Registration No.333-48973
File No. 811-5670
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. 2 / X /
---
POST-EFFECTIVE AMENDMENT NO. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. / /
OPPENHEIMER WORLD BOND FUND
--------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
--------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 323-0200
--------------------------------------------------------------------------
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
Two World Trade Center New York, New York 10048-0203
--------------------------------------------------------------------------
(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)
/ / On --------, 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(b)
The Registrant hereby amends the Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
FORM N-1A
OPPENHEIMER WORLD BOND FUND
Cross Reference Sheet
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; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 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; Distribution and Service
Plan for Class C Shares; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special Investor
Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment Techniques
and Strategies; Additional Investment Restrictions
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 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 Financial Statements
- ----------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER
World Bond Fund
Prospectus dated April 24, 1998
Oppenheimer World Bond Fund is a mutual fund with the primary investment
objective of seeking total return. As a secondary objective, the Fund seeks
income when consistent with total return. The Fund seeks to achieve its
objectives by investing primarily in government bonds, both domestic and
foreign. The Fund will, under normal market conditions, invest at least 65% of
its total assets in bonds (debt securities) and at least 50% of its net assets
in foreign securities.
The Fund's foreign investments are subject to certain additional risks,
including foreign currency fluctuations, that do not affect investments in
domestic issuers. The Fund may also use certain hedging instruments and
derivative investments in an effort to reduce the risks of market fluctuations
that affect the value of the securities the Fund holds, or to seek total return
or income. The Fund may borrow money from banks to buy securities, which is a
speculative investment method known as "leverage." Investors should carefully
consider these risks before investing. Please refer to "Investment Objective and
Policies" for more information about the types of securities the Fund invests in
and refer to "Investment Risks" for a discussion on 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
24,1998 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).
[logo] OppenheimerFunds
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
A B O U T T H E F U N D
3 Expenses
6 A Brief Overview of the Fund
9 Financial Highlights
12 Investment Objectives and Policies
14 Investment Risks
18 Investment Techniques and Stretegies
28 How the Fund is Managed
31 Performance of the Fund
A B O U T Y O U R A C C O U N T
34 How to Buy
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
47 AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
50 How to Sell Shares
By Mail
By Telephone
By Checkwriting
52 How to Exchange Shares
53 Shareholder Account Rules and Policies
55 Dividends, Capital Gains and Taxes
A-1 Appendix A: Description of Securities Ratings
B-1 Appendix B: Special Sales Charge Arrangements
-2-
<PAGE>
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
values per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are 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
summarize the expenses expected to be incurred by the Fund as an open-end fund
during its current fiscal year (with $55 million of assets) under the new
investment advisory agreement, 12b-1 plans and other agreements and the new
capital structure of three classes of shares: Class A with a front-end sales
load and Class B and Class C sold without a front-end sales load but with
different contingent deferred sales arrangements. On April 24, 1998, the Fund
was converted from a closed-end to an open-end investment company. See "How
the Fund is Managed -Organization and History" for information on the
organizational background of the Fund.
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 34 for
an explanation of how and when these charges apply.
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
Maximum Sales Charge 4.75% None None
on Purchases (as a % of
offering price)
- ------------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the 1% if shares
Charge (as a % of the first year, are redeemed
lower of the original declining to Within 12
offering price or 1% in the months of
redemption proceeds) sixth year and purchase(2)
eliminated
thereafter(2)
- ------------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- ------------------------------------------------------------------------------
Exchange Fee None None None
- ------------------------------------------------------------------------------
Redemption Fee 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 40) 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 from the end of the calendar
month during 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 advisor, 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
Shares Shares Shares
- ------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------
12b-1 Distribution Plan
Fees(1) 0.25% 1.00% 1.00%
- ------------------------------------------------------------------------------
Other Expenses 0.33% 0.33% 0.33%
- ------------------------------------------------------------------------------
Total Fund 1.33% 2.08% 2.08%
Operating Expenses
(1) The numbers in the chart above are the expenses expected to be
incurred in its current fiscal year by the Fund as an open-end investment
company. The numbers have been restated to reflect the new investment advisory
agreement, 12b-1 plans and other agreements and the new capital structure of
three classes of shares. The 12b-1 Service Plan Fees for Class A shares are
service fees (the maximum fee is 0.25% of average annual net assets of that
class). For Class B and Class C shares, the 12b-1 Distribution and Service Plan
Fees are the service fees of 0.25% and the annual asset-based sales charges of
0.75%.
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 changes in the actual value of the Fund's assets represented by each
class of shares. These Plans are discussed in greater detail in "How to Buy
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, which is the
expected business expenses of the Fund as an open-end investment company after
the April 24, 1998 conversion. 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 Expenses 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 $88 $117 $200
- ------------------------------------------------------------------------------
Class B Shares $71 $95 $132 $204
- ------------------------------------------------------------------------------
Class C Shares $31 $65 $112 $241
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $60 $88 $117 $200
- ------------------------------------------------------------------------------
Class B Shares $21 $65 $112 $204
- ------------------------------------------------------------------------------
Class C Shares $21 $65 $112 $241
- ------------------------
* The expenses set forth in the examples above are based upon expenses of the
Fund that are expected to be incurred during the Fund's first fiscal year as an
open-end investment company on an annualized basis. 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 the 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 higher asset-based sales charge and the contingent
deferred sales charge imposed on Class B and Class C shares, long-term holders
of Class B and Class C shares could pay the economic equivalent of more 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 will 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 Are the Fund's Investment Objectives? The Fund's primary investment
objective is to seek total return, with a secondary objective of seeking income
when consistent with total return.
o What Does the Fund Invest In? Under normal market conditions, the Fund
will invest at least 65% of its total assets in bonds (defined, for purposes of
this non-fundamental investment policy, to be debt securities), and will invest
at least 50% of its net assets in foreign securities. Debt securities, in
general, represent a loan of money to the issuer, who promises to pay back the
amount loaned (the "principal amount") plus interest, which may be at a fixed
rate or a variable rate. As a fundamental policy, the Fund will not make any
purchase that will cause more than 25% of its total assets to be invested in
Foreign Government Securities and foreign corporate securities of any one
country (other than the United States). Foreign Government Securities are debt
instruments issued or guaranteed by foreign governments, or their political
subdivisions, agencies or instrumentalities, including supranational entities.
The Fund may also invest in U.S. Government Securities, which are debt
instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The Fund may also invest in fixed-income securities of domestic and
foreign corporations, including short-term money market instruments. Other
securities and investments which may be held by the Fund include put and call
options, common stock acquired upon the exercise of options or conversion of
convertible securities, and futures contracts and related options. The Fund is
designed for long-term investment and investors should not consider it as a
trading vehicle although the Fund itself may at times have a relatively high
turnover rate.
Further, the Fund may use hedging instruments and some derivative
investments in an effort to protect against market risks. Derivative investments
may also be used to enhance total return or income. These investments are more
fully explained in "Investment Objectives and Policies," starting on page 12.
o Who Manages the Fund? The Fund's investment advisor (the "Manager") is
OppenheimerFunds, Inc. The Manager (including subsidiaries) manages investment
company portfolios in excess of $85 billion in assets at March 31, 1998. The
Manager is paid an advisory fee by the Fund, based on its net assets. The Fund's
portfolio manager, Mr. Ashwin Vasan, is employed by the Manager. He is primarily
responsible for the selection of the Fund's securities. The Fund's Board of
Trustees, elected by shareholders, oversees the investment advisor and the
portfolio manager. Please refer to "How the Fund is Managed," starting on page
28 for more information about the Manager and its fees.
o How Risky is the Fund? While different types of investments have risks
that differ in type and magnitude, all investments carry risk to some degree.
Changes in overall market movements or interest rates, or factors affecting a
particular country, industry or issuer, can affect the value of the Fund's
investments and the Fund's net asset values per share. Equity investments are
generally subject to a number of risks, including the risk that values will
fluctuate as a result of fluctuations in equity markets, and changing
expectations for the economy and individual issuers. Fixed-income investments
are generally subject to the risk that values will fluctuate with changes in
interest rates and inflation; lower-rated, fixed-income investments are subject
to a greater risk that the issuer will default in its interest or principal
payment obligations. For both equity and income investments, foreign investments
are subject to the risk of adverse currency fluctuation and additional risks and
expenses in comparison to domestic investments. Hedging instruments and
derivative investments involve certain risks, as discussed under "Hedging" and
"Derivative Investments," below. The Fund may borrow money from banks to buy
securities, a practice known as leverage that is subject to certain risks
discussed below under "Borrowing for Leverage."
In the Oppenheimer funds spectrum, the Fund is generally considered to be
a fairly risky fixed-income fund. That is, the Fund is more aggressive than
domestic fixed-income funds because the Fund invests a substantial portion of
its assets in foreign debt securities, which are subject to special risks. While
the Manager tries to reduce risks by diversifying investments (particularly
geographic diversification among developed countries and emerging market
countries), and 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 objectives and your shares may be
worth more or less than their original cost when you redeem them. Please refer
to "Investment Objectives and Policies" 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" on page 36 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 12 months 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 36 for more details, including a discussion about
which class may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail, by
checkwriting, or by telephone call to the Transfer Agent on any business day, or
through your dealer. Please refer to "How To Sell Shares" on page 50. The Fund
also offers exchange privileges to other Oppenheimer funds, described in "How to
Exchange Shares" on page 52.
o How Has the Fund Performed? Prior to April 24, 1998, the Fund operated as
a closed-end investment company. The Fund measures its performance by quoting
its average annual total returns, cumulative total returns and yields, which
measure historical performance. The historical performance of the Class A shares
of the Fund (formerly, a closed-end fund) has been restated to reflect the fees
and expenses of such Class A shares in effect as of April 24, 1998 as set forth
above in "About the Fund" in "Shareholder Transaction Expenses" and "Annual Fund
Operating Expenses." Those returns can be compared to the returns (over similar
periods) of other mutual funds. Of course, other mutual funds may have different
objectives, investments and levels of risk. The Fund's performance can also be
compared to one or more securities market indices, which we have done on page
33. Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following page presents selected financial information about
the Fund, including per share data, expense ratios and other data based on the
Fund's average net assets. This information has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, whose report on the Fund's
financial statements for the fiscal year ended October 31, 1997 is included in
the Statement of Additional Information.
The financial information below reflects the Fund's performance as a
closed-end investment company. The Fund's single class of shares were converted
from closed-end shares on April 24, 1998, after the end of the Fund's fiscal
year, and have been classified as Class A shares. Accordingly, the financial
information below may not be indicative of the Fund's performance as an open-end
investment company. Class B and Class C shares were not offered during the
fiscal year ended October 31, 1997. See "How the Fund is Managed" for additional
information about the background of the Fund.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS YEAR ENDED OCTOBER 31,
1997 1996 1995
====================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $8.31 $7.91 $7.93
- ------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .72 .73 .71
Net realized and unrealized gain (loss) (.08) .34 (.05)
----- ----- -----
Total income from investment operations .64 1.07 .66
- ------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.67) (.67) (.69)
Distributions from net realized gain -- -- --
Tax return of capital distribution -- -- --
----- ----- -----
Total dividends and distributions
to shareholders (.67) (.67) (.68)
- ------------------------------------------------------------------------------------
Offering costs -- -- --
- ------------------------------------------------------------------------------------
Net asset value, end of period $8.28 $8.31 $7.91
===== ===== =====
Market value, end of period $8.06 $7.50 $7.00
====================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 7.94% 14.14% 8.81%
====================================================================================
TOTAL RETURN, AT MARKET VALUE(3) 16.42% 16.40% 9.09%
====================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $54,781 $54,962 $52,340
- ------------------------------------------------------------------------------------
Average net assets (in thousands) $55,339 $53,309 $51,207
- ------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.65% 9.04% 9.20%
Expenses(5) 1.20% 1.28% 1.24%
- ------------------------------------------------------------------------------------
Portfolio turnover rate(6) 289.2% 260.8% 344.2%
</TABLE>
1. For the period from November 30, 1988 (commencement of operations) to October
31, 1989. 2. 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. Prior
to April 27, 1998, the Fund operated as a closed-end investment company and
total return was calculated based on market value. 3. Assumes a hypothetical
purchase at the current market price 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 a
sale at the current market price on the last business day of the period. Total
return does not reflect sales charges or brokerage commissions. Total returns
are not annualized for periods of less than one full year.
10
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989(1)
==================================================================================
<S> <C> <C> <C> <C> <C>
$8.54 $8.55 $8.97 $8.66 $9.12 $9.30
- ----------------------------------------------------------------------------------
.69 .82 .89 .97 .96 .82
(.61) -- (.39) .33 (.43) (.09)
----- ----- ----- ----- ----- -----
.08 .82 .50 1.30 .53 .73
- ----------------------------------------------------------------------------------
(.68) (.75) (.92) (.99) (.94) (.80)
-- -- -- -- (.05) (.04)
(.01) (.08) -- -- -- --
----- ----- ----- ----- ----- -----
(.69) (.83) (.92) (.99) (.99) (.84)
- ----------------------------------------------------------------------------------
-- -- -- -- -- (.07)
- ----------------------------------------------------------------------------------
$7.93 $8.54 $8.55 $8.97 $8.66 $9.12
===== ===== ===== ===== ===== =====
$7.00 $8.00 $8.63 $9.50 $7.75 $9.00
==================================================================================
0.98% 10.08% 5.74% 15.91% 6.59% 8.21%
==================================================================================
(4.84)% 2.22% 0.70% 37.18% (3.27)% (1.33)%
==================================================================================
$52,439 $56,526 $55,668 $57,208 $54,676 $57,418
- ----------------------------------------------------------------------------------
$54,380 $55,877 $56,970 $55,604 $56,175 $57,012
- ----------------------------------------------------------------------------------
8.90% 9.59% 10.13% 11.06% 10.83% 9.85%(4)
1.24% 1.22% 1.32% 1.21% 1.22% 1.34%(4)
- ----------------------------------------------------------------------------------
315.5% 112.5% 98.4% 59.9% 95.3% 98.7%
</TABLE>
4. Annualized.
5. Beginning in fiscal 1997, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities and mortgage
"dollar rolls") for the period ended October 31, 1997 were $144,978,367 and
$142,251,536, respectively. Prior to the period ended October 31, 1996,
purchases and sales of investment securities included mortgage "dollar-rolls."
11
[insert chart]
Investment Objectives and Policies
Objectives. The Fund's primary investment objective is to seek total return. As
a secondary objective, the Fund seeks income when consistent with total return.
Investment Policies and Strategies. Set forth below are the investment policies
and strategies the Fund may use in seeking its investment objectives. The
Manager might not use all of these instruments or all of these investment
strategies to the full extent permitted unless it believes doing so will help
the Fund achieve its investment objectives.
As a matter of non-fundamental policy, the Fund will invest at least 65%
of its total assets in bonds (defined, for purposes of this non-fundamental
investment policy, to be debt securities), and will invest at least 50% of its
net assets in foreign securities. As a matter of fundamental policy, the Fund
will not make any purchase that will cause more than 25% of its total assets to
be invested in Foreign Government Securities and foreign corporate securities of
any one country (other than the United States). Foreign Government Securities
are debt instruments issued or guaranteed by foreign governments, or their
political subdivisions, agencies or instrumentalities, including supranational
entities. The Fund may also invest in U.S. Government Securities, which are debt
instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The Fund may invest in equity and debt securities (which may either be
denominated in U.S. dollars or in non-U.S. currencies), issued or guaranteed by
foreign corporations, certain supranational entities (described below), and
foreign governments or their agencies or instrumentalities, and in debt
obligations issued by U.S. corporations denominated in non-U.S. currencies. All
such securities are referred to as "foreign securities."
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the countries in
which they may be held and the sub-custodians or depositories holding them must
be approved by the Corporation's Board of Directors to the extent that approval
is required under applicable rules of the Securities and Exchange Commission.
In addition to investments in U.S. Government Securities and Foreign
Government Securities, the Fund may invest in fixed-income securities of
domestic and foreign corporations, including short-term money market
instruments. Other securities and investments which may be held by the Fund
include put and call options, common stock acquired upon the exercise of options
or conversion of convertible securities, and futures contracts and related
options. The Fund is designed for long-term investment and investors should not
consider it as a trading vehicle although the Fund itself may at times have a
relatively high turnover rate.
The Fund's investment Manager, OppenheimerFunds, Inc. (the "Manager"),
will adjust the duration of the Fund's investment in debt securities from time
to time, depending on its assessment of relative yields of securities of
different maturities and its expectations of future changes in interest rates.
The Fund measures its portfolio duration on a "dollar-weighted" basis.
"Effective duration" refers to the expected percentage change in the value of a
bond resulting from a change in general interest rates (measured by each 1%
change in the rates on U.S. Treasury securities). For example, if a bond has an
effective duration of three years, a 1% increase in general interest rates would
be expected to cause the bond to decline about 3%. It is a measure of portfolio
volatility.
Under normal market conditions, the Fund may invest up to 35% of its total
assets in certain securities other than debt securities, including common
stocks, convertible securities and other equity securities that generally
represent an ownership interest in the company issuing the security.
Because changes in stock and bond market prices can occur at any time, and
because yields on debt securities available at different times will vary, there
is no assurance that the Fund will achieve its investment objectives, and when
you redeem your shares, they may be worth more or less than what you paid for
them.
o Can the Fund's Investment Objectives and Policies Change? The Fund has
primary and secondary investment objectives, described above, as well as
investment policies it follows to try to achieve its objectives. 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 primary and secondary
investment objectives are fundamental policies.
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. "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 its last fiscal year, its portfolio
turnover rate would have been 100%. Although the Fund's portfolio turnover rate
is higher than some funds, most purchases made by the Fund are principal
transactions at net prices, and therefore, the Fund incurs relatively little
brokerage costs. 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 securities the Fund invests in and the investment
techniques the Fund uses, the Fund is designed for investors who are investing
for the long term. It is not intended for investors seeking assured income or
preservation of capital. While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are purchased, and
in some cases by using hedging techniques, changes in overall market prices can
occur at any time, and because the income earned on securities is subject to
change, there is no assurance that the Fund will achieve its investment
objective. 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 value due to changes in prevailing interest
rates. When prevailing interest rates fall, the values of outstanding debt
securities generally rise. Conversely, when interest rates rise, the values of
outstanding debt securities generally decline. The magnitude of these
fluctuations will usually be greater when the average maturity of the portfolio
securities is longer.
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 are some of the types of bonds the
Fund seeks to invest in) 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 if they are backed 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 interest and principal. While the Manager may rely
to some extent on credit ratings by nationally recognized statistical rating
agencies, including, but not limited to Standard & Poor's, Duff & Phelps 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 or that provided by
other sources. 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 or that the credit risk will be correctly
analyzed by the Manager, by nationally recognized rating agencies, or by other
sources.
o Foreign Securities Have Special Risks. Because the Fund may buy
securities denominated in foreign currencies or traded primarily in foreign
markets, 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 securities denominated in
that foreign currency. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in future exchange
rates.
Currency rate changes will also affect the income available to distribute
to shareholders of the Fund. 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. Therefore, the Fund will absorb the
cost of currency fluctuations. While the Fund may use hedging techniques to try
to reduce the risk of currency fluctuations, if the Fund suffers losses on
foreign currencies after it has distributed its income during the year, it may
find that it has distributed more income than was available from net investment
income. That could result in previously distributed income being re-classified
as a return of capital to shareholders. Please refer to "Taxes - Returns of
Capital."
