.35/$1,000)^.1030}-1 = 7.93% {($2,202.94/$1,000)^.1030}- 1= 8.47%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
2.00% for the inception year:
One Year One Year
{($1,044.07/$1,000)^ 1} - 1 = 4.41% {($1,094.07/$1,000)^ 1} - 1 = 9.41%
Inception Inception
{($1,290.05/$1,000)^.2143}-1 = 5.61% {($1,309.82/$1,000)^.2143}-1 = 5.95%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
{($1,083.93/$1,000)^ 1} - 1 = 8.39% {($1,093.94/$1,000)^ 1} - 1 = 9.39%
Inception Inception
{($1,180.47/$1,000)^.4045}-1 = 6.94% {($1,180.47/$1,000)^.4045}-1 = 6.94%
<PAGE>
Oppenheimer Bond Fund
Page 6
2. Cumulative Total Returns for the Periods Ended 12/31/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum Examples at NAV:
sales charge of 4.75%:
One Year One Year
$1,048.98 - $1,000/$1,000 = 4.90% $1,101.30 - $1,000/$1,000 = 10.13%
Five Year Five Year
$1,364.00 - $1,000/$1,000 = 36.40% $1,432.00 - $1,000/$1,000 = 43.20%
Inception Inception
$2,098.35 - $1,000/$1,000 = 109.84% $2,202.94 - $1,000/$1,000 = 120.29%
Class B Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 5.00% for the first year, and
2.00% for the inception year:
One Year One Year
$1,044.07 - $1,000/$1,000 = 4.41% $1,094.07 - $1,000/$1,000 = 9.41%
Inception Inception
$1,290.05 - $1,000/$1,000 = 29.01% $1,309.82 - $1,000/$1,000 = 30.98%
Class C Shares
Examples, assuming a maximum Examples at NAV:
contingent deferred sales charge
of 1.00% for the first year, and
0.00% for the inception year:
One Year One Year
$1,083.93 - $1,000/$1,000 = 8.39% $1,093.94 - $1,000/$1,000 = 9.39%
Inception Inception
$1,180.47 - $1,000/$1,000 = 18.05% $1,180.47 - $1,000/$1,000 = 18.05%
<PAGE>
Oppenheimer Bond Fund
Page 7
3. Standardized Yield for the 30-Day Period Ended 12/31/97:
The Fund's standardized yields are calculated using the following formula set
forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = The average daily number of Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$1,169,372.57 - $180,661.02 6
2{(--------------------------- + 1) - 1} = 6.05%
17,229,510 x $11.52
Class B Shares
Example at NAV:
$ 292,623.62 - $ 74,558.94 6
2{(--------------------------- + 1) - 1} = 5.59%
4,312,898 x $10.97
Class C Shares
Example at NAV:
$ 55,133.95 - $14,049.32 6
2{(--------------------------- + 1) - 1} = 5.60%
811,080 x $10.98
<PAGE>
Oppenheimer Bond Fund
Page 8
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/97
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = (a x 12) / b or c
The symbols above represent the following factors:
a = The last dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on payable date.
c = The Fund's net asset value (excluding sales charge) per share
on payable date.
Examples:
Class A Shares
Dividend Yield
at Maximum Offering $.0676810 x 12 / $11.52 = 7.05%
Dividend Yield
at Net Asset Value $.0676810 x 12 / $10.97 = 7.40%
Class B Shares
Dividend Yield
at Net Asset Value $.0606557 x 12 / $10.97 = 6.64%
Class C Shares
Dividend Yield
at Net Asset Value $.0606249 x 12 / $10.98 = 6.63%
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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