The value of foreign investments may be affected by other factors,
including exchange control regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement of transactions, changes
in governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors. Issuers of foreign securities that are not
registered for sale in the U.S. do not have to comply with disclosure
requirements that U.S. companies are subject to.
In addition, it is generally more difficult to obtain court judgments
outside the U.S. if the Fund were to sue a foreign issuer or broker. Additional
costs may be incurred because foreign brokerage commissions are generally higher
than U.S. rates, and there are additional custodial costs associated with
holding securities abroad. More information about the risks and potential
rewards of investing in foreign securities is contained in the Statement of
Additional Information.
o Special Risks of Emerging Market Countries. Investments in emerging
market countries may involve further risks in addition to those identified above
for investments in foreign securities. Securities issued by emerging market
countries and by companies located in those countries may be subject to extended
settlement periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset values could be affected. Emerging market
countries may have smaller, less well-developed markets and exchanges; there may
be a lack of liquidity for emerging market securities; interest rates and
foreign currency exchange rates may be more volatile; sovereign limitations on
foreign investments may be more likely to be imposed; there may be significant
balance of payment deficits; and their economies and markets may respond in a
more volatile manner to economic changes than those of developed countries.
o Special Risks of Lower-Grade Securities. The debt instruments in which
the Fund may invest may be unrated or, if rated, in any rating category,
provided, that, investments in securities rated lower than investment grade
("Baa" by Moody's Investors Service, Inc. ("Moody's") or "BBB" by Standard &
Poor's Corporation ("Standard & Poor's"), Fitch Investors Service, L.P.
("Fitch") or Duff & Phelps, Inc. (Duff & Phelps) or another nationally
recognized statistical rating organization) may not exceed 50% of the Fund's
total assets, with no more than 30% of the Fund's total assets being invested in
non-investment grade: (1) Foreign Government Securities, (2) securities issued
by foreign corporations or (3) securities denominated in non-U.S. currencies.
Notwithstanding the foregoing, the Fund may not invest more than 5% of its total
assets, measured at the time of purchase, in securities which are rated "C" or
"D" by either Moody's, Duff & Phelps, Fitch or Standard & Poor's. Those
securities may be considered highly speculative and may be in default. The
Appendix to this Prospectus describes these rating categories.
The primary advantage of lower-rated, high risk, high yield securities is
their relatively higher investment return. High yield bonds, commonly called
junk bonds, offer a higher yield to maturity than bonds with higher ratings, as
compensation for holding an obligation that may be subject to greater risk.
During periods of falling interest rates, the values of outstanding fixed-income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. The magnitude of these
fluctuations will generally be greater for securities with longer maturities.
Those changes will affect the values of the Fund's portfolio securities, and
therefore its net asset value per share. Further, because of their high coupon
rates, high yield securities are generally less price sensitive to changes in
interest rates than U.S. Treasury Securities. However, high yield securities,
whether rated or unrated, may be subject to greater market fluctuations and
risks of loss of income and principal and have less liquidity than lower
yielding, higher-rated fixed-income securities.
Some of the principal risks of high yield, high risk securities include:
(i) limited liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest rates, (iii)
subordination of the holder's claims to the prior claims of banks and other
senior lenders in bankruptcy proceedings, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of declining interest
rates, whereby the holder might receive redemption proceeds at times when only
lower-yielding portfolio securities are available for investment, (v) the
possibility that earnings of the issuer may be insufficient to meet its debt
service, and (vi) the issuer's low creditworthiness and potential for insolvency
during periods of rising interest rates and economic downturn. Some high yield
bonds pay interest in kind rather than in cash.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously decided to
sell them. A decline is also likely in the high yield bond market during an
economic downturn. An economic downturn or an increase in interest rates could
severely disrupt the market for high yield securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest.
o Stock Investment Risks. Because the Fund may invest a portion of its
assets in stocks, the value of the Fund's portfolio will be affected by changes
in the stock markets. At times, the stock markets can be volatile and stock
prices can change substantially. This market risk will affect the Fund's net
asset values per share, which will fluctuate as the values of the Fund's
portfolio securities change. Not all stock prices change uniformly or at the
same time, not all stock markets move in the same direction at the same time,
and other factors can affect a particular stock's prices (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, and changes in government regulations affecting an industry). Not all
of these factors can be predicted.
The Fund attempts to limit market risks by diversifying its investments,
that is, by not holding a substantial amount of the securities of any one
company and by not investing too great a percentage of the Fund's assets in any
one company. Also, the Fund does not concentrate its investments in any one
industry or group of industries.
o Hedging instruments can be volatile instruments and may involve special
risks. The Fund may invest in a number of different kinds of hedging
instruments. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is required for
normal portfolio management. If the Manager uses a hedging instrument at the
wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other investments
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 a put, 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. These risks and the hedging strategies the Fund may use
are described in greater detail in the Statement of Additional Information.
o There are special risks in investing in derivative investments. The Fund
can invest in a number of different kinds of "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 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, may not perform the way the Manager expects 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,
specifically those that are traded in the over-the-counter market, may be
illiquid. Please refer to "Illiquid and Restricted Securities," below, for more
information.
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 also 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.U.S. Government Securities are considered
among the most creditworthy of fixed-income investments. Because of this, the
yields available from U.S. Government Securities are generally lower than the
yields available from corporate debt securities. Nevertheless, the values of
U.S. Government Securities (like those of fixed-income securities generally)
will change as interest rates fluctuate. Despite guarantees as to the timely
payment of principal and interest on U.S. Government Securities and Foreign
Government Securities, such guarantees do not extend to the value or yield of
such securities nor do they extend to the value of shares of the Fund. The
Fund's investments in U.S. debt securities may include, but are not limited to,
the following:
o U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less when issued), Treasury Notes (which have
maturities of one to ten years when issued) and Treasury Bonds (which have
maturities generally greater than ten years when issued). U.S. Treasury
obligations are backed by the full faith and credit of the United States.
o U.S. Government and Agency Obligations. U.S. government securities are
debt obligations issued by or guaranteed by the United States government or any
of its agencies or instrumentalities. Some of these obligations, including U.S.
Treasury notes and bonds, and mortgage-backed securities (referred to as
"Ginnie Maes"), guaranteed by the Government National Mortgage Association, are
supported by the full faith and credit of the United States, which means that
the government pledges to use its taxing power to repay the debt. Other U.S.
government securities issued or guaranteed by Federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States. They may include obligations supported by the ability of
the issuer to borrow from the U.S. Treasury. However, the Treasury is not under
a legal obligation to make a loan. Examples of these are obligations of Federal
Home Loan Mortgage Corporation (these securities are often called "Freddie
Macs"). Other obligations are supported by the credit of the instrumentality,
such as Federal National Mortgage Association bonds (these securities are often
called "Fannie Maes").
(1) 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.
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.
(2) 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.
(3) 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.
(4) Mortgage-Backed Security Rolls. The Fund may enter into "forward roll"
transactions with respect to mortgage-backed securities issued by GNMA, FNMA or
FHLMC. In a forward roll transaction, which is considered to be a borrowing by
the Fund, the Fund will sell a mortgage security to a bank or other permitted
entity and simultaneously agree to repurchase a similar security from the
institution at a later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with different
prepayment histories than those sold. Risks of mortgage- backed security rolls
include: (i) the risk of prepayment prior to maturity, (ii) the possibility that
the proceeds of the sale may have to be invested in money market instruments
(typically repurchase agreements) maturing not later than the expiration of the
roll, and (iii) the possibility that the market value of the securities sold by
the Fund may decline below the price at which the Fund is obligated to purchase
the securities. Upon entering into a mortgage-backed security roll, the Fund
will be required to identify on its records certain assets which may consist of
liquid securities of any type, including equity securities and debt securities
of any grade, in an amount at least equal to the Fund's obligation under the
security roll.
o Mortgage-Backed Securities and CMO's. These securities represent
participation interests in pools of residential mortgage loans. Mortgage-backed
securities include collateralized mortgage-backed obligations (referred to as
"CMOs") issued by the U.S. government, its agencies or instrumentalities, or by
private issuers. Mortgage-backed securities and CMOs 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.
(1) Mortgage-Backed Securities. 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 or 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 "I/O" class), while the other class will
receive all of the principal (the "principal-only" or "P/O" class).
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.
(2) CMOs. CMOs are fully-collateralized bonds that are the general
obligations of the issuer thereof. 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
(known as "tranches") 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. The value of certain classes or "tranches" 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 objectives and policies, consider
making investments in such new types of mortgage-related securities.
o Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S. Treasury or by private issuers such as domestic or foreign
corporations. Zero coupon U.S. Treasury securities include: (1) U.S. Treasury
bills without interest coupons, (2) U.S. Treasury notes and bonds that have been
stripped of their unmatured interest coupons and (3) receipts or certificates
representing interests in such stripped debt obligations or coupons. These
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that make current
payments of interest. However, the lack of periodic interest payments means that
the interest rate is "locked in" and the investor avoids the risk of having to
reinvest periodic interest payments in securities having lower rates. An
additional risk of private-issuer zero coupon securities is the credit risk that
the issuer will be unable to make payment at maturity of the obligation.
Because the Fund accrues taxable income from zero coupon securities
without receiving cash, the Fund may be required to sell portfolio securities in
order to pay dividends or redemption proceeds for its shares, which require the
payment of cash. This will depend on several factors: the proportion of
shareholders who elect to receive dividends in cash rather than reinvesting
dividends in additional shares of the Fund, and the amount of cash income the
Fund receives from other investments and the sale of shares. In either case,
cash distributed or held by the Fund that is not reinvested by investors in
additional Fund shares will hinder the Fund from seeking current income.
o Asset-Backed Securities. Asset-backed securities represent interests in
pools of consumer loans (such as credit card loans and automobile loans) and in
other trade receivables. Asset-backed 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.
Prepayments on the underlying receivables may reduce the yield on asset-backed
securities.
o Participation Interests. Participation interests are interests in loans
made to U.S. or foreign companies. These interests are acquired from banks or
brokers that have made the loan or are members of the lending syndicate. No more
than 5% of the Fund's net assets may be invested in participation interests of
the same borrower.
o Corporate Securities. The Fund may invest in corporate fixed-income
securities issued by domestic and foreign corporations and issuers and may be
denominated in U.S. dollars or in non- U.S. currencies. These investments may
include non-convertible debt obligations such as bonds, debentures and notes.
The corporate fixed-income investments of the Fund may also include preferred
and convertible preferred stocks of domestic corporations and issuers.
o Equity Securities. The Fund may invest in common stocks, preferred stock,
convertible securities and other equity securities of domestic or foreign
companies of any size.
o Preferred Stock. Generally, preferred stock is an equity security that
has a specified dividend and ranks after bonds and before common stocks in its
claim on income for dividend payments and on assets should the issuing company
be liquidated or enter bankruptcy proceedings. While most preferred stocks pay a
dividend, the Fund may purchase preferred stock where the issuer has omitted, or
is in danger of omitting, payment of its dividend. Such investments would be
made primarily for their capital appreciation potential. Certain preferred stock
may be convertible into or exchangeable for a given number of common shares.
Such preferred stock tends to be more volatile than nonconvertible preferred
stock, which behaves more like a fixed-income security.
o Convertible SecuritConvertible securities are bonds, preferred stocks
and other securities that normally pay a fixed rate of interest or dividends and
give the owner the option to convert the security into common stock. While the
value of convertible securities depends in part on interest rate changes and the
credit quality of the issuer, the price will also change based on the price of
the underlying stock. While convertible securities generally have less potential
for gain than common stock, their income provides a cushion against the stock
price declines. They generally pay less income than non-convertible bonds. The
Manager generally analyzes these investment from the perspective of the growth
potential of the underlying stock and treats them as "equity substitutes."
o Money Market Instruments. In order to maintain liquidity deemed necessary
by the Manager for investment purposes, as well as in times of unstable market
or economic conditions, the Fund may invest in U.S. dollar-denominated debt
obligations maturing in one year or less.
o Borrowing for Leverage. The Fund may borrow money in an amount up to
(one-third of its total assets from banks to buy securities. The Fund will
borrow only if it can do so without putting up assets as security for a loan.
This is a speculative investment method known as "leverage." Leveraging may
subject the Fund to greater risks and costs than funds that do not borrow. These
risks may include the possible reduction of income since the Fund pays interest
on borrowings and increased fluctuation in the Fund's net asset values per
share. Borrowing is subject to regulatory limits described in more detail in the
Statement of Additional Information. Under the Investment Company Act, the Fund
can borrow only if it maintains at least a 300% ratio of assets to borrowings at
all times.
|X| 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 whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. The Fund does not intend to make such
purchases for speculative purposes. During the period between the purchase and
settlement, no payment is made for the security and no interest accrues to the
buyer from the investment. There may be a risk of loss if the value of the
security changes prior to the settlement date.
o Derivative Investments. In general, a "derivative investment" is a
specially designed investment. Its 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, this
does not prevent the Fund from buying or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities.
Derivative investments used by the Fund are used in some cases for hedging
purposes and in other cases for "non-hedging" investment purposes to seek income
or total return. In the broadest sense, exchange-traded options and futures
contracts (discussed in "Hedging," below) may be considered "derivative
investments." Any derivative instrument that is a debt security will be included
for purposes of the Fund's investment policy that it will invest at least 65% of
its total assets in debt securities.
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 make fixed interest payments and 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.
o Hedging. As described below, the Fund may purchase 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, and
options and futures thereon, 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 hedging instruments the Fund may use are described in
greater detail in "Other Investment Techniques and Strategies" in the Statement
of Additional Information.
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. The Fund may purchase and sell foreign
currency in hedging transactions. It may also use certain kinds of hedging
instruments to try to manage its exposure to changing interest rates.
o Futures. The Fund may buy and sell futures contracts that relate to (1)
stock indices (referred to as Stock Index Futures), other securities indices
(together with Stock Index Futures, refereed to as Financial Futures), (3)
interest rates (referred to as Interest Rate Futures),(4) foreign currencies
(referred to as Forward Contracts), or (5) commodities (referred to as Commodity
Futures). 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 bond index assigns
relative values to the bonds included in that index and is used as a basis for
trading long-term Bond Index Futures contracts. Bond Index Futures reflect the
price movements of bonds included in the index. They differ from Interest Rate
Futures in that settlement is made in cash rather than by delivery; or
settlement may be made by entering into an offsetting contract. These types of
Futures are described in "Hedging" in the Statement of Additional Information.
o Put and Call Options. 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, above. 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 must 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.
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.
o Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to 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. 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.
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 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. Also, 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 Illiquid and Restricted Securities. Under the policies and procedures
established by the Board, 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%). 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. 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 to determine
whether to sell any holdings to maintain adequate liquidity.
|X| Board-Approved Instruments. The Fund may invest in other investments
(including new investments that may be developed in the future) that the Fund's
Board of Trustees (or the Manager, under guidelines established by the Board)
determines are consistent with the Fund's investment objectives and investment
policies. Any significant new types of investments approved by the Board will be
described in supplements to this Prospectus.
|X| Repurchase Agreements. The Fund may enter into repurchase agreements.
They are primarily used for liquidity purposes. 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
transaction having a maturity beyond seven days. There is no limit on the amount
of the Fund's net assets that may be subject to repurchase agreements of seven
days or less.
|X| Loans of Portfolio Securities. To attempt to increase its income, 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 Fund's total assets and are subject to other
conditions described in the Statement of Additional Information. The value of
securities loaned, if any, is not expected to exceed 5% of the value of the
Fund's total assets in the coming year.
o Temporary Defensive Investments. In times of unstable market or economic
conditions, when fluctuations in the value of the Fund's net assets may occur,
the Manager may determine it appropriate to assume a temporary defensive
position and may invest up to 100% of its assets in shorter-term debt
securities, cash or cash equivalents including U.S. Government securities, bank
obligations, commercial paper and corporate obligations. It is impossible to
predict when, or for how long, alternative strategies will be utilized.
Investment Restrictions. The Fund has other investment restrictions which are
fundamental policies. Under these fundamental policies, the Fund cannot:
o As to 75% of its total assets, the Fund cannot invest in securities
of any one issuer (other than the United States Government, its
agencies or instrumentalities) if after any such investment either
(a) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would then own more than
10% of the voting securities of that issuer;
o The Fund cannot concentrate investments to the extent of more than
25% of its total assets in securities of issuers in the same
industry; provided that this limitation shall not apply with respect
to investments in U.S. Government Securities. The Fund interprets
this restriction to mean that the Fund cannot concentrate its assets
as stated above to the extent of 25% or more of its total assets;
o The Fund cannot make loans, except that the Fund may purchase debt
securities and enter into repurchase agreements or when-issued,
delayed delivery or similar securities transactions, and may lend
its portfolio securities;
o The Fund may borrow money from banks on an unsecured basis to buy
securities, and may borrow for temporary, emergency purposes or
under other unusual circumstances, subject to the limits set forth
in the Investment Company Act;
o The Fund cannot mortgage, pledge or hypothecate the Fund's assets;
for purposes of this policy escrow, collateral and margin
arrangements involved with any of its investments are not considered
to involve a mortgage, hypothecation or pledge;
o The Fund cannot invest in companies for the purpose of exercising
control or management thereof;
o The Fund cannot make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns
an equal amount of such securities or by virtue of ownership of
other securities has the right, without payment of any further
consideration, to obtain an equal amount of the securities sold
short ("short sales against the box"); short sales may be made to
defer realization of gain or loss for Federal income tax purposes;
o The Fund cannot invest in (a) real estate, except that it may
purchase and sell securities of companies which deal in real estate
or interests therein; or (b) interests in oil, gas or other mineral
exploration or development programs;
o The Fund cannot invest in physical commodities or physical commodity
contracts; however, the Fund may: (i) buy and sell hedging
instruments permitted by any of its other investment policies, and
(ii) buy and sell options, futures, securities or other instruments
backed by, or the investment return from which is linked to changes
in the price of, physical commodities;
o The Fund cannot act as an underwriter of securities, except insofar
as the Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held for its
own portfolio; or
o The Fund cannot purchase securities on margin; however, the Fund may
make margin deposits in connection with any of its other investments.
Unless the prospectus 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. The Fund was originally a closed-end diversified
management company organized on October 5, 1988 as a Massachusetts business
trust named "Oppenheimer Multi-Government Trust" (the "Fund"). The Fund
commenced operations on November 23, 1988 and on July 26, 1996 the Fund's name
was changed to Oppenheimer World Bond in order to better describe the Fund's
then current objective. Pursuant to shareholder approval received on April 16,
1998, effective as of the close of business on the date of this Prospectus, the
Fund was converted to an open-end diversified management investment company,
with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. "Trustees and Officers
of the Fund" in the Statement of Additional Information names the Trustees and
officers of the Fund and provides more information about them. Although the Fund
will not normally hold annual meetings of its shareholders, it may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of the Fund into three or more classes. The Board has
done so, and the Fund currently has three classes of shares, Class A, Class B
and Class C. 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. Each class has separate voting rights on any matter in
which the interests of one class differ from another. Only 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 OppenheimerFunds, Inc.
(the "Manager") 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 Investment Advisory
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.
The Manager has operated as an investment advisor since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets in excess of $85 billion for more than 4 million
shareholder accounts as of March 31, 1998. 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 Manager. The Portfolio Manager of the Fund is Mr. Ashwin K.
Vasan. He is a Vice President of the Fund and the Manager and has been the
individual principally responsible for the day-to-day management of the Fund's
portfolio since June, 1993. Mr. Vasan joined he Manager in January, 1992 as a
securities analyst. Since June, 1993, he has been an officer and co- portfolio
manager of this fund as well as other Oppenheimer funds with particular
responsibility for managing the foreign debt component of those portfolios.
o Fees and Expenses. Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which are higher than the rates paid
by most other investment companies, and which decline on additional assets as
the Fund grows: 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 0.58% of average annual
net assets in excess of $1 billion. The Fund's management fee for its fiscal
year ended October 31, 1997, when the fund was still organized as a closed-end
investment company, was 0.65% of average annual net assets. Please refer to
"Expenses." Under the current Investment Advisory Agreement based on $55 million
net assets, the Fund's management fee would be 0.75%.
The Fund pays expenses related to its daily operations, such as custodian
fees, certain Trustees' fees, transfer agency fees, legal fees and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. 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. When deciding which brokers to use, the Manager
is permitted by the Investment Advisory Agreement to consider whether brokers
have sold shares of the Fund or any other funds for which the Manager serves as
investment advisor.
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 shares of the other Oppenheimer
funds 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 the 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 in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "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. These returns measure the performance of a
hypothetical account in the Fund over various periods, and do not show the
performance of each shareholder's account (which will vary if dividends are
received in cash or shares are sold or purchased). The Fund's performance
information may help you see how well your Fund has done over time and to
compare it to other mutual funds or market indices.
It is important to understand that the Fund's total returns and yield
represent past performance and should not be considered to be predictions of
future returns or performance. More detailed information about how total returns
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 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 shown for a one-year period (or less) for Class C shares, they reflect the
effect of the contingent deferred sales charge. However, total returns may also
be quoted at net asset value, without considering the effect of either the
front-end or the appropriate contingent deferred sales charge, as applicable,
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 from 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 result.
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.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended October 31, 1997, while the Fund
was still organized as a closed-end investment company, followed by a graphical
comparison of the Fund's performance to an appropriate broad-based market index
and a secondary index.
o Management's Discussion of Performance. During its fiscal year ended
October 31, 1997, Oppenheimer World Bond Fund's investments in foreign
fixed-income securities, U.S. government securities and lower-rated, high yield
domestic corporate bonds were negatively affected by the relatively low interest
rates in much of the world, resulting in a decline of bond yields in many
countries. The Fund's holdings in Latin American countries were decreased during
the fiscal year, and investments were shifted to other parts of the world, in
reaction to yield declines in Latin American markets. The Fund benefited from
fixed-income opportunities in a number of emerging markets. For example, the
Fund increased its allocation in Eastern Europe, which offered significant yield
opportunities. The Fund did not have many investments in Southeast Asia and was
therefore able to avoid some of the difficulties experienced in those markets,
including the devaluation of several currencies. The Fund's portfolio holdings,
allocations and strategies are subject to change.
o Comparing the Fund's Performance to the Market. The graph below shows
the performance of a hypothetical $10,000 investment in Class A shares of the
Fund held from its commencement of operations (November 23, 1988) until its
fiscal year end October 31, 1997. Performance information is based on the
performance of the Fund's shares as a closed-end fund with different expenses
Class B and C shares were not publicly offered during the fiscal year ended
October 31, 1997; therefore, no performance information is presented on Class B
and Class C shares in the graph below.
Performance is compared to the Salomon Brothers World Government Bond
Index. That index is an inclusive index of institutionally traded bonds,
including fixed-rate bonds, with a remaining maturity of one year or longer with
amounts outstanding of at least the equivalent of $25 million dollars. Floating-
or variable-rate bonds and private placement-type securities are not included.
The Index is designed to measure the total return performance of the domestic
and foreign government bond markets.
Index performance reflects the reinvestment of dividends' but does not
consider the effect of capital gains or transaction costs, and none of that data
below shows the effect of taxes. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index. The
Fund's performance reflects the effect of the Fund's 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 the indices shown.
Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments
in: Oppenheimer World Bond Fund (Class A), Salomon Brothers World Government
Bond Index [graph]
Average Annual Total Return of Class A Shares of the Fund at 10/31/97(1)
1 Year 5 Year Life of Class
- -------------------------------------------------------------------
2.81% 7.26% 8.13%
Total returns and the ending account values in the graphs reflect change in
share value and include reinvestment of all dividends and capital gains
distributions. The performance information for the Salomon Brothers World
Government Index begins on November 30, 1988.
(1) The inception date of the Fund (Class A shares) was 11/23/88. Class A
returns and the ending account value in the graph are shown net of the
applicable 4.75% maximum initial sales charge.
Past performance is not predictive of future performance.
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 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 may pay an initial sales
charge on investments up to $1 million (up to $500,000 for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page 40). 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, 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 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
described in "Buying Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
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 to consider are how much you plan to invest and how long you plan to
hold your investment. If your goals and objectives change over time and you plan
to purchase additional shares, you should re-evaluate those factors to see if
you should consider another class of shares.
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 each class, 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 the 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 Class B or Class C shares 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 might be more advantageous than Class C (as well as Class B) 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 B). If investing
$500,000 or more, Class A may be more advantageous as your investment horizon
approaches 3 years or more.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more for Class B shares or $1 million or more for
Class C shares, 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 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 such as checkwriting are not available to Class B or Class
C shareholders, or other features (such as Automatic Withdrawal Plans) might not
be advisable (because of the effect of the contingent deferred sales charge) in
non-retirement accounts 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 to buy. Share certificates are not available for Class B
and Class C shares, and if you are considering using your shares as collateral
for a loan, that may be a factor to consider.
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 of as little as $25. Subsequent purchases of at least $25 can be
made by telephone through AccountLink.
o Under pension, profit-sharing and 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 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, it is recommended that you discuss your
investment first with a financial advisor, to be sure that it is appropriate for
you.
o Payments by 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 to 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 an authorized entity 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 normally your order must be transmitted 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 A to this
Prospectus sets 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 (as defined in that 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. 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 Commissions 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
less than $100,000 4.50% 4.71% 3.75%
- ------------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
- ------------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------
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.
|X| 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 aggregating $1 million or more;
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more;
o Purchases by a retirement plan qualified under sections 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 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 within 12 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. That sales charge may 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 gains distributions) or (2)
the original offering 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 amount of the 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 of the end of the
calendar month of the purchase of the exchanged shares, the sales charge will
apply.
|X| 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 include 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 the 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 and Class B shares of the Fund and other Oppenheimer funds
during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for
the Class A shares purchased during that period. 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 as to 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 providing specifically for the use of
shares of the Fund in particular investment products made available to their
clients (those clients may be charged a transaction fee by their dealer, broker
or advisor for the purchase or sale of Fund shares);
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 sections 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 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 of 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 Class 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 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 for distributions form 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 mutual fund (other than a fund managed by the Manger or its
subsidiary) 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; or (11) plan termination or "in-service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA;
o for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
o Service Plan for Class A Shares. In connection with its conversion to an
open-end investment company, 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 shareholder accounts
that hold Class A shares. Under the Plan, 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 shares at the time of redemption or the original offering 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 (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse 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 Beginning of Contingent Deferred Sales
Month in which Purchase Charge On Redemptions in That
Order Was Accepted Year (As % of Amount Subject tCharge)
- ------------------------------------------------------------------------------
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 at that time 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 offering 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 the Distributor to
reimburse 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.
Distribution and Service Plans for Class B and Class C Shares. In connection
with its conversion to an open-end investment company, the Fund has adopted
Distribution and Service Plans for Class B and Class C shares to compensate the
Distributor for its services and costs in distributing Class B and Class C
shares and servicing accounts. Under the Plans, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B and Class C
shares. The Distributor also receives 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 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 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 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 Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor include paying
and financing the payment of sales commissions, service fees and other costs of
distributing and selling Class B and Class C shares.
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 sales of Class B shares is 4.00% of the
purchase price. The Distributor retains the Class B asset-based sales charge.
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 to dealers from its own resources at the time of sale of Class C shares.
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 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 may pay the Class C service fee and
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'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 Plans for Class B and Class C shares. 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.
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
described in "Reduced Sales Charges" in the Statement of Additional Information.
In order to receive a waiver of the Class B or Class C contingent deferred sales
charge, you must notify the Transfer Agent as to which conditions apply.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
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 to make "substantially equal periodic
payments" as permitted in 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 (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.
o Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares 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;
o shares issued in plans of reorganization to which the Fund is a party;
and
o shares redeemed in involuntary redemptions as described below.
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 shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the special PhoneLink number: 1-800-533-3310.
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. Requests for certain account transactions may
be sent to the Transfer Agent by fax (telecopier). Please call 1-800-525-7048
for 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 worth $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks may
be sent to you or sent automatically to your bank account on 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
automatically to exchange an amount you establish in advance for shares 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, including SARSEP-IRAs o Pension and Profit-Sharing
Plans for self-employed persons and other employers, and 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 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 held 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 your account statement o Shares are being transferred to a Fund
account with a different owner or name 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 Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
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 call must be received by the Transfer Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but which 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
on AccountLink, you may have the proceeds sent to that bank account.
o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed 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.
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 "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
name(s) and address. Shares held under certificates 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 in 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 7 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 sale of portfolio 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 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 and Class C 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 or certified check or arrange with your
bank to 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 $200 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 taxable 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 underreport 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 and
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 and Class
C shares from net investment income each regular business day and pays such
dividends to shareholders monthly. It is expected that distributions paid with
respect to Class A 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. Dividends paid on each class of shares may generally be less than
dividends paid by a conventional bond fund that seeks income, because the Fund
seeks total return as its primary objective.
Prior to the Fund's conversion to an open-end investment company, and it
is intended to continue upon such conversion, the Fund had adopted 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. The
practice of attempting to pay dividends on Class A shares at a constant level
requires the Manager, consistent with the Fund's investment objective and
investment restrictions, to monitor the Fund's portfolio and select higher
yielding securities when deemed appropriate to maintain necessary net investment
income levels. The Fund anticipates paying dividends at the targeted dividend
level from net investment income and other distributable income without any
impact on the Fund's net asset value per share. During the Fund's fiscal year
ended October 31, 1997, the Fund's practice of attempting to pay dividends
(while still a closed-end investment company) at a constant level did not have
any impact on the Fund's investment strategies or its net asset value per share.
The Board of Trustees may change the Fund's targeted dividend level at any time,
without prior notice to shareholders; the Fund does not otherwise have a fixed
dividend rate and 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 or long-term capital gains, and may make supplemental distributions of
dividends and capital gains following the end of its fiscal year (which ends
October 31). Short-term capital gains are treated as dividends for tax purposes.
Long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year. There can be no assurance
that the Fund will pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your application
how you want to receive your distributions. For OppenheimerFunds 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 through 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. So that the Fund will
not have to pay taxes on the amounts 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.
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, respectively.
o Taxes on Transactions. Share redemptions, including redemptions for
exchanges, are subject to capital gains tax. Generally, a capital gain or loss
is the difference between the price you paid for the shares and the price you
receive when you sell 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.
-3-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER WORLD BOND FUND
Graphic material included in Prospectus of Oppenheimer World Bond Fund:
"Comparison of Total Return of Oppenheimer World Bond Fund, the Salomon Brothers
World Government Bond Index - Change in Value of a $10,000 Hypothetical
Investment"
Linear graphs will be included in the Prospectus of Oppenheimer World 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, the graphs will cover the period since the Fund's commencement of
operations on November 23, 1988 through October 31, 1997. The graphs will
compare such values with the same investments over the time periods which are
similar but not identical with the Salomon Brothers World Government Bond Index.
The index comparison begins on November 31, 1988. 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
Salomon Brothers World Government Bond Index, is set forth in the Prospectus
under "Performance of the Fund -- Comparing the Fund's Performance to the
Market"
Oppenheimer Salomon Brothers
Fiscal Year World Bond World
(Period)Ended Fund A Government Bond Index
- ------------- ------------------- ---------------------
11/30/88(1) $9,525 $10,000
10/31/89 $10,307 $10,110
10/31/90 $10,995 $11,262
10/31/91 $12,745 $12,533
10/31/92 $13,477 $14,273
10/31/93 $14,834 $15,985
10/31/94 $14,981 $16,562
10/31/95 $16,301 $19,079
10/31/96 $18,606 $20,105
10/31/97 $20,082 $20,631
Total returns and the ending account values in the graphs reflect change in
share value and include reinvestment of all dividends and capital gains
distributions. The performance information for the Salomon Brothers World
Government Index begins on November 30, 1988.
(1) The inception date of the Fund (Class A shares) was 11/23/88. Class A
returns and the ending account value in the graph are shown net of the
applicable 4.75% maximum initial sales charge.
Past performance is not predicative of future performance.
-4-
<PAGE>
Appendix A
Description of Securities Ratings
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.
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 Corporation 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, L.P.
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.
A-1
<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 Commission
Sales Charge Sales 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 40 to 45 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>
Oppenheimer World Bond Fund
Two World Trade Center
New York, New York 10048-0203
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 Agent 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
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, CO 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
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 an
offer in such state.
PR0705.001.0498 *Printed on Recycled Paper
B-1
<PAGE>
Oppenheimer World Bond Fund
2 World Trade Center, New York, New York, 10048-0203
1-800-525-7048
Statement of Additional Information dated April 24, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated April 24, 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 Objectives and Policies...........................................2
Investment Policies and Strategies......................................2
Other Investment Techniques and Strategies..............................9
Other Investment Restrictions..........................................23
How the Fund is Managed.....................................................24
Organization and History...............................................24
Trustees and Officers of the Fund......................................25
The Manager and Its Affiliates.........................................31
Brokerage Policies of the Fund..............................................32
Performance of the Fund.....................................................34
Distribution and Service Plans..............................................38
About Your Account
How To Buy Shares...........................................................40
How To Sell Shares..........................................................49
How To Exchange Shares......................................................54
Dividends, Capital Gains and Taxes..........................................56
Additional Information About the Fund.......................................57
Financial Information About the Fund
Independent Auditors' Report................................................58
Financial Statements........................................................59
Appendix A: Corporate Industry Classifications............................A-1
-1-
<PAGE>
ABOUT THE FUND
Investment Objectives 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 strategies the Fund may use to achieve its investment
objectives. Certain capitalized terms used in this Statement of Additional
Information have the same meaning as those terms have in the Prospectus.
o Foreign Securities. As noted in the Prospectus, the Fund may invest in
securities (which may be denominated 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, and in securities issued by U.S. corporations denominated in
non-U.S. currencies. Foreign securities are subject, however, to additional
risks not associated with domestic securities, as discussed below. These
additional risks may be more pronounced as to investments in securities issued
by emerging market countries or by companies located in emerging market
countries. Securities of foreign issuers that are represented by American
depository receipts, or that are listed only on a U.S. securities exchange, or
are traded only 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. 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.
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.
Investments in foreign securities offer potential benefits not available
from investing 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.
o Investment Risks of Fixed-Income Securities. All fixed-income securities
are subject to two types of risks: credit risk and interest rate risk. Credit
risk relates to the ability of the issuer to meet interest or principal payments
on a security as they become due. Generally, higher yielding lower-grade bonds
are subject to credit risk to a greater extent than lower yielding, investment
grade bonds. 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
prevailing interest rates will generally reduce the market value of
already-issued 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 changes in their prices from changes in interest rates than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities after the Fund buys them will not affect the interest payable on
those securities, and thus the cash income from such securities is not affected
by interest rate changes. However, those price fluctuations will be reflected in
the valuations of these securities and therefore the Fund's net asset values.
As stated in the Prospectus, the Fund may invest no more than 50% of its
total assets in non-investment grade securities with no more than 30% of the
Fund's total assets being invested in non-investment grade: (1) foreign
government securities, (2) securities issued by foreign corporations or (3)
securities denominated in non-U.S. currencies, and no more than 5% of its total
assets, measured at the time of purchase, in securities which are rated "C" or
"D" by either Moody's, Duff & Phelps or Standard & Poor's. Those securities may
be considered highly speculative and may be in default. High yield securities,
whether rated or unrated, may be subject to greater market fluctuations and
risks of loss of income and principal than lower-yielding, higher-rated,
fixed-income securities. Risks of high yield securities may include (i) limited
liquidity and secondary market support, (ii) substantial market price volatility
resulting from changes in prevailing interest rates, (iii) subordination of the
obligations to the prior claims of banks and other senior lenders, (iv) the
operation of mandatory sinking fund or call/redemption provisions during periods
of declining interest rates that could cause the Fund to be able to reinvest
premature redemption proceeds only in lower-yielding portfolio securities, (v)
the possibility that earnings of the issuer may be insufficient to meet its debt
service, and (vi) the issuer's low creditworthiness and potential for insolvency
during periods of rising interest rates and economic downturn. As a result of
the limited liquidity of high yield securities, at times their prices have
experienced significant and rapid declines when a substantial number of holders
decided to sell simultaneously. A decline is also likely in the high yield bond
market during a general economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield bonds and
adversely affect the value of outstanding bonds and the ability of the issuers
to repay principal and interest. In addition, there have been several
Congressional attempts to limit the use of tax and other advantages of high
yield bonds which, if enacted, could adversely affect the value of these
securities and the Fund's net asset value. For example, federally-insured
savings and loan associations have been required to divest their investments in
high yield bonds.
o U.S. Government Securities. The obligations of U.S. Government agencies
or instrumentalities in which the Fund may invest may or may not be guaranteed
or supported by the "full faith and credit" of the United States. Some are
backed by the right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full faith and
credit of the United States. If the securities are not backed by the full faith
and credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and may not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. The Fund will invest in U.S.
Government Securities and the securities of such agencies and instrumentalities
of the U.S. Government when the Fund's investment manager, OppenheimerFunds,
Inc. (the "Manager") is satisfied that the credit risk with respect to such
instrumentality is minimal.
General changes in prevailing interest rates will affect the values of the
Fund's portfolio securities. The value will vary inversely to changes in such
rates. For example, if such rates go up after a security is purchased, the value
of the security will generally decline. A decrease in interest rates may affect
the maturity and yield of mortgage-backed securities by increasing unscheduled
prepayments of the underlying mortgages. With its objective of seeking interest
income while conserving capital, the Fund may purchase or sell securities
without regard to the length of time the security has been held, to take
advantage of short-term differentials in yields. While short-term trading
increases the portfolio turnover, the execution cost for U.S. Government
Securities is substantially less than for equivalent dollar values of equity
securities (see "Brokerage Provisions of the Investment Advisory Agreement,"
below).
The U.S. Government Securities in which the Fund may invest include the
following:
o GNMA Certificates. The Government National Mortgage Association ("GNMA")
is a wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs involve
its guarantees of privately-issued securities backed by pools of mortgages. GNMA
Certificates are debt securities representing an interest in one or a pool of
mortgages that are insured by the Federal Housing Administration ("FHA") or the
Farmers Home Administration ("FMHA") or guaranteed by the Veterans
Administration ("VA").
The GNMA Certificates in which the Fund invests are of the "fully modified
pass-through" type, that is, they provide that the registered holders of the
Certificates will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not those
amounts are collected by the issuers. Amounts paid include, on a pro rata basis,
any prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of such GNMA
Certificates, whether or not the interest on the underlying mortgages has been
collected by the issuers.
The GNMA Certificates purchased by the Fund are guaranteed as to timely
payment of principal and interest by GNMA. It is expected that payments received
by the issuers of GNMA Certificates on account of the mortgages backing the
Certificates will be sufficient to make the required payments of principal of
and interest on such GNMA Certificates, but if such payments are insufficient
for that purpose, the guaranty agreements between the issuers of the
Certificates and GNMA require the issuers to make advances sufficient for such
payments. If the issuers fail to make such payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts which may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under such guaranties.
GNMA Certificates are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and, except to
the extent of payments received by the issuers on account of such mortgages,
GNMA Certificates do not constitute a liability of, nor evidence any recourse
against, such issuers, but recourse is solely against GNMA. Holders of GNMA
Certificates (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
GNMA Certificates held by the Fund. All of the mortgages in the pools relating
to the GNMA Certificates in the Fund are subject to prepayment without any
significant premium or penalty, at the option of the mortgagors. While the
mortgages on 1-to-4-family dwellings underlying certain GNMA Certificates have a
stated maturity of up to 30 years, it has been the experience of the mortgage
industry that the average life of comparable mortgages, as a result of
prepayments, refinancing and payments from foreclosures, is considerably less.
Periods of dropping interest rates may spur refinancing of existing mortgages,
accelerating the rate of prepayments. Prepayments on such mortgages received by
the Fund will be reinvested in additional GNMA Certificates or other U.S.
Government Securities. The yields on such additional securities may not
necessarily be the same as (and may be lower than) the yields on the prepaid
securities, which will affect the income the Fund receives and pays to its
shareholders.
o Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each registered
holder of a FHLMC Certificate timely payment of the amounts representing a
holder's proportionate share in (i) interest payments less servicing and
guarantee fees, (ii) principal prepayments and (iii) the ultimate collection of
amounts representing such holder's proportionate interest in principal payments
on the mortgage loans in the pool represented by such FHLMC Certificate, in each
case whether or not such amounts are actually received. The obligations of FHLMC
under its guarantees are obligations solely of FHLMC and are not backed by the
full faith and credit of the United States.
o Federal National Mortgage Association ("FNMA") Certificates. FNMA, a
federally-chartered and privately-owned corporation, issues FNMA Certificates
which are backed by a pool of mortgage loans. FNMA guarantees to each registered
holder of a FNMA Certificate that the holder will receive amounts representing
such holder's proportionate interest in scheduled principal and interest
payments, and any principal prepayments, on the mortgage loans in the pool
represented by such FNMA Certificate, less servicing and guarantee fees, and
such holder's proportionate interest in the full principal amount of any
foreclosed or other liquidated mortgage loan, in each case whether or not such
amounts are actually received. The obligations of FNMA under its guarantees are
obligations solely of FNMA and are not backed by the full faith and credit of
the United States or any agency or instrumentality thereof other than FNMA.
o Preferred Stocks. Preferred stocks, like common stocks, represent
ownership interests in a corporation. However, unlike common stock, preferred
stock offers a stated dividend rate payable from a corporation's earnings.
Dividends on some preferred stocks may be "cumulative" if stated dividends from
prior periods have not been paid. Preferred stock also generally has a
preference over common stock on the distribution of a corporation's assets in
the event of liquidation of the corporation, and may be "participating," which
means that it may be entitled to a dividend exceeding the stated dividend in
certain cases. The rights of preferred stocks are generally subordinate to
rights associated with a corporation's debt securities.
o Convertible Securities. While convertible securities are a form of debt
security in many cases, their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's
investment decision with respect to convertible securities than in the case of
non-convertible fixed income securities. To determine whether convertible
securities should be regarded as "equity equivalents," the Manager examines the
following factors: (1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common stock of the
issuer, (2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis (considering the
effect of conversion of the convertible securities), and (3) the extent to which
the convertible security may be a defensive "equity substitute," providing the
ability to participate in any appreciation in the price of the issuer's common
stock.
o Money Market Instruments. The Fund may invest in U.S. dollar-denominated
debt obligations maturing in one year or less to maintain liquidity deemed
necessary by the Manager for investment purposes. In addition, the Fund may
invest in such instruments for defensive purposes, to minimize the impact of
fluctuating interest rates on the net asset value of the Fund during periods of
adverse market conditions. These obligations include:
(1) U.S. Government Securities: Debt instruments of the type described
under "U.S. Government Securities" above. Instruments in money market
instruments will be viewed by the Fund as U.S. Government Securities to the
extent that the securities or, in the case of repurchase agreements, the
securities collateralizing the agreements, are U.S. Government Securities.
(2) 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 that are subject to withdrawal penalties,
other than those maturing in seven days or less, 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.
(3) Commercial Paper: Obligations rated "A-1", "A-2" or "A-3" by Standard
& Poor's or Prime-1, Prime-2 or Prime-3 by Moody's or if not rated, issued by a
corporation or a foreign government, subdivision, agency or instrumentality
having an existing debt security rated "A" or better by Standard & Poor's or
Moody's.
(4) Corporate Obligations: Corporate debt obligations (including master
demand notes but not including commercial paper) if they are issued by domestic
corporations and are rated "A" or better by Standard & Poor's or Moody's or
unrated securities which are of comparable quality in the opinion of the
Manager.
(5) Other Obligations: Obligations other than those listed in (1) through
(4) above, but not satisfying the standards set forth therein, if they are: (i)
subject to repurchase agreements; or (ii) guaranteed as to principal and
interest by a domestic or foreign bank having total assets in excess of $1
billion, by a corporation whose commercial paper may be purchased by the Fund,
or by a foreign government, subdivision, agency or instrumentality having an
existing debt security rated "A" or better by Standard & Poor's, Duff & Phelps
or Moody's.
(6) Board Approved Instruments: Other short-term investments of a type
which the Board determines presents minimal credit risks and which are of "high
quality" as determined by any major rating service or, in the case of an
instrument that is not rated, of comparable qualify as determined by the Board.
Appendix B to the Prospectus dated November 23, 1988 contains a general
description of securities ratings.
Bankers' 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.
Bank time deposits may be non-negotiable until expiration and may impose
penalties for early withdrawal. 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
repay 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, and there is no secondary market for them, although
they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The Fund has no
limitations on the type of issuer from whom these notes will be purchased;
however, in connection with such purchase and on an ongoing basis, subject to
policies established by the Board of Trustees, 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. Investments in bank time
deposits and master demand notes are subject to the 10% investment limitation on
securities that are not readily marketable as set forth below.
o Asset-Backed Securities. The value of asset-backed securities 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 is exhausted. The
risks of investing in asset-backed securities are ultimately dependent upon
payment of the underlying consumer loans by the individuals, and 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 that
shorten the weighted average life of asset-backed securities and may lower their
return in the same manner as described above for prepayments of a pool of
mortgage loans underlying mortgage-backed securities.
o Participation Interests. As stated in the Prospectus, 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 borrower. 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.
Although changes in the value of the Fund's portfolio securities subsequent to
their acquisition are reflected in the net asset value of the Fund's shares,
such changes will not affect the income received by the Fund from such
securities. The dividends paid by the Fund will increase or decrease in relation
to the income received by the Fund from its investments, which will in any case
be reduced by the Fund's expenses before being distributed to the Fund's
shareholders.
Other Investment Techniques and Strategies
o Borrowing. From time to time, the Fund may increase its ownership of
securities by borrowing from banks on a unsecured basis and investing the
borrowed funds, subject to the restrictions stated in the Prospectus. Any such
borrowing will be made only from banks, and pursuant to the requirements of the
Investment Company Act, will be made only to the extent that the value of that
Fund's assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings including the proposed borrowing and amounts covering the
Fund's obligations under "forward roll" transactions. If the value of the Fund's
assets so computed should fail to meet the 300% asset coverage requirement, the
Fund is required within three days to reduce its bank debt to the extent
necessary to meet such requirement and may have to sell a portion of its
investments at a time when independent investment judgment would not dictate
such sale. Borrowing for investment increases both investment opportunity and
risk. Since substantially all of the Fund's assets fluctuate in value, but
borrowing obligations are fixed, when the Fund has outstanding borrowings, its
net asset value per share correspondingly will tend to increase and decrease
more when portfolio assets fluctuate in value than otherwise would be the case.
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, or to securities to
be delivered at a later date. 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 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 be required to
identify with its Custodian certain assets, which may consist of liquid assets
of any type, including equity securities and debt securities of any grade, in an
amount 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 objectives 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.
o 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 U.S. government securities, which must meet
the credit requirements set by the Fund'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
and illiquid 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 must,
on each business day, at least equal the market value of the loaned securities
and must consist of cash, bank letters of credit, U.S. government securities, or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. In a portfolio securities
lending transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Fund pays in arranging the loan. The Fund
may share the interest it receives on the collateral securities with the
borrower as long as it realizes at least a minimum amount of interest required
by the lending guidelines established by its Board of Trustees. The Fund will
not lend its portfolio securities to any officer, trustee, employee or affiliate
of the Fund or its Manager. The terms of the Fund's loans must meet certain
tests under the Internal Revenue Code and permit the Fund to reacquire loaned
securities on five business days' notice or in time to vote on any important
matter.
o Hedging. As described in the Prospectus, the Fund may employ one or more
types of hedging instruments. 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) buy 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) buy Futures, or (ii) buy calls or write puts 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) buy 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 higher or lower rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's activities in the underlying cash market. Additional
Information about the hedging instruments the Fund may use is provided below. 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 objectives, legally
permissible and adequately disclosed.
o Writing Covered Call Options. 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 is 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. An option position may be closed out only on a
market that provides secondary trading for option of the same series, and there
is no assurance that a liquid secondary market will exist for a particular
option. 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 security, provided that at the time the call is written, the
Fund covers the call by segregating in escrow an equivalent dollar amount of
liquid assets. The Fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the obligation under 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. 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 identify liquid assets on its records as
segregated 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.
o Purchasing Calls and Puts. When the Fund purchases a call (other than in
a closing purchase transaction), it pays a premium and, except as to calls on
indices or Futures, 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. When the Fund purchases a call on an index or Future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. 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 exercise price plus the
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, except as to puts on
indices, 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 enables the Fund to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling such underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will become
worthless at its expiration date, and the Fund will lose its premium payment and
the right to sell the underlying investment. The put may, however, be sold prior
to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index or
a put on a Future not held by the Fund, permits the Fund either to resell the
put or 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 its expiration date. When the Fund purchases a put on an index, or
on a Future not held by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities held. In the case of a put on
an index or Future, settlement is in cash rather than by delivery by the Fund of
the underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts and
calls on securities except that all settlements are in cash and gain or loss
depends on changes in the index or Future in question (and thus on price
movements in the securities markets generally) rather than on price movements in
individual securities or futures contracts. When the Fund buys a calls on an
index or Future, it pays a premium. During the call period, upon exercise of a
call by the Fund, a seller of a corresponding call on the same investment will
pay the Fund an amount of cash to settle the call if the closing level of the
index or Future upon which the call is based is greater than the exercise price
of the call. That cash payment is equal to the difference between the closing
price of the index or Future and the exercise price of the call times a
specified multiple (the "multiplier"), which determines the total dollar value
for each point of difference. When the Fund buys a put on an index or Future, it
pays a premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver to the Fund
an amount of cash to settle the put if the closing level of the index or Future
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.
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
put or 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 or 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 and puts 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 over-the-counter markets or are quoted by major recognized dealers
in such options. It does so to protect against declines in the dollar value of
foreign securities and against increases in the dollar cost of foreign
securities to be acquired. If the Manager anticipates a rise in the dollar value
of a foreign currency in which securities to be acquired are denominated, the
increased cost of 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 transaction 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 held in a segregated account by 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 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
due to an expected adverse change in the exchange rate. This is a cross-hedging
strategy. In such circumstances, the Fund covers the option by identifying with
its Custodian, certain assets which may consist of liquid securities of any type
including equity securities and debt securities of any grade in an amount equal
to the exercise price of the option.
o Interest Rate Futures. No price is paid or received upon the purchase or
sale of an Interest Rate Future. Interest Rate Futures obligate one party to
deliver and the other party to take a specific debt security or amount of
foreign currency, respectively, at a specified price on a specified date. Upon
entering into a Futures transaction, the Fund will be required to deposit an
initial margin payment with the futures commission merchant (the "futures
broker"). 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 and from the futures broker
on a daily basis. Prior to 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 Financial Futures. Financial Futures are similar to Interest Rate
Futures except that settlement is made in cash, and net gain or loss on options
on Financial Futures depends on price movements of the securities included in
the index. The strategies which the Fund employs regarding Financial Futures are
similar to those described above with regard to Interest Rate Futures.
o Commodity Futures Contracts. The Fund intends to invest a portion of its
assets in commodity futures contracts (referred to as commodity futures).
Commodity futures may be based upon commodities within five main commodity
groups: (1) energy, which includes crude oil, natural gas, gasoline and heating
oil; (2) livestock, which includes cattle and hogs; (3) agriculture, which
includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial
metals, which includes aluminum, copper, lead, nickel, tin and zinc; and (5)
precious metals, which includes gold, platinum and silver. The Fund may purchase
and sell commodity futures contracts, options on futures contracts and options
and futures on commodity indices with respect to these five main commodity
groups and the individual commodities within each group, as well as other types
of commodities.
Characteristics of the commodity futures markets. Commodity futures
contracts are an agreement between two parties for one party to buy an asset
from the other party at a later date at a price and quantity agreed upon today.
Commodity futures contracts are traded on futures exchanges. These futures
exchanges offer a central marketplace in which to transact futures contracts, a
clearing corporation to process trades, a standardization of expiration dates
and contract sizes, and the availability of a secondary market. Futures markets
also specify the terms and conditions of delivery as well as the maximum
permissible price movement during a trading session. Additionally, the commodity
futures exchanges have position limit rules which limit the amount of futures
contracts that any one party may hold in a particular commodity at any point in
time. These position limit rules are designed to prevent any one participant
from controlling a significant portion of the market.
Comparison to forward contracts. Futures contracts and forward contracts
achieve the same economic effect: both are an agreement to purchase a specified
amount of a specified commodity at a specified future date for a price agreed
upon today. However, there are significant differences in the operation of the
two contracts. Forward contracts are individually negotiated transactions and
are not exchange traded. Therefore, with a forward contract, the Fund would make
a commitment to carry out the purchase or sale of the underlying commodity at
expiration.
Storage Costs. As in the financial futures markets, there are hedgers and
speculators in the commodity futures markets. However, unlike financial
instruments, commodities entail costs of physical storage when purchased. For
instance, a large manufacturer of baked goods that wishes to hedge against a
rise in the price of wheat has two choices: (i) it can purchase the wheat today
in the cash market and store the wheat at its cost until it needs the wheat to
produce baked goods, or (ii) it can buy commodity futures related to wheat. The
price of the commodity futures will reflect the storage costs associated with
purchasing the physical commodity. To the extent that these storage costs change
for an underlying commodity while the Fund is "long" (that is, owns) futures
contracts on that commodity, the value of the futures contract may change
commensurately.
Reinvestment Risk. In the commodity futures markets, if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will sell futures contracts to lock in the price of the commodity at delivery in
the future. In order to induce speculators to take the corresponding purchase
side of the same futures contract, the commodity producer must be willing to
sell the futures contract at a price which is below the expected future spot
price. Conversely, if the predominant group of hedgers in the futures market are
the purchasers of the underlying commodity who purchase futures contracts to
hedge against a rise in prices, then speculators will take the short side of the
futures contract if the futures price is greater than the expected future spot
price of the commodity.
Strategies. The changing strategies of the hedgers and speculators in the
commodity markets can determine whether futures prices are above or below the
expected future spot price. This can have significant implications for the Fund
when it is time to reinvest the proceeds from a maturing futures contract into a
new futures contract. If the strategies of hedgers and speculators in futures
markets has shifted such that commodity purchasers are the predominant group of
hedgers in the market, the Fund might reinvest at higher futures prices or
choose other related commodity investments.
Additional Economic Factors. The values of commodities which underlie
commodity futures contracts are subject to additional variables which may be
less significant to the values of traditional securities such as stocks and
bonds. Variables such as drought, floods, weather, livestock disease, embargoes
and tariffs may have a greater impact on commodity prices and commodity-linked
instruments, including futures contracts, Hybrid Instruments, commodity options
and commodity swaps, than on traditional securities. These additional variables
may create additional investment risks which subject the Fund's
commodity-related investments to greater volatility than investments in
traditional securities.
Leverage. There is much greater leverage in futures trading than in
stocks. As a registered investment company, the Fund must pay in full for all
securities it purchases. In other words, the Fund is not allowed to purchase
securities on margin. However, the Fund is allowed to purchase futures contracts
on margin where the initial margin requirements are typically between 3 and 6
percent of the face value of the contract. That means the Fund is required to
pay up front only between 3 to 6 percent of the face value of the futures
contract. Therefore, the Fund has a higher degree of leverage in its futures
contract purchases than in its stock purchases. As a result there may be greater
volatility in rates of return on futures contract purchases than on stock
purchases.
Price volatility. Despite the daily price limits on the futures exchanges,
the price volatility of commodity futures contracts has been historically
greater than that for traditional securities such as stocks and bonds. To the
extent that the Fund invests in commodity futures contracts, the assets of the
Fund, and hence the net asset value of Fund shares, may be subject to greater
volatility.
Marking-to-market futures positions. The futures clearinghouse marks every
futures contract to market at the end of each trading day, to ensure that the
outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Fund's futures
positions have declined in value, the Fund may be required to post additional
margin to cover that decline. Alternatively, if the Fund's futures positions
have increased in value, that increase will be credited to the Fund's account.
o Forward Contracts. 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 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.
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 may limit any potential gain that might
result should the value of the currencies increase.
The Fund may also enter into a forward contract to sell a foreign currency
other than that in which the underlying security is denominated. This technique
is referred to as "cross hedging," and 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.
The success of cross hedging is dependent on many factors, including the
ability of the Manager to correctly identify and monitor the correlation among
foreign currencies and between foreign currencies and the U.S. dollar. To the
extent that these correlations are not identical, the Fund may experience losses
or gains on both the underlying security and the cross currency hedge. However,
the Manager shall determine that any cross hedge is a bona fide hedge in that it
is expected to reduce the volatility of the Fund's total return.
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. To do so, the Fund enters 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 value of portfolio
positions ("position hedges"). In a position hedge, for example, when the Fund
believes that a foreign currency in which the Fund has security holdings may
suffer a substantial decline against the U.S. dollar, the Fund may enter into a
forward sale contract to sell an amount of that foreign currency for a fixed
U.S. dollar amount. Additionally, 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 U.S. dollar
amount.
The Fund may also cross hedge its portfolio positions by entering into a
forward contract to buy or sell a foreign currency other than the currency in
which its underlying securities are denominated for a fixed amount in U.S.
dollars or a fixed amount in another currency which is correlated with the U.S.
dollar. If the Fund does not own portfolio securities denominated in the
currency on the long side of the cross hedge, the Fund will not be required to
later purchase portfolio securities denominated in that currency. Instead, the
Fund may unwind the cross hedge by reversing the original transaction, that is,
by transacting in a forward contract that is opposite to the original cross
hedge or it may extend the hedge by "rolling" the hedge forward.
The Fund will identify with its Custodian certain assets, which may
consist of liquid assets of any type, including equity securities and debt
securities of any grade, having a value equal to the aggregate amount of the
Fund's commitment under Forward Contracts to cover its short positions. The Fund
will not enter into such Forward Contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency or another
currency that is also the subject of the hedge. The Fund, however, in order to
avoid excess transactions and transaction costs, may maintain a net exposure to
Forward Contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in these currencies provided the excess amount is
"covered" by liquid securities, denominated in any currency, at least equal at
all times to the amount of such excess. 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. Such contracts
are not traded on an exchange. Therefore, 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. 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 identify with its custodian certain
assets, which may consist of liquid assets of any type, including equity
securities 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. 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 the 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.
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 is
evaluating whether OTC options should be considered liquid securities, and the
procedure described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its 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 in a manner
beyond the Fund's control. The exercise by the Fund of puts on securities or
Futures may cause the sale of related investments, also 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 or sells a put, a call, or 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 the 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.
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 a Rule adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and related
options premiums for a bona fide hedging position. However, under the Rule the
Fund must limit its aggregate initial Futures margin and related options
premiums to 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 options on futures 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 option exchanges governing the maximum number of options that 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 different
exchanges or through one or more 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 Manager as the
Fund (or a Manager that is an affiliate of the Fund's Manager. The exchanges
also impose position limits on Futures transactions which 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 buys
or sells a Future, the Fund will identify with its Custodian certain assets,
which may consist of liquid assets of any type, including equity securities and
debt securities of any grade, in an amount equal to the net exposure between the
market value and the contract price of the 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 marked-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 and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent 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 on each trade before determining a
net "Section 988" gain or loss under the Internal Revenue Code for that trade,
which may increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
o Risks of Hedging With Options and Futures. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are discussed in the Prospectus and above, there is a risk in using short
hedging by selling Futures to attempt to protect against decline in value of the
Fund's portfolio securities (due, for example, 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.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
equity securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of equity securities being hedged if the historical
volatility of the prices of the equity securities being hedged is more than the
historical volatility of the applicable index. It is also possible that if the
Fund has used hedging instruments in a short hedge, the market may advance and
the value of equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Futures and/or calls on such Futures or on
debt securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of concerns as
to possible further market decline or for other reasons, the Fund will realize a
loss on the hedging instruments that is not offset by a reduction in the price
of the debt securities purchased.
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 objectives 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: (1) 67%
or more of the shares present or represented by proxy at a shareholder meeting
if the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (2) more than 50% of the outstanding shares.
Under these additional restrictions:
o The Fund may not underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter for purposes of the
Securities Act of 1933;
o The Fund may not buy and retain securities of any issuer if those
officers, Trustees or Directors of the Fund or the Manager who beneficially own
more than 0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer; or
o The Fund cannot issue "senior securities," but this restriction does not
prohibit it from borrowing money as described in the Prospectus, or entering
into margin, collateral, segregation or escrow arrangements, or options,
futures, hedging transactions or purchasing and selling other investments as
permitted by its other investment policies.
For purposes of the Fund's policy not to concentrate its assets as
described in the Prospectus, the Fund has adopted, as a non-fundamental policy,
the corporate industry classifications set forth in Appendix A to this Statement
of Additional Information. This is not a fundamental policy.
How the Fund Is Managed
Organization and HistoryThe Fund is organized as a Massachusetts business trust
which currently operates as a diversified open-end management investment
company. The Fund originally commenced operations as a closed-end investment
company, formerly named Oppenheimer Multi Government Trust. Pursuant to
shareholder approval received on April 24, 1998 the Fund converted to an
open-end investment company effective as of the date of this Statement of
Additional Information.
As a Massachusetts business trust, the Fund is not required to hold, and
does not plan to hold, regular annual meetings of shareholders. The Fund will
hold meetings when required to do so by the Investment Company Act or other
applicable law, 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
Fund, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
of 10% of its outstanding shares. 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 Fund valued at $25,000 or more or holding at least
1% of the Fund'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 Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set forth
under Section 16(c) of the Investment Company Act.
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 their vote at shareholders' meetings. Shareholders of the
Fund vote together in the aggregate on certain matters at shareholder meetings,
such as the election of Trustees and ratification of appointment of auditors for
the Fund. Shareholders of a particular series or class vote separately on
proposals which affect that series or class, and shareholders of a series or
class which is not affected by that matter are not entitled to vote on the
proposal.
The Trustees are authorized to create new series and classes of series. The
Trustees may reclassify unissued shares of the Fund 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.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. 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 Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund 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
listed below. The address of each Trustee and officer is Two World Trade Center,
New York, New York 10048-0203, unless another address is listed below. All of
the Trustees are also Trustees or Directors of 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 Mid-Cap Fund,
Oppenheimer Money Market Fund, Inc., Oppenheimer Multiple Strategies Fund,
Oppenheimer Municipal Bond Fund, Oppenheimer Multi- Sector Income Trust,
Oppenheimer New York Municipal Fund, Oppenheimer Multi-State Municipal Trust and
Oppenheimer Series Fund, Inc. (the "New York-based Oppenheimer funds"), except
that Ms. Macaskill is not a Director of Oppenheimer Money Market Fund, Inc. Ms.
Macaskill and Messrs. Spiro, Levy, Bishop, Bowen, Donohue, Farrar and Zack
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of April 1, 1998, the officers and Trustees of the
Fund as a group owned of record or beneficially less than 1% of the outstanding
shares of each class of the Fund. The statement does not include ownership of
shares held of record by an employee benefit plan for employees of the Manager
(for which plan a Trustee and an officer listed below, Ms. Macaskill and Mr.
Donohue, respectively, are trustees), other than the shares beneficially owned
under that plan by the officers of the Fund listed below.
Leon Levy, Chairman of the Board of Trustees; Age: 72
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership)(since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee; Age: 64
19790 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995 to December 1997); Vice President (June 1990
to March 1994 and Counsel of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; Executive Vice President (December 1997 to
October 1995), General Counsel and a director (December 1995 to October 1993) of
the Manager; Executive Vice President and a director of OppenheimerFunds
Distributor, Inc. (the "Distributor"), (July 1978 to October 1993); Executive
Vice President and (a director of HarbourView Asset Management Corporation
("HarbourView") (april 1986 to October 1995),an investment adviser subsidiary of
the Manager, Vice President and a director (October 1988 to October 1993) and
Secretary (March 1981 to September 1988) or Centennial Asset Management
Corporation ("Centennial"), an investment adviser subsidiary of the Manager; a
director (November 1989 to October 1993) and Executive Vice President (November
1989 to January 1990) of Shareholder Financial Services, Inc. ("SFSI"), a
transfer agent subsidiary of the Manager; a director of Shareholder Services,
Inc. ("SSI"), (August 1984 to October 1993), a transfer agent subsidiary of the
Managr; an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 74
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers, Inc
(publishers of Psychology Today and Mother Earth News) and of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*#; Age: 49
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 (since 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 or trustee 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.
Elizabeth B. Moynihan, Trustee; Age: 68
801 Pennsylvania Avenue, NW, Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University) and
National Building Museum; a member of the Trustees Council, Preservation League
of New York State, and of the Indo-U.S. Sub-Commission on Education and Culture.
------------------------
* A Trustee who is an "interested person" of the Fund.
# Not a Director of Oppenheimer Money Market Fund, Inc.
Kenneth A. Randall, Trustee; Age: 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texan
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age: 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and ASB); formerly New
York State Comptroller and trustee of the New York State and Local Retirement
Fund.
Russell S. Reynolds, Jr., Trustee; Age: 65
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K.); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.
Donald W. Spiro, Vice Chairman of the Board of Trustees*; Age: 72
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
Pauline Trigere, Trustee; Age: 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee; Age: 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries, Ltd.
(tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order) IMC Global Inc. (chemicals and
animal feed), Counselor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S. Department of
Agriculture, and U.S. Trade Representative.
------------------------
* A Trustee who is an "interested person" of the Fund.
Ashwin Vasan, Vice President and Portfolio Manager; Age: 35
Vice President of the Manager (since July 1993); an officer of other Oppenheimer
funds; formerly a Securities Analyst for the Manager (since January 1992).
Andrew J. Donohue, Secretary; Age: 47
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 Counsl (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.
George C. Bowen, Treasurer; Age: 61
6803 South 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); Trustee (since December 1997) of the
Denver-based Oppenheimer Funds; an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 49
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, 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.
Robert Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
o Remuneration of Trustees. The officers of the Fund and certain Trustees
of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the Manager
receive no salary or fee from the Fund. Mr. Galli received no salary or fee
prior to January 1, 1998. The remaining Trustees of the Fund received the
compensation shown below. The compensation from the Fund was paid during its
fiscal year ended October 31, 1997. The compensation from all of the New
York-based Oppenheimer funds includes the Fund and is compensation received as a
director, trustee or member of a committee of the Board during the calendar year
1997.
Aggregate Retirement BenefitTotal Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses Oppenheimer funds(1)
Leon Levy $0 $ (72)(2) $158,500
Chairman and
Trustee
Benjamin Lipstein $0 $ (43)(2) $137,000
Study Committee
Chairman, Audit
Committee Member
and Trustee (3)
Elizabeth B. Moyni$0n $ (43)(2) $ 96,500
Study Committee
Member and Trustee
Kenneth A. Randall $0 $ (39)(2) $ 88,500
Audit Committee
Chairman and
Trustee
- ----------------------
(1) For the 1997 calendar year.
(2) A credit was made for the Fund's projected benefit obligations and payments
were made to retired trustees, resulting in an accumulated liability at October
31, 1997.
(3) Committee position held during a portion of the period shown.
Aggregate Retirement BenefitTotal Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses Oppenheimer funds(1)
Edward V. Regan $0 $ (37)(2) $ 87,500
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S.
Reynolds, Jr. $0 $ (28)(2) $65,500
Proxy Committee
Member and
Trustee
Pauline Trigere $0 $ (26)(2) $ 58,500
Trustee
Clayton K. Yeutter $0 $ (28)(2) $ 65,500
Proxy Committee
Member and
Trustee
- ----------------------
(1) For the 1997 calendar year.
(2) A credit was made for the Fund's projected benefit obligations and payments
were made to retired trustees, resulting in an accumulated liability at October
31, 1997.
(3) Committee position held during a portion of the period shown.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York-based Oppenheimer
funds for at least 15 years to be eligible for the maximum payment. Because each
Trustee's retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited service that will be used to determine those benefits.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Fund. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds elected 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 without shareholder approval for the limited purpose
of determining the value of the Trustee's deferred fee account.
Major Shareholders. As of April 1, 1998, the only persons known by the
management of the Fund to own or be the beneficial owner of 5% or more of the
outstanding shares of the Fund was Paine Webber Incorporated, 1000 Harbor
Boulevard, 6th Floor, Union City, New Jersey 07087-6727, which owned of record
1,317,312 shares (representing approximately 19.9% of the shares) and Smith
Barney, Inc., 333 W 34th Street, New York, New York 10001, which owned 456,382
shares (representing approximately 6.9% of the shares).
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. OAC is also owned in part by certain of the Manager's
directors and officers, some of whom also serve as officers of the Fund, and one
of whom (Ms. Macaskill) also serves as a Trustee of the Fund.
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 by the Manager.
|X| Portfolio Management. The Portfolio manager of the Fund is Ashwin
Vasan, who is principally responsible for the day-to-day management of the
Fund's portfolio. Mr. Vasan's background is 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 domestic and international government and
corporate fixed-income securities, provide the Fund's portfolio manager with
counsel and support in managing the Fund's portfolio.
o The Investment Advisory Agreement. The Manager acts as investment adviser
to the Fund pursuant to the terms of an Investment Advisory Agreement dated as
of April 16, 1998. The Investment Advisory Agreement was approved by the Board
of Trustees, including a majority of the Trustees who are not "interested
persons" of the Fund (as defined in the 1940 Act) and who have no direct or
indirect financial interest in such agreement, on December 11, 1997 and by the
shareholders of the Fund at a meeting held for that purpose on April 16, 1998.
The investment advisory agreement between the Manager and the Fund
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 Distributor's 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 and
custodian expenses, share issuance costs, certain printing and registration
costs and non-recurring expenses, including litigation costs. For the Fund's
fiscal years ended October 31, 1995, 1996 and 1997 (while still a closed-end
investment company), the management fees paid by the Fund to the Manager totaled
$332,730, $346,262 and $359,532, respectively. The Fund incurred approximately
$15,011 in expenses for the fiscal year ended October 31, 1997 for services
provided by the Fund's prior Transfer Agent, Shareholder Financial services,
Inc. ("SFSI").
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.
o The Distributor. Under its General Distributor's Agreement with the Fund
dated as of April 16, 1998, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A, Class B and
Class C shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (excluding payments under the
Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders), are borne by the Distributor. Prior to the effective date of the
Agreement while still a closed-end investment company, the Fund did not have a
principal underwriter nor was a sales charge assessed on purchase of the Fund's
then single class of shares; therefore no expenses were incurred for these items
prior to conversion. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
o The Transfer Agent. OppenheimerFunds Services, a division of the
Manager, acts as the Fund's Transfer Agent pursuant to a Transfer Agency and
Service Agency Agreement. Pursuant to the Agreement, OppenheimerFunds Services,
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 Agreement. One of the duties of
the Manager under the advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act, 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 but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its 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
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would 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. Subject
to the foregoing considerations, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager or its
affiliates as a factor in the selection of brokers for the Fund's portfolio
transactions.
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 based 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 transactions 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. 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. Options commissions may be relatively higher than those
which would apply to direct purchases and sales of portfolio securities.
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 request 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 the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis at
the stated commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and
supplements 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 to
the Board of Trustees on an annual basis relating to the commissions paid to
brokers for such services, together with the Manager's assessment of the
reasonableness of such commissions in relation to the value or benefit of such
services.
While organized as a closed-end investment company, most purchases of the
portfolio securities made by the Fund were principal transactions at net prices,
and the Fund incurred little or no brokerage costs. The Fund paid brokerage
commissions during the fiscal years ended October 31, 1995, 1996 and 1997 in the
amounts of $1,333, $4,239 and $5,477, respectively.
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,"
"cumulative total return," "average annual 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 these total returns
are calculated for each class and the components of those calculations is set
forth below.
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 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 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 the particular class. Class B and Class C shares were not
publicly offered during the Fund's fiscal year ended October 31, 1997;
accordingly, no performance information for such classes of shares is set forth
below.
Prior to the date of this Statement of Additional Information, the Fund
operated as a closed- end investment company. Pursuant to shareholder approval
received on April 16, 1998 effective as of the date of this Statement of
Additional Information, the Fund was converted to an open-end investment company
with a revised and restated primary investment objective of seeking total return
and a secondary objective of income when consistent with total return. The
historical performance of the Class A shares of the Fund (formerly, the World
Bond Fund) has been restated to reflect the fees and expenses of such Class A
shares in effect as of the date of this Statement of Additional Information.
o 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 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 that apply to all funds that quote
yields 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 the class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield for a 30-day period may differ from the yield for
other periods. The SEC formula assumes that the standardized yield for a 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. Prior to April 24, 1998 the
Fund operated as a closed-end Fund and therefore the SEC yield was not
calculated.
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period. To calculate dividend yield, the dividends of
a class declared during a stated 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 Class A dividend yield may also be quoted without
deducting the maximum initial sales charge. The dividend yield for the 30-day
dividend period ended October 31, 1997 was as follows:
Without Deducting Sales Charge With Sales Charge Deducted
Class A: 8.06% 7.63%
o Total Return Information.
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 )
o Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
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). Prior to the date hereof, the Fund operated as a closed-end
investment company and no initial sales charge was imposed on Fund shares. 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. As discussed
above, total returns for Class A shares have been adjusted to reflect the fees
and expenses of such Class of shares in effect as of the date thereof without
giving effect to any fee waivers.
The average "annual total return" on an investment in Class A shares of
the Fund (using the method described above) for the one and five year periods
ended October 31, 1997, and for the period from November 23, 1988 (commencement
of operations of the Fund) through October 31, 1997, were 2.81%, 7.26% and
8.13%, respectively.
The "cumulative total return" on an investment in Class A shares (using
the method described above) for the period November 23, 1988 (commencement of
operations) through October 31, 1997 was 100.83%.
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 or Class C shares. Each is based
on the difference in net asset value per share at the beginning and the end of
the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions. The
average annual total return at net asset value on an investment in Class A
shares of the Fund for one and five year period ended October 31, 1997 and for
the period from November 23, 1988 (commencement of operations of the Fund)
through October 31, 1997, were 7.94%, 8.31% and 8.72%, respectively. The
cumulative total return at net asset value for the Fund's Class A shares for the
period from November 23, 1988 (commencement of operations) to October 31, 1997
was 110.84%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C 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 is
ranked against (i) all other funds, (ii) all other "international bond" funds,
and (iii) all other fixed-income funds, excluding money market funds. The Lipper
performance rankings are based on total returns that include the reinvestment of
capital gains distributions and income dividends but do not take sales charges
or taxes into consideration.
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 ranking of the performance of
its Class A, Class B or Class C 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 and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among international bond funds. Investment return
measures a fund's or class's one, three, five and ten-year average annual total
returns (depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns after considering the fund's sales charges and
expenses. Risk measures fund's or class' performance below 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's 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 rankings, 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 or Class
C shares may be compared with the performance for the same period of one or more
of the following indices, among others: the Consumer Price Index and the Salomon
Brothers. World 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
performance of each index includes a factor for the reinvestment of income
dividends but does not reflect reinvestment of capital gains, expenses or taxes.
The performance of the Fund's Class A, Class B or Class C 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.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C 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. For example, investors may
also wish to compare the Fund's Class A, Class B or Class C 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
Oppenheimer funds themselves. Those ratings or rankings of shareholder/investor
services by third parties may compare the Oppenheimer funds' 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 makes payments to the Distributor in
connection with the distribution and/or servicing of the shares of that class.
Each Plan has been approved by a vote of (i) the Board of Trustees of the Fund,
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 Class A Plan Fund, shareholder approval was received on April 16,
1998; for the Class B and Class C Plans, the vote was cast by the Manager as the
sole initial holder of Class B and Class C shares of the Fund. Prior to the date
of this Statement of Additional Information the Fund operated as a closed-end
investment company and did not have Distribution and Service Plans and
Agreements.
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 such 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. Any 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 automatically
convert into Class A shares after six years, the Fund is required by a
Securities and Exchange Commission rule 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 Fund shall provide
separate written reports to the Fund's Board of Trustees at least quarterly on
the amount of all payments made pursuant to each Plan, the purpose for which
each payment was made and the identity of Recipients that received any such
payment. Those reports 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 Fund who are not "interested persons" of the Fund is committed
to the discretion of the Independent Trustees. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such 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.
Initially, the Board of Trustees has set the fees at the maximum rate and set no
minimum amount.
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 such shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. The advance payment is based on the net asset value of the shares
sold. An exchange of shares does not entitle the Recipient to an advance service
fee payment. In the event shares are redeemed during the first year shares are
outstanding, the Recipient will be obligated to repay a pro rata portion of the
advance payment to the Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor presently 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 Plan and the Class C Plan by the Board. Initially, the Board
has set no minimum holding period. All payments under the Class B Plan and the
Class C Plan are subject to the limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. 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 or Class C Plan and from contingent
deferred sales charges collected on redeemed Class B or Class C shares) the
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 outstanding for less than six years.
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.
Under the Class B and Class C Plans, the distribution assistance and
administrative support services rendered by the Distributor in connection with
the distribution of Class B and Class C shares may include: (i) paying service
fees and sales commissions to any broker, dealer, bank or other person or entity
that sells and services the Fund's Class B or Class C shares, (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Class B or Class C shares by Recipients, (iii) obtaining
financing or providing such financing from its own resources, or from an
affiliate, for interest and other borrowing costs of the Distributor's
unreimbursed expenses incurred in rendering distribution assistance for Class B
or Class C shares, and (iv) paying certain other distribution expenses.
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 will not accept any order for $500,000 or $1 million or more of
Class B or Class C shares, respectively, 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.
The three 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 incremental 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 and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to a 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
Independent 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 (a) Distribution and
Service Plan fees, (b) transfer and shareholder servicing agent fees and
expenses, (c) registration fees and (d) 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 and Class C 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 Fund's net assets attributable to a class by
the number of shares of that class that are outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some 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. 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 values will not be calculated on those
days, the Fund's net asset values per share of Class A, Class B and Class C
shares 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 U.S. 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 valued generally
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 a remaining maturity of sixty 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 the "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.
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, foreign corporate securities or mortgage-backed
securities for which last sale information is not generally available. The
pricing service, hen valuing such securities, may use "matrix" comparisons to
the prices for comparable instrumnts 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.
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 New
York Stock Exchange will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or 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 and the Fund's net asset
value. 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 at the closing price in
the London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service.
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing bid and
asked prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between bid and asked
prices obtained by the Manager from two active market makers (which in certain
cases may be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset, and an
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the call or put. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium; if the Fund enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium received was more or less than the
cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy 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 three days after the transfers are initiated. The
Distributor and the Fund are not responsible for any delays in purchasing shares
resulting from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the Prospectus
because the Distributor incurs little or no selling expenses. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, aunts, uncles, nieces and nephews, sons-
and daughters-in-law, siblings, a sibling's spouse and a spouse's siblings.
Relations by virtue of a remarriage (step-children, step-parents, etc.) are
included.
o The Oppenheimer Funds. 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 Convertible Securities Fund Oppenheimer
Capital Appreciation Fund Oppenheimer Champion Income Fund Oppenheimer
California Municipal 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 Main Street California Municipal
Fund
Oppenheimer Main Street Income & Growth
Fund
Oppenheimer Mid-Cap Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond 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 ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (or Class A and
Class B shares of the Fund and other eligible Oppenheimer funds) sold with a
front-end sales charge during the 13-month period from the investor's first
purchase pursuant to the Letter (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 (excluding any purchases made by reinvestment of dividends
or distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at their
respective public offering prices calculated on the date of the Letter) will
equal or exceed the amount specified in the Letter. This enables the investor to
count the shares to be purchased under the Letter of Intent to obtain the
reduced sales charge rate (as set forth in the Prospectus) 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 to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended purchase amount is $50,000, the
escrow shall be shares valued in the amount of $2,500 (computed at the 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 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 "How To Sell
Shares," 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 for 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 differed
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 recordkeeping 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 recordkeeping 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 recordkeeping 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 in 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 than
$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 be 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.
o 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 check writing
privileges at any time without prior notice.
By choosing the Checkwriting privilege, whether done 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 chosen 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 or 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 of 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 Involuntary Redemptions. The Fund's Board of Trustees has the right to
cause the involuntary redemption of the shares held in any account if the
aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board 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.
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 Fund may determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
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 Values Per Share" and that valuation will be made as
of the time the redemption price is determined.
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. 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
OppenheimerFunds 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 that
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 B and 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 or 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 this 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 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 selected 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
charges on such withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus under "Waivers
of Class B and Class C Sales Charges."
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 in 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 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. It may not be desirable to purchase additional Class A shares while
making automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.
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 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 ACH
transfer payments of the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment (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 shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop 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
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 and Oppenheimer Money Market Fund,
Inc., 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 classes 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 from 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 OppenheimerFunds 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 Oppenheimer funds or from any unit investment trust for which reinvestment
arrangements have been made with the Distributor may be exchanged at net asset
value for shares of any of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares of
any class purchased subject to a contingent deferred sales charge. However, when
Class A shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 12 months of the end of the calendar month in which they were purchased;
the Class A contingent deferred sales charge is imposed on the redeemed shares.
The Class B contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B and Class C contingent deferred sales charges 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 and acknowledge receipt of a prospectus of, 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 requests from a dealer might
require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund).
The 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. 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,
to enable the investor to earn a return on otherwise idle funds.
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 Shares," 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 than dividends on Class A shares as a result of the asset-based sales
charges 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 the classes.
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 that 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 Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
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 during its last
fiscal period, and intends to qualify in current and future years, but reserves
the right not to qualify. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund might not meet
those tests in a particular year.
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 Fund's
Board of Trustees 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.
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 Oppenheimer funds 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 with 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. Such
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 certain other funds advised by the Manager and its affiliates.
-2-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Oppenheimer World Bond Fund
The Board of Trustees and Shareholders of
Oppenheimer World Bond Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer World Bond Fund as of October 31, 1997, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer World Bond Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1997
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1997
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> MORTGAGE-BACKED OBLIGATIONS --
18.6%
GOVERNMENT AGENCY -- 15.1% FHLMC/FNMA/Sponsored -- 8.8% Federal Home Loan
Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates, Series
1343, Cl. LA, 8%, 8/15/22 . . . . . . . . . . . $ 229,000 $ 252,188 Government
National Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates, Series 26, Cl. B,
6%, 5/25/15(2) . . . . 2,403,999 2,342,857 Interest-Only Stripped
Mtg.-Backed Security, Series 177, Cl. B, 9.554%-10.045%, 7/1/26(3) . . . . . . . . . . . . . . . . .
.. 2,275,396 704,306 Mtg.-Backed Certificates:
11.50%, 1/1/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,466 87,357
13%, 5/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,681 479,718 Federal
National Mortgage Assn.:
7%, 11/25/27(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,000 220,688
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates:
Trust 1992-162, Cl. C, 7%, 10/25/21 . . . . . . . . . . . . . . . . 350,000
355,796 Trust 1997-27, Cl. J, 7.50%, 4/18/27 . . . . . . . . . . . . . . . . 109,540
116,706 Trust 1997-5, Cl. B, 7%, 9/18/17 . . . . . . . . . . . . . . . . . . 232,000
236,899 Sr. Unsub. Medium-Term Nts., 6.50%, 7/10/02(AUD) . . . . . . . . . . . .
40,000 29,011
- ----------- ,825,526
-----------
GNMA/Guaranteed -- 6.3%
Government National Mortgage Assn.:
11%, 10/20/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,727 140,715
7.50%, 1/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,789 514,434
7.50%, 11/1/27(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,556,250
7.50%, 5/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,110 56,525
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-5, Cl. PQ, 7.493%, 7/16/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,000 159,377
-----------
3,427,301 -----------
PRIVATE -- 3.5%
Commercial -- 2.1%
Asset Securitization Corp., Commercial Mtg. Pass-Through
Certificates, Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(5) . . . . . . 200,000
209,406 Commercial Mortgage Acceptance Corp., Interest-Only Stripped Mtg.-Backed
Security, Series 1996-C1, Cl. X-2, 0.981%, 12/25/20(3)(6)(7) 6,208,300
180,429 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series
1996-C1, Cl. E, 7.51%, 2/15/28(5)(6) . . . . . . . 553,342 538,298 Resolution
Trust Corp., Commercial Mtg. Pass-Through Certificates, Series 1995-C1, Cl. F, 6.90%,
2/25/27 . . . . . . . . . . . . . . . . . 153,799 144,319
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Commercial (continued)
Structured Asset Securities Corp., Multiclass Pass-Through Certificates, Series 1995-C4, Cl. E,
8.776%, 6/25/26(5)(6) . . . . . . $ 100,000 $ 104,250
----------
1,176,702
----------- Multi-Family -- 0.4%
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through Certificates, Series
1996-MC1, Cl. G, 7.15%, 6/15/06(8) . . . . . . . . 250,000 241,250
----------- Residential -- 1.0%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C1,
Cl. E, 7.50%, 3/1/11(6) . . . . . . . . . 190,000 193,325 First Chicago/Lennar
Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, 8.134%,
7/25/06(5)(6) . . . . . . . . . 200,000 206,812 First Union-Lehman Brothers
Commercial Mortgage Trust, Interest- Only Stripped Mtg.-Backed Security, Series 1997-C1,
6.772%, 4/18/27(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 883,995
70,461 Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%, 3/25/22(6) . . . .
50,000 53,219
- ----------- 523,817
----------- Total
Mortgage-Backed Obligations (Cost $9,909,465) . . . . . . . . . . . .
10,194,596 -----------
U.S. GOVERNMENT OBLIGATIONS -- 15.1%
U.S. Treasury Bonds, STRIPS, Zero Coupon, 6.52%, 8/15/22(9) . . . . . . . .
1,000,000 213,432 U.S. Treasury Nts.:
6.125%, 8/31/98(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,247,000 2,257,534
6.25%, 2/15/03(10) . . . . . . . . . . . . . . . . . . . . . . . . . . 707,000 722,024
6.375%, 8/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,000 1,365,524
7.50%, 10/31/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,000 201,764
7.75%, 1/31/00(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,385,000 2,488,600
9.25%, 8/15/98(10) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,028,126
----------- Total U.S.
Government Obligations (Cost $8,188,685) . . . . . . . . . . . . 8,277,004
----------- FOREIGN
GOVERNMENT OBLIGATIONS -- 33.0%
Argentina -- 1.2%
Argentina (Republic of) Bonds, 5%, 12/20/02 (JPY) . . . . . . . . . . . . . 65,000,000
499,384 Argentina (Republic of) Floating Rate Bonds, Series L, 6.688%, 3/31/05(5) . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . 168,000 142,800
-----------
642,184
Australia -- 1.9%
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
8%, 5/14/03(AUD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 38,840
8%, 8/14/01(AUD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 19,026
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03(AUD) . . . . . . . . 1,230,000
965,697 -----------
1,023,563
-----------
</TABLE>
4
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Canada -- 1.2%
Canada (Government of) Bonds, 5.50%, 9/1/02(CAD). . . . . . . . . . . . . . 880,000
$ 638,748 ----------
Cayman Islands -- 0.5%
Pera Financial Services Sec. Nts., 9.375%, 10/15/02(8) . . . . . . . . . . 290,000
271,513 ----------
Colombia -- 0.5%
Colombia (Republic of) Unsec. Unsub. Bonds, 8.375%, 2/15/27 . . . . . . . . 125,000
115,155 Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 . . . . . . . . . .
140,000 141,312
---------- 256,467
---------- Costa Rica -- 0.4%
Banco Central Costa Rica Interest Claim Bonds, Series A, 6.539%, 5/21/05(5)(6) . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . 217,150 209,550
---------- Germany -- 5.8%
Germany (Republic of) Bonds:
7.375%, 12/2/02(DEM) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,090,000
696,310 Series 123, 4.50%, 5/17/02(DEM) . . . . . . . . . . . . . . . . . . . . 2,800,000
1,601,764 Series JA07, Zero Coupon, 4.255%, 1/4/01(2)(9)(DEM) . . . . . . . . . .
1,180,000 592,476 Series JA07, Zero Coupon, 5.758%, 1/4/07(9)(DEM) . . . . . . . . . . .
.. 420,000 147,054 Series JL07, Zero Coupon, 5.66%, 7/4/07(9)(DEM) . .
.. . . . . . . . . . 450,000 153,114
----------
3,190,718
- ---------- Great Britain -- 3.1%
United Kingdom Treasury Nts.:
13%, 7/14/00(GBP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,000 298,177
8%, 6/10/03(GBP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790,000 1,405,893
----------
1,704,070
---------- Italy -- 2.6%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 12%, 1/1/02(2)(ITL) . . . . . . . . . . . . . . . . . . . . 1,955,000,000
1,414,299 ----------
Ivory Coast -- 0.3%
Ivory Coast (Government of) Past Due Interest Bonds, 12/29/49(4) . . . . . 500,000
184,375 ----------
Jordan -- 1.1%
Hashemite (Kingdom of Jordan) Disc. Bonds, 6.75%, 12/23/23(5) . . . . . . . 550,000
446,875 Hashemite (Kingdom of Jordan) Par Bonds, 3.934%, 12/23/23(11) . . . . . . .
250,000 173,750
----------
620,625 ----------
Mexico -- 0.7%
Petroleos Mexicanos Debs., 14.50%, 3/31/06(GBP) . . . . . . . . . . . . . . 100,000
216,320 United Mexican States Global Bonds, 9.875%, 1/15/07 . . . . . . . . . . . .
150,000 150,375
---------- 366,695
</TABLE>
5
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Moldova -- 0.4%
Moldova (Republic of) Sr. Unsub. Nts., 8.465%, 12/10/99(5) . . . . . . . . $ 220,000
$ 220,137 ----------
New Zealand -- 2.6%
National Bank of New Zealand, New Zealand Dollar Bank Bill, Zero Coupon, 7.594%,
12/10/97(9)(17)(NZD). . . . . . . . . . . . . . . . . . . . 1,948,000 1,205,229 New
Zealand (Government of) Bonds, 8%, 11/15/06(NZD). . . . . . . . . . . . 330,000
226,228 ---------
1,431,457
---------- Norway -- 1.0%
Norway (Government of) Bonds, 9.50%, 10/31/02(2)(NOK) . . . . . . . . . . . 3,190,000
537,014
- ---------- Pakistan -- 0.5%
Pakistan (Republic of) Debs., 11.50%, 12/22/99 . . . . . . . . . . . . . . 32,000
33,440 Pakistan (Republic of) Bonds, 9.946%, 5/30/00(5) . . . . . . . . . . . . . 220,000
223,300
- ---------- 256,740
---------- Peru -- 0.3%
Peru (Republic of) Front-Loaded Interest Reduction Bonds, 3.25%, 3/7/17(5) . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . 350,000 177,625
---------- Romania -- 0.5%
Romania (Government of) Bonds, 7.75%, 6/17/02(DEM). . . . . . . . . . . . . 515,000
287,998 ----------
Russia -- 0.9%
Ministry of Finance (Russian Government) Debs., 9%,
3/25/04(4)(DEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425,000 237,051
SBS Agro Finance BV Bonds, 10.25%, 7/21/00 . . . . . . . . . . . . . . . . 250,000
244,063 ---------
481,114
---------- South Africa -- 2.3%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05(ZAR) . . . . . . . . . . . . . . . . . . . . . 3,615,620
667,952 Series 162, 12.50%, 1/15/02(ZAR) . . . . . . . . . . . . . . . . . . . . 2,087,360
406,750 Series 175, 9%, 10/15/02(ZAR) . . . . . . . . . . . . . . . . . . . . . 1,242,530
208,539 ----------
1,283,241
---------- Spain -- 1.1%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00(ESP) . . . . .
.. . . . . . . . . . . . . . . . . . . . . 78,920,000 626,032
---------- Sweden -- 1.7%
Sweden (Kingdom of) Bonds, Series 1033, 10.25%, 5/5/03(2)(SEK). . . . . . .
5,900,000 941,662
---------- Turkey -- 2.4%
Export Credit Bank of Turkey Bonds, 8.352%, 8/18/00(5) . . . . . . . . . . 240,000
237,300 Halkbank Turkiye Halk Bonds, 8%, 2/26/02(DEM) . . . . . . . . . . . . . . .
500,000 271,620 </TABLE>
6
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Turkey (continued)
Turkey (Republic of) Treasury Bills, Zero Coupon,
93.92%, 3/4/98(9)(TRL) . . . . . . . . . . . . . . . . . . . . . . . . . 195,909,000,000 $
789,422 -----------
1,298,342
----------- Total Foreign Government
Obligations (Cost $18,097,428) . . . . . . . . . . 18,064,169
----------- LOAN PARTICIPATIONS --
1.1%
Colombia (Republic of) Concorde Loan Participation, 8.625%, 1/31/98(5)(6) . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . 25,000 24,375 Jamaica (Government of) 1990
Refinancing Agreement Nts.,
Tranche A, 6.563%, 10/16/00(5)(6) . . . . . . . . . . . . . . . . . . . 87,499
83,563 Morocco (Kingdom of) Loan Participation Agreement,
Tranche B, 6.812%, 1/1/04(5) . . . . . . . . . . . . . . . . . . . . . 76,470
69,875 Trinidad & Tobago Loan Participation Agreement, Tranche A, 1.575%,
9/30/00(5)(6)(JPY) . . . . . . . . . . . . . . . . . . . . . . . 57,326,833 443,285
----------- Total Loan
Participations (Cost $665,588) . . . . . . . . . . . . . . . . . 621,098
----------- CORPORATE BONDS
AND NOTES -- 21.9%
BASIC INDUSTRY -- 1.5%
Chemicals -- 0.3%
ICO, Inc., 10.375% Sr. Nts., 6/1/07(8) . . . . . . . . . . . . . . . . . . 25,000
26,875 Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . 25,000
25,125 Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07(8) . . . . . .
25,000 24,875 Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(8) . .
.. . 25,000 25,500 Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 . . . . . . . . . . . . . . . . . . . . . 15,000 16,425
11.75% Sr. Unsec. Sub. Nts., 8/15/06 . . . . . . . . . . . . . . . . . 25,000
27,812 -----------
146,612
----------- Containers -- 0.1%
Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05(6) . . . . . . 50,000
54,250 -----------
Paper -- 0.9%
Ainsworth Lumber Ltd., 12.50% Sr. Nts., 7/15/07(8)(12) . . . . . . . . . . 20,000
20,300 Asia Pulp & Paper International Finance Co., Zero Coupon Asian Currency Nts.,
14.712%, 12/8/97(9)(IDR) . . . . . . . . . . . . . . . . 200,000,000 53,552 Four M
Corp., 12% Sr. Nts., Series B, 6/1/06(6) . . . . . . . . . . . . . . 20,000 21,400
Indah Kiat International Finance Co. BV, 11.875% Gtd. Sr. Sec. Nts., 6/15/02 . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . 97,000 99,425 Pindo Deli Finance Mauritius Ltd.,
10.75% Gtd. Nts., 10/1/07(6) . . . . . . 170,000 158,100 Tjiwi Kimia
International Finance Co. BV, 13.25% Gtd. Sr. Nts., 8/1/01 . . 130,000
135,720 ----------
488,497
-----------
</TABLE>
7
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Steel -- 0.2%
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 . . . . . . . . . . . $25,000
$ 28,875 Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 . . . . . . . . . . .
25,000 27,000 Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(8) . . . .
25,000 25,500
---------
81,375 ---------
CONSUMER RELATED -- 1.7%
Consumer Products -- 0.1%
Coleman Escrow Corp., Zero Coupon Sr. First Priority Disc. Nts., 10.823%, 5/15/01(8)(9) . .
.. . . . . . . . . . . . . . . . . . . . . . 25,000 16,125 Dyersburg Corp., 9.75% Sr.
Sub. Nts., 9/1/07(8) . . . . . . . . . . . . . . 25,000 25,625 Revlon Worldwide
Corp., Zero Coupon Sr. Sec. Disc. Nts., 10.773%, 3/15/01(9) . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . 20,000 13,700
---------
55,450 --------
Food/Beverages/Tobacco -- 0.0%
CFP Holdings, Inc., 11.625% Gtd. Sr. Nts., Series B, 1/15/04 . . . . . . . 25,000
24,125 --------
Healthcare -- 0.1%
Integrated Health Services, Inc., 9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . 50,000
51,875 Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(8) . . . . . . . .
25,000 25,375
- --------- 77,250
--------- Hotel/Gaming --
0.5%
Capital Gaming International, Inc., Promissory Nts., 8/1/95(13) . . . . . . 2,000
-- Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07(8) . . . . . . . . . . . . 25,000
25,281 Casino Magic of Louisiana Corp., 13% First Mtg. Nts., 8/15/03 . . . . . . .
25,000 23,875 Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 . . . . . . . .
25,000 26,562 Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07(8) .
.. . . . . . . . . 25,000 25,625 Mohegan Tribal Gaming Authority, 13.50% Sr.
Sec. Nts., Series B, 11/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
32,125 Rio Hotel & Casino, Inc., 9.50% Gtd. Sr. Sub. Nts., 4/15/07 . . . . . . . .
25,000 26,125 Showboat Marina Casino Partnership/Showboat Marina Finance Corp.,
13.50% First Mtg. Nts., Series B, 3/15/03 . . . . . . . . . . . 25,000 28,687
Signature Resorts, Inc., 9.75% Sr. Sub. Nts., 10/1/07(8) . . . . . . . . . 20,000
20,300 Station Casinos, Inc., 10.125% Sr. Sub. Nts., 3/15/06 . . . . . . . . . . . 45,000
46,125 ---------
254,705
--------- Restaurants -- 0.0%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 . . . . . . . . . . . . . . . . . 20,000
21,250 ---------
Textile/Apparel -- 1.0%
CMI Industries, Inc., 9.50% Sr. Sub. Nts., 10/1/03(6) . . . . . . . . . . . 25,000
24,500 Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B,
10/1/03(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 52,750 Dan
River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 . . . . . . . . . . . . . 30,000
32,025 </TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------- <S>
<C> <C> Textile/Apparel (continued)
Polysindo International Finance Co. BV, 11.375% Gtd. Sec. Nts., 6/15/06 . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . $ 25,000 $ 25,562 PT Polysindo Eka Perkasa, Zero
Coupon Promissory Nts.:
9.39%, 7/14/98(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 45,752
30.945%, 3/16/98(9) (IDR). . . . . . . . . . . . . . . . . . . . . . . . 1,000,000,000
246,621 Tultex Corp., 9.625% Sr. Unsec. Nts., 4/15/07 . . . . . . . . . . . . . . . 50,000
51,625 WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 . . . . . . . . .
25,000 26,375 William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 . . . . . . .
50,000 52,750
--------
557,960 --------
ENERGY -- 1.0%
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . 50,000
51,250 Canadian Forest Oil Ltd., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . .
5,000 4,986 Chesapeake Energy Corp., 9.125% Sr. Unsec. Nts., 4/15/06 . . . . . . . . .
25,000 25,875 Dailey International, Inc., 9.75% Gtd. Sr. Unsec. Nts.,
8/15/07(8) . . . . 25,000 26,125 Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B, 2/15/07 . . . . . . . . . . . . . . . . 25,000
25,000 9.50% Sr. Sub. Nts., 11/1/06 . . . . . . . . . . . . . . . . . . . . . 25,000
26,312 Gothic Energy Corp., Units (each unit consists of $1,000 principal amount of
0%/12.25% sr. disc. nts., 9/1/04 and 14 warrants to purchase one ordinary share)(8)(14)(15) . .
.. . . . . . . . . . . . . . 25,000 26,625 J. Ray McDermott SA, 9.375% Sr. Sub.
Bonds, 7/15/06 . . . . . . . . . . . . 25,000 26,625 Moran Energy, Inc., 8.75%
Cv. Sub. Debs., 1/15/08 . . . . . . . . . . . . . 200,000 194,750 Petroleum Heat
& Power Co., Inc., 9.375% Sub. Debs., 2/1/06(6) . . . . . . 25,000 23,250
Pogo Producing Co., 8.75% Sr. Sub. Nts., 5/15/07 . . . . . . . . . . . . . 25,000
25,500 Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . 50,000
49,875 Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 . . . . . . . . . . . . . . . .
15,000 15,000
- -------- 521,173
-------- FINANCIAL
SERVICES -- 2.9%
Banks & Thrifts -- 0.9%
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts., 2/1/99 . . . . . . . . . 250,000
261,875 First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 . . . . . .
30,000 33,150 Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(8) . . . .
.. 185,000 170,662 Western Financial Bank, 8.875% Sub. Bonds, 8/1/07 . . . .
.. . . . . . . . . 25,000 25,115
--------
490,802
- -------- Diversified Financial -- 1.8%
Amresco, Inc., 10% Sr. Sub. Nts., Series 97-A, 3/15/04 . . . . . . . . . . 25,000
26,250 Bakrie Investindo, Zero Coupon Promissory Nts., 17.257%,
3/16/98(9)(IDR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,000,000 206,777
Emergent Group, Inc., 10.75% Sr. Nts., 9/15/04(8) . . . . . . . . . . . . . 25,000
24,625 Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(6) . . . . . . . . . . . .
255,000 237,150 </TABLE>
9
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Diversified Financial (continued)
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts., Series B, 4/1/02 . . . . . . . . .
.. . . . . . . . . . . . . . . . . . $ 25,000 $ 26,687 Shoshone Partners Loan Trust,
7.50% Sr. Nts., 5/31/02(5)(6) . . . . . . . . 476,000 488,931
----------
1,010,420
---------- Insurance -- 0.2%
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 . . . . . . . . . . . . . 125,000
130,000 ----------
HOUSING RELATED -- 0.4%
Building Materials -- 0.1%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . 25,000 25,500 Nortek, Inc.:
9.125% Sr. Nts., 9/1/07(8) . . . . . . . . . . . . . . . . . . . . . . 20,000 20,200
9.25% Sr. Nts., Series B, 3/15/07 . . . . . . . . . . . . . . . . . . . 25,000 25,437
----------
71,137
---------- Homebuilders/Real Estate -- 0.3%
International de Ceramica SA, 9.75% Gtd. Unsec. Unsub. Nts., 8/1/02(6) . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . 90,000 84,600 Standard Pacific Corp., 8.50% Sr. Nts.,
6/15/07 . . . . . . . . . . . . . . 50,000 50,500
----------
135,100
---------- MANUFACTURING -- 1.0%
Aerospace -- 0.1%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(8) . . . . . . . . . . . . . . . . . 25,000
25,312 ----------
Automotive -- 0.3%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(8) . . . . . . . 50,000
52,250 Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 . . . . .
25,000 28,500 Hayes Wheels International, Inc., 9.125% Sr. Sub. Nts., 7/15/07 . . . . . .
25,000 25,750 Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 . . .
.. . . . . 50,000 52,375 Oxford Automotive, Inc., 10.125% Sr. Sub. Nts.,
6/15/07(8) . . . . . . . . 25,000 26,250
----------
185,125
---------- Capital Goods -- 0.6%
Burke Industries, Inc., 10% Sr. Nts., 8/15/07(8) . . . . . . . . . . . . . 25,000
26,000 Clark-Schwebel, Inc., 12.50% Debs., 7/15/07(8)(12) . . . . . . . . . . . . 45,994
50,823 Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07(8) . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . 50,000 51,875 Insilco Corp., 10.25% Sr.
Sub. Nts., 8/15/07(8) . . . . . . . . . . . . . . 25,000 26,250 International Wire
Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,000 27,437 Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 . . . .
.. . . . . . 100,000 113,000 </TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S>
<C> <C> Capital Goods (continued)
Roller Bearing Co. (America), 9.625% Sr. Sub. Nts., 6/15/07(6) . . . . . . $ 25,000
$ 25,250 Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 . . . . . . .
25,000 26,000
- --------- 346,635
--------- MEDIA -- 2.0%
Broadcasting -- 0.8%
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 . . . . . 25,000
25,250 Chancellor Radio Broadcasting Co., 8.75% Sr. Sub. Nts., 6/15/07(8) . . . .
25,000 25,250 Conecel Holdings Ltd., Units (each unit consists of $1,000 principal
amount of 14% sec. nts., 10/1/00 and one warrant to buy class B common stock)(6)(15) . . . . .
.. . . . . . . . . . . . . . 135,000 136,350 Consorcio Ecuatoriano, 14% Nts.,
5/1/02(6) . . . . . . . . . . . . . . . . 135,000 137,700 Jacor Communications Co.,
8.75% Gtd. Sr. Sub. Nts., 6/15/07(8) . . . . . . 20,000 20,100 SFX
Broadcasting, Inc., 10.75% Sr. Sub. Nts., Series B, 5/15/06 . . . . . . 50,000
54,750 Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 . . . . . . . .
25,000 26,313 Spanish Broadcasting Systems, Inc., 11% Sr. Nts., 3/15/04 . . . . . . . . .
25,000 27,125
---------
452,838 --------- Cable
Television -- 0.6%
Adelphia Communications Corp.:
9.25% Sr. Nts., 10/1/02(8) . . . . . . . . . . . . . . . . . . . . . . 25,000 24,875
9.875% Sr. Nts., Series B, 3/1/07 . . . . . . . . . . . . . . . . . . . 25,000 25,750
Cablevision Systems Corp., 9.875% Sr. Sub. Nts., 5/15/06 . . . . . . . . . 50,000
53,500 EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec. Disc. Nts., 3/15/04(14)
.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 19,875 FrontierVision Holdings
LP, 0%/11.875% Sr. Disc. Nts., 9/15/07(8)(14) . . . 20,000 13,750 Marcus
Cable Operating Co. LP/Marcus Cable Capital Corp.,
0%/13.50% Gtd. Sr. Sub. Disc. Nts., Series II, 8/1/04(14) . . . . . . . 50,000
45,250 Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 . . . . . . . . . . . . . . . 20,000
20,700 Rogers Communications, Inc.:
8.75% Sr. Nts., 7/15/07(CAD) . . . . . . . . . . . . . . . . . . . . . . 80,000
57,099 8.875% Sr. Nts., 7/15/07 . . . . . . . . . . . . . . . . . . . . . . . 25,000
24,813 TCI Satellite Entertainment, Inc., 10.875% Sr. Sub. Nts., 2/15/07(8) . . .
15,000 15,525
- --------- 301,137
--- Diversified Media --
0.4%
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(8) . . . . . . . . 25,000
26,375 ITT Promedia CVA, 9.125% Sr. Sub. Nts., 9/15/07(8)(DEM) . . . . . . . . . .
100,000 58,972 ITT Publimedia BV, 9.375% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . .
25,000 25,625 Katz Media Corp., 10.50% Sr. Sub. Nts., Series B, 1/15/07 . . .
.. . . . . . 25,000 27,563 Lamar Advertising Co., 8.625% Sr. Sub. Nts.,
9/15/07(8) . . . . . . . . . . 25,000 25,250 Universal Outdoor, Inc., 9.75% Sr.
Sub. Nts., 10/15/06 . . . . . . . . . . 25,000 27,875
---------
191,660
--------- </TABLE>
11
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Publishing/Printing -- 0.2%
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 3/15/07 . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . $ 50,000 $ 51,750 Sun Media Corp., 9.50% Sr. Sub.
Nts., 2/15/07 . . . . . . . . . . . . . . . 75,000 79,500
--------
131,250
-------- OTHER -- 0.6%
Conglomerates -- 0.2%
Mechala Group Jamaica Ltd., 12.75% Gtd. Sr. Sec. Sub. Nts., Series B, 12/30/99 . . . . . . . . . .
.. . . . . . . . . . . . . . . . 125,000 118,750
-------- Services -- 0.4%
Borg-Warner Security Corp., 9.625% Sr. Sub. Nts., 3/15/07 . . . . . . . . . 25,000
25,875 Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(6)(14) . . . . . . . . . . .
25,000 19,750 Energy Corp. of America, 9.50% Sr. Sub. Nts., Series A, 5/15/07 . . . . . .
25,000 25,125 Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts.,
2/15/09 . . . . . . 50,000 49,375 Protection One Alarm Monitoring, Inc.,
0%/13.625% Sr. Disc. Nts., 6/30/05(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,000 106,500
-------- 226,625
-------- RETAIL -- 0.5%
Specialty Retailing -- 0.4%
Central Termica Guemes, 12% Bonds, 11/26/01(6) . . . . . . . . . . . . . . 126,000
128,520 Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 . . . . . . . . .
20,000 21,800 Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03(6) . . . . . . . . . .
25,000 26,375 Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07(6) . . . . . . . . .
.. . 25,000 24,625 Specialty Retailers, Inc., 9% Gtd. Unsec. Sr. Sub. Nts.,
7/15/07 . . . . . 25,000 25,500
--------
226,820
- -------- Supermarkets -- 0.1%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(8) . . . . . . . . . . . 25,000
26,500 Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(8) . . . . . . .
25,000 24,875 Stater Brothers Holdings, Inc., 9% Sr. Sub. Nts., 7/1/04(8) . . . . . . . .
25,000 25,188
--------
76,563 --------
TECHNOLOGY -- 2.5%
Information Technology -- 1.5%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(6)(14) . . . . . . . . . . . 125,000
124,375 Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 12.154%, 8/15/00(9) . . . . . . . . . . . . . . . . . . 25,000
19,875 Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(14) . . . . . . . . .
50,000 49,500 Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts.,
12/15/05(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 15,400 DII
Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . . 15,000
14,869 Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . . . . 25,000
25,375 </TABLE>
12
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Information Technology (continued)
Globalstar LP/Globalstar Capital Corp., 11.25% Sr. Nts., 6/15/04 . . . . . $25,000
$ 24,500 Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., 10/15/07(8)(14) (CAD) . . . . . . . . . . . . 90,000
35,451 0%/14% Sr. Disc. Nts., Series B, 6/1/06(14) . . . . . . . . . . . . . . 25,000
16,750 Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(14) . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . 45,000 34,088 Nextel Communications,
Inc., 0%/9.75% Sr. Disc. Nts.,
10/31/07(8)(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 27,875
Omnipoint Corp., 11.625% Sr. Nts., Series A, 8/15/06 . . . . . . . . . . . 50,000
51,750 Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(14) . . . .
50,000 37,000 Pierce Leahy Corp., 11.125% Sr. Sub. Nts., 7/15/06 . . . . . . . . . . . .
61,000 69,235 Price Communications Cellular Holdings, Inc., Units (each unit
consists of $1,000 principal amount of 0%/13.50% sr. sec. disc. nts., 8/1/07 and 3.44 warrants
to purchase one ordinary share)(8)(14)(15) . . 50,000 29,750 Sprint
Spectrum LP/Sprint Spectrum Finance Corp.:
0%/12.50% Sr. Disc. Nts., 8/15/06(14) . . . . . . . . . . . . . . . . . 50,000
38,000 11% Sr. Nts., 8/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
27,688 Teletrac, Inc., Units (each unit consists of $1,000 principal amount of 14% sr. nts.,
8/1/07 and one warrant to buy
.537495 ordinary shares)(6)(15) . . . . . . . . . . . . . . . . . . . . 25,000
25,375 Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . . . . . 75,000
76,688 Unisys Corp., 11.75% Sr. Nts., 10/15/04 . . . . . . . . . . . . . . . . . . 25,000
28,375 Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . . . .
25,000 25,625
- --------- 797,544
---------
Telecommunications/Technology -- 1.0%
American Communications Services, Inc., 13.75% Sr. Nts., 7/15/07(8) . . . . 35,000
39,375 BTI Telecom Corp., 10.50% Sr. Nts., 9/15/07(8) . . . . . . . . . . . . . .
20,000 20,000 Call-Net Enterprises, Inc., 0%/9.27% Sr. Disc. Nts., 8/15/07(14) . . . . .
25,000 16,625 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)(14)(15) . . . . . . . . . . . 25,000 18,875 Diamond Cable
Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(14) . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . 75,000 55,688 GST USA, Inc., 0%/13.875% Gtd. Sr. Sec. Disc.
Nts., 12/15/05(14) . . . . . 30,000 21,450 ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(14). . . . . . . . . . . . . . . . 50,000
36,938 0%/13.50% Sr. Disc. Nts., 9/15/05(14) . . . . . . . . . . . . . . . . . 25,000
19,969 Intermedia Communications, Inc., 0%/11.25% Sr. Disc. Nts., 7/15/07(14) . .
25,000 16,625 IXC Communications, Inc., 12.50% Sr. Nts., Series B, 10/1/05 . . . . .
.. . 25,000 28,500 McLeodUSA, Inc.:
0%/10.50% Sr. Disc. Nts., 3/1/07(14) . . . . . . . . . . . . . . . . . . 25,000
17,375 9.25% Sr. Nts., 7/15/07(8) . . . . . . . . . . . . . . . . . . . . . . 25,000
25,625 </TABLE>
13
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> Telecommunications/Technology (continued)
MGC Communications, Inc., Units (each unit consists of $1,000 principal amount of 13% sr.
sec. nts., 10/1/04 and one warrant to purchase 8.07 shares of common stock at $0.01 per
share)(8)(15). . . $ 25,000 $ 24,750 NEXTLINK Communications, Inc.,
9.625% Sr. Nts., 10/1/07 . . . . . . . . . . 45,000 45,225 NTL, Inc., 10% Sr.
Nts., 2/15/07 . . . . . . . . . . . . . . . . . . . . . 25,000 25,875 Qwest
Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(8)(14) . . . . . . . . . . . .
.. . . . . . . . . . . . . 50,000 32,250 Teleport Communications Group, Inc.,
0%/11.125% Sr. Disc. Nts., 7/1/07(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75,000 59,156 Telewest Communications plc, 0%/11% Sr. Disc. Debs., 10/1/07(14) . . .
.. . 50,000 37,250
----------
541,551 ----------
TRANSPORTATION -- 6.9%
Railroads -- 5.6%
Red Nacional de los Ferrocarriles Espanoles, 5.875% Gtd. Nts., 11/19/98(5) . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . 3,000,000 2,996,850 Transtar Holdings LP/Transtar
Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(14) . . . . . . . . . . . . . . . . . .
100,000 85,750
----------
3,082,600 ----------
Shipping -- 0.2%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(8) . . . . . . . . . . . 50,000
53,750 Units (each unit consists of $1,000 principal amount of 12% second priority ship
mtg. nts., 6/30/07 and one warrant)(8)(15) . . 25,000 27,625
----------
81,375
---------- Trucking -- 1.1%
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., 7/1/07(8) . . . . . . . . . . . 50,000
50,750 Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd. Unsec. Unsub. Bonds,
7/15/07(6) . . . . . . . . . . . . . . . . . . . . . . . 400,000 373,000 Tribasa Toll
Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(8) . . . . . . 246,395
203,893 ----------
627,643
---------- UTILITIES -- 0.9%
Electric Utilities -- 0.5%
AES Corp., 8.375% Sr. Sub. Nts., 8/15/07 . . . . . . . . . . . . . . . . . 20,000
19,600 Calpine Corp., 10.50% Sr. Nts., 5/15/06(6) . . . . . . . . . . . . . . . . 50,000
54,250 El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 . . . . . .
25,000 27,750 Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(6) . . . . . . . . . . .
150,000 144,750
----------
246,350 ----------
</TABLE>
14
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
----------- --------- <S>
<C> <C> Gas Utilities -- 0.4%
CE Casecnan Water & Energy, Inc., 11.95% Sr. Nts., Series B, 11/15/10 . . .
200,000 $ 207,500
- ----------- Total Corporate Bonds and Notes (Cost $12,099,566) . . . . . . . . . . . .
11,987,384
- ----------- COMMON STOCKS -- 0.1%
Air New Zealand Ltd., Cl. B . . . . . . . . . . . . . . . . . . . . . . . . 24,000 50,898
Finlay Enterprises, Inc.(16) . . . . . . . . . . . . . . . . . . . . . . . 333 6,994
Optel, Inc.(6)(16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 --
----------- Total Common Stocks
(Cost $70,764) . . . . . . . . . . . . . . . . . . . . 57,892
-----------
PREFERRED STOCKS -- 0.1%
Spanish Broadcasting Systems, Inc., 14.25% Cum. Sr.
Exchangeable Preferred Stock, Non-Vtg. (Cost $26,125)(8)(12) . . . . . . 25
26,562 -----------
OTHER SECURITIES -- 0.2%
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred
(Cost $129,300)(8)(16) . . . . . . . . . . . . . . . . . . . . . . . . 3,600 133,200
-----------
Units
----------- RIGHTS, WARRANTS AND CERTIFICATES -- 0.0%
American Telecasting, Inc. Wts., Exp. 6/99(6) . . . . . . . . . . . . . . . 500
5 Capital Gaming International, Inc. Wts., Exp. 2/99(6) . . . . . . . . . . . 3,538
-- Cellular Communications International, Inc. Wts., Exp. 8/03(6) . . . . . . 100
1,700 ICG Communications, Inc. Wts., Exp. 9/05(6) . . . . . . . . . . . . . . . .
495 7,425 Microcell Telecommunications, Inc.:
Conditional Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . . . 100 63
Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . . . . . . . . . 100 1,300 Orion
Network Systems, Inc. Wts., Exp. 1/07 . . . . . . . . . . . . . . . . 50 625
Protection One, Inc. Wts., Exp. 6/05(6) . . . . . . . . . . . . . . . . . . 640
8,160 Venezuela (Republic of) Oil Linked Payment Obligation
Wts., Exp. 4/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,785 --
----------- Total Rights, Warrants
and Certificates (Cost $18,030) . . . . . . . . . . 19,278
-----------
Face Amount(1)
----------- STRUCTURED INSTRUMENTS -- 7.8%
Canadian Imperial Bank of Commerce (New York Branch)
Canadian Dollar Three Month Banker's Acceptance Linked
Maximum Rate Nts., 8.66%, 4/13/98 . . . . . . . . . . . . . . . . . . . $300,000
300,960 Canadian Imperial Bank of Commerce, U.S. Dollar Nts. Linked to the Ministry of
Finance of the Russian Federation GKO, Zero Coupon, 9.857%, 9/17/98(9) . . . . . . . . . . . . . . .
.. . . . . 315,000 280,602 Credit Suisse First Boston (Cayman) Ltd., City of
Moscow, Credit & Convertibility Linked Nts., Series EM 215, Zero Coupon, 12.046%,
12/30/97(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 145,981
</TABLE>
15
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- --------- <S>
<C> <C> STRUCTURED INSTRUMENTS
(CONTINUED)
ING (U.S.) Financial Holdings Corp.:
PT Polysindo Linked Nts., Zero Coupon, 10.426%, 7/15/98(6)(9) . . . . . $150,000
$ 134,704 U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.088%, 12/3/97(6)(9) . . . . . . . . . . . . . . . . . . . . . . . 350,000 346,133
Merrill Lynch & Co., Inc.:
SPIRES Ltd. -- Series XXX, 10.91%, 10/11/06(4) . . . . . . . . . . . . 435,000
435,000 U.S. Dollar Nts. Linked to the Ministry of Finance of Ukraine OVGZ's, Zero
Coupon, 11.45%, 10/19/98(9) . . . . . . . . . . . . . . 640,000 555,328 Morgan
Guaranty Trust Co. of New York, Japanese Government Bond 193 Currency Protected Bank
Nts., 8.14%, 4/29/98 . . . . . . . . . 10,000 6,000 Salomon, Inc.:
Colombian Peso Linked Nts., Zero Coupon, 18.174%, 8/20/98(9) . . . . . 350,000
282,800 Russian GKO Linked Nts., Zero Coupon, 9.58%, 6/11/99(9) . . . . . . . .
450,000 358,425 Russian S-Account Credit Linked Nts., Zero Coupon, 14.157%,
5/22/98(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,000 624,240
Standard Chartered Bank:
Indian Rupee Linked Nts.:
32.641%, 11/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 57,907
35.115%, 11/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 57,820 U.S.
Dollar/Chinese Yuan Linked Nts.:
11.268%, 11/20/97 . . . . . . . . . . . . . . . . . . . . . . . . . 510,000 506,889
12.903%, 12/5/97 . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 148,110
Union Bank of Switzerland, Indian Rupee Linked Nts., 5.40%, 11/17/97 . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . 35,000 35,364
---------- Total Structured Instruments (Cost $4,370,642) . . . . . . .
.. . . . . . . 4,276,263
---------- </TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
------ -------------- --------- <S> <C>
<C> <C> <C> CALL OPTIONS PURCHASED -- 0.2%
Finnish Markka/German Mark Call Opt. . . . . . . 1/98 2.949(FIM/DEM)
1,610,000 68 German Mark Call Opt. . . . . . . . . . . . . . 12/97
19.22(CZK) 275,000 6,325 German Mark/Japanese Yen Call Opt. . . . . . . .
11/97 69.06(DEM/JPY) 1,500,000 5,256 German Mark/Japanese Yen Call
Opt. . . . . . . . 11/97 71.00(DEM/JPY) 6,860,000 25,862 Norwegian
Krone/German Mark Call Opt. . . . . . 1/98 4.101(NOK/DEM) 2,270,000
24,634 Russian (Government of) Principal Loans
Debs., 5.80%, 12/29/49 Call Opt. . . . . . . . 11/97 75.125% 405
202 Russian (Government of) Principal Loans
Debs., 12/29/49 Call Opt. . . . . . . . . . . 12/97 75.50% 400
200 U.S. Treasury Nts., 6.125%, 8/15/07 Call Opt. . 11/97 100.953%
1,000 14,687 U.S. Treasury Nts., 6.125%, 8/15/07 Call Opt. . 11/97
101.453% 1,000 11,563
---------- Total Call Options Purchased (Cost $85,657) . . .
88,797
---------- </TABLE>
16
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Date Strike Contracts See Note 1
------ -------------- --------- --------- <S>
<C> <C> <C> <C> PUT OPTIONS PURCHASED --
0.1%
New Zealand Dollar Put Opt. . . . . . . . . . . . 11/97 1.567(NZD) 1,710,000
$ 27,941 Standard & Poor's 500 Index Futures Put Opt. . . 12/97 $935
2 42,200
- ----------- Total Put Options Purchased (Cost $42,197) . . .
70,141 -----------
</TABLE>
<TABLE>
<CAPTION>
Face Amount(1)
----------- <S>
<C> <C> REPURCHASE AGREEMENTS -- 9.7%
Repurchase agreement with First Chicago Capital Markets,
5.69%, dated 10/31/97, to be repurchased at $5,299,512 on 11/3/97, collateralized by U.S.
Treasury Nts., 5.75%--8.50%, 5/15/99--11/15/00, with a value of $5,405,702 (Cost
$5,297,000). . . . . . . . . . . . . . . . . . . . . . . $5,297,000 5,297,000
----------- Total Investments, at
Value (Cost $59,000,447) . . . . . . . . . 107.9% 59,113,384 Liabilities in
Excess of Other Assets . . . . . . . . . . . . . . (7.9) (4,332,464)
---------- ----------- Net Assets . . . . . . . . . .
.. . . . . . . . . . . . . . . . . 100.0% $54,780,920
========== ===========
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD -- Australian Dollar
CAD -- Canadian Dollar
CZK -- Czech Koruna
DEM -- German Mark
ESP -- Spanish Peseta
FIM -- Finnish Markka
GBP -- British Pound Sterling
IDR -- Indonesian Rupiah
ITL -- Italian Lira
JPY -- Japanese Yen
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
SEK -- Swedish Krona
TRL -- Turkish Lira
ZAR -- South African Rand
2. A sufficient amount of securities have been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Face/Contracts Expiration Exercise Premium
Market Value Subject to Call Date Price Received
See Note 1 ------------- --------- ---------- -------
--------- <S> <C> <C> <C> <C>
<C> British Pound Sterling Call Opt. . . . . . . 365,000 12/23/97 0.602(GBP)
$3,869 $10,549 British Pound Sterling Put Opt. . . . . . . 365,000 12/18/97
0.625(GBP) 4,199 1,422 British Pound Sterling Put Opt. . . . . . . 365,000
12/18/97 0.602(GBP) 4,288 11,177 British Pound Sterling Put Opt. . . . . . .
365,000 12/23/97 0.625(GBP) 3,577 986 Finnish Markka/German Mark
Put Opt. . . . . . 1,610,000 1/22/98 3.00(FIM/DEM) 1,858 3,817 German
Mark Put Opt. . . . . . . . . . . . . 530,000 11/6/97 1.79(DEM) 1,214
21 German Mark Put Opt. . . . . . . . . . . . . 2,300,000 11/19/97 1.80(DEM)
4,217 872 German Mark Put Opt. . . . . . . . . . . . . 1,065,000 11/20/97
1.82(DEM) 1,276 167 German Mark Put Opt. . . . . . . . . . . . . 1,070,000
11/26/97 1.85(DEM) 1,041 1,002 Japanese Yen Call Opt. . . . . . . . . . . .
73,000,000 1/5/98 115.00(JPY) 3,904 4,380 Japanese Yen Call Opt. . . . .
.. . . . . . . 68,600,000 11/20/97 118.00(JPY) 3,372 4,891 Japanese Yen Put
Opt. . . . . . . . . . . . . 73,000,000 1/5/98 125.00(JPY) 6,366 2,993
Japanese Yen Put Opt. . . . . . . . . . . . . 68,600,000 11/20/97 123.00(JPY) 1,952
2,360 </TABLE>
17
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
2. Outstanding written options (continued)
<TABLE>
<CAPTION>
Expiration Exercise Premium Market
Value Face/Contracts Date Price Received
See Note 1 ------------- --------- ---------- --------
- --------- <S> <C> <C> <C> <C>
<C> Japanese Yen Put Opt. . . . . . . . . . . . . . . . 73,010,000 11/26/97 125.00(JPY) $
2,044 $ 1,227 Japanese Yen Put Opt. . . . . . . . . . . . . . . . 72,520,000 12/11/97
115.00(JPY) 3,153 3,466 Japanese Yen Put Opt. . . . . . . . . . . . . . . . 72,520,000
12/11/97 123.00(JPY) 4,717 4,670 New Zealand Dollar Call Opt. . . . . . . . . .
.. . 1,710,000 11/20/97 1.558(NZD) 7,191 1,334 Norwegian
Krone/German Mark Put Opt. . . . . . . . 2,270,000 1/23/98 4.18(NOK/DEM) 3,694
6,030 United Mexican States Collateralized Fixed
Rate Par Bonds, Series A, 6.25%, 12/31/19 Put Opt. 175 11/28/97 75.00%
15,750 11,200 -------
------- ,679
$72,564 =======
======= </TABLE>
3. 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. 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.
4. When-issued security to be delivered and settled after October 31, 1997. 5.
Represents the current interest rate for a variable rate security. 6.
Identifies issues considered to be illiquid or restricted -- See Note 8 of
Notes to Financial Statements.
7. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to
Financial Statements.
8. 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 $2,595,326 or 4.74% of the Fund's net
assets, at October 31, 1997.
9. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
10. Securities with an aggregate market value of $388,763 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
11. Represents the current interest rate for an increasing rate security. 12.
Interest or dividend is paid in kind.
13. Non-income producing -- issuer is in default of interest payment.
14. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
15. 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.
16. Non-income producing security.
17. A sufficient amount of securities has been designated to cover outstanding
interest rate swap transactions. See Note 9 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
18
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
Industry Market Value Percent -----
------------ ------- <S>
<C> <C> United States .........................................................
$29,193,849 49.3% Spain ................................................................. 3,622,882
6.1 Germany ............................................................... 3,320,718 5.6 Russia
................................................................. 2,236,896 3.8 Great Britain
.......................................................... 1,815,882 3.1 New Zealand
............................................................ 1,482,356 2.5 Italy
.................................................................. 1,414,299 2.4 Turkey
................................................................. 1,298,343 2.2 South Africa
........................................................... 1,283,241 2.2 Canada
................................................................. 1,219,133 2.1 Argentina
.............................................................. 1,205,704 2.0 Indonesia
.............................................................. 1,088,620 1.8 Australia
.............................................................. 1,052,574 1.8 Colombia
............................................................... 949,892 1.6 Sweden
................................................................. 941,662 1.6 China
.................................................................. 799,749 1.4 Mexico
................................................................. 655,188 1.1 Jordan
................................................................. 620,625 1.1 Other
.................................................................. 4,911,771 8.3
----------- ----- Total ........................................................
$59,113,384 100.0% ===========
===== </TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1997 Oppenheimer World Bond Fund
<TABLE>
<S> <C> ASSETS:
Investments, at value (cost $59,000,447)--see accompanying statement ........................
$59,113,384 Cash ........................................................................................ 887,563
Unrealized appreciation on forward foreign currency exchange contracts -- Note 5 ............
93,002 Receivables:
Investments sold .......................................................................... 4,498,209 Closed
forward foreign currency exchange contracts ........................................ 2,325,036 Interest,
dividends and principal paydowns ................................................ 921,464 Daily variation
on futures contracts -- Note 6 ............................................ 15,330 Other
........................................................................................ 2,617
----------- Total assets
............................................................................. 67,856,605
----------- LIABILITIES:
Unrealized depreciation on forward foreign currency exchange contracts -- Note 5 ............
117,592 Options written, at value (premiums received $77,679) -- see accompanying statement --
Note 7 72,564 Open interest rate swap transactions at market value -- Note 9
............................... 7,560 Payables and other liabilities:
Investments purchased (including $4,448,993 purchased on a when-issued basis) -- Note 1
......................................................................... 10,355,155 Closed forward foreign currency
exchange contracts ........................................ 2,395,080 Trustees' fees -- Note 1
................................................................... 43,469 Management and administrative fees
......................................................... 23,554 Daily variation on futures contracts -- Note 6
............................................. 4,165 Other
........................................................................................ 56,546
----------- Total liabilities
........................................................................ 13,075,685
----------- NET ASSETS
................................................................................... $54,780,920
----------- COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest .................................................. $66,155
Additional paid-in capital .................................................................. 59,674,068
Undistributed net investment income ......................................................... 82,750
Accumulated net realized loss on investments and foreign currency transactions ..............
(5,105,071) Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies ......................................................... 63,018
----------- NET ASSETS -- applicable to
6,615,505 shares of beneficial interest outstanding ............. $54,780,920
=========== NET ASSET VALUE PER SHARE
.................................................................... $8.28
===== </TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1997 Oppenheimer World
Bond Fund
<TABLE>
<S> <C> INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $24,070) . . . . . . . . . . . . . . . . . $5,438,948
Dividends (net of foreign withholding taxes of $601) . . . . . . . . . . . . . . . . . . 3,465
---------- Total income . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . 5,442,413
- ---------- EXPENSES:
Management fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,532 Administrative
fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,613 Custodian fees and expenses . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,702 Shareholder reports . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . 50,947 Transfer agent and accounting services fees -- Note 4 . . . . . . . . . . . .
.. . . . . . 33,011 Legal and auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,915
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,950 Other . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,686
---------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
663,356 Less expenses paid indirectly--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . (8,303)
---------- Net expenses . . . . . . .. . .
.. . . . . . . . . . . . . . . . . . . . . . . 655,053
---------- NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,787,360 ---------- REALIZED
AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,825,394 Closing of futures
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185,198) Closing and expiration of options
written . . . . . . . . . . . . . . . . . . . . . . . (72,879) Foreign currency transactions . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . (481,386)
- ---------- Net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,085,931
---------- Net change in unrealized appreciation or
depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,415,140) Translation of
assets and liabilities denominated in foreign currencies . . . . . . . . (194,026)
---------- Net change . . . . . . . . . . . .. . . . . . . . . . .
.. . . . . . . . . . . (1,609,166) ----------
NET REALIZED AND UNREALIZED LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . (523,235)
---------- NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $4,264,125
==========
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1997 1996 ------------
- ------------ <S> <C> <C>
OPERATIONS:
Net investment income ................................................... $ 4,787,360 $ 4,817,348 Net
realized gain ....................................................... 1,085,931 1,174,051 Net change in
unrealized appreciation or depreciation ................... (1,609,166) 1,076,747
------------ ------------ Net increase in net assets resulting
from operations ................ 4,264,125 7,068,146
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME ................................................... (4,445,641)
(4,445,589) ------------ ------------ NET
ASSETS:
Total increase (decrease) ............................................... (181,516) 2,622,557
Beginning of period ..................................................... 54,962,436 52,339,879
------------ ------------ End of period (including
undistributed net investment
income of $82,750 and $523,824, respectively) ......................... $ 54,780,920 $
54,962,436 ============
============ </TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- ------- <S>
<C> <C> <C> <C> <C> PER SHARE OPERATING DATA:
Net asset value, beginning of period ................ $8.31 $7.91 $7.93 $8.54
$8.55 ----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ............................. .72 .73 .71 .69 .82
Net realized and unrealized gain (loss) ........... (.08) .34 (.05) (.61)
- -- ----- ----- ----- ----- -----
Total income from investment operations ......... .64 1.07 .66 .08
..82 ----- ----- ----- ----- -----
Dividends and distributions to shareholders:
Dividends from net investment income .............. (.67) (.67) (.68) (.68)
(.75) Tax return of capital distribution ................ -- -- -- (.01)
(.08) ----- ----- ----- ----- -----
Total dividends and distributions to shareholders (.67) (.67) (.68) (.69)
(.83) ----- ----- ----- ----- -----
Net asset value, end of period ...................... $8.28 $8.31 $7.91 $7.93
$8.54 ===== ===== ===== =====
===== Market value, end of period ......................... $8.06 $7.50 $7.00
$7.00 $8.00
TOTAL RETURN, AT MARKET VALUE(1) 16.42% 16.40%
9.09% (4.84)% 2.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............ $54,781 $54,962 $52,340
$52,439 $56,526 Average net assets (in thousands) ................... $55,339 $53,309
$51,207 $54,380 $55,877 Ratios to average net assets:
Net investment income ............................. 8.65% 9.04% 9.20% 8.90%
9.59% Expenses(2) ....................................... 1.20% 1.28% 1.24%
1.24% 1.22% Portfolio turnover rate(3) .......................... 289.2% 260.8%
344.2% 315.5% 112.5% </TABLE>
(1) Assumes a hypothetical purchase at the current market price 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 a
sale at the current market price on the last business day of the period. Total
return does not reflect sales charges or brokerage commissions.
(2) Beginning in fiscal 1997, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
(3) 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
"dollar-rolls") for the period ended October 31, 1997 were $144,978,367 and
$142,251,536, respectively. Prior to the period ended October 31, 1996,
purchases and sales of investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Oppenheimer World Bond Fund
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer World Bond Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Fund's investment objective is to seek high current
income consistent with preservation of capital through investments in debt
securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). 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 the last day of each week on which day the New York Stock
Exchange is open. 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.
Structured Notes -- The Fund invests in foreign currency-linked structured notes
whereby the market value and redemption price are linked to foreign currency
exchange rates. The structured notes may be leveraged, which increases the
notes' volatility relative to the face of the security. Fluctuations in values
of the securities are recorded as unrealized gains and losses in the
accompanying financial statements. During the year ended October 31, 1997, the
market value of these securities comprised an average of 9% of the Fund's net
assets, and resulted in realized and unrealized losses of $573,017. 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 October 31, 1997, the Fund had entered into outstanding
when-issued or forward commitments of $4,448,993.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
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.
Security Credit Risk -- The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower-yielding, higher-rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default.
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 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.
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 October 31, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $5,093,000, which expires between 2001 and 2003.
Trustees' Fees and Expenses -- The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 1997, a provision of $384 was made for the Fund's projected benefit
obligations and payments of $1,509 were made to retired trustees, resulting in
an accumulated liability of $40,578 at October 31, 1997.
Distributions to Shareholders -- The Fund intends to declare and pay dividends
from net investment income monthly. Distributions from net realized gains on
investments, if any, will be made 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
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to timing
of dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that 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
October 31, 1997, amounts have been reclassified to reflect a decrease in
accumulated net realized loss on investments of $892,777, a decrease in
undistributed net investment income of $782,793, and a decrease in additional
paid-in capital of $109,984.
Other -- Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend 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. Dividends in kind are recognized as income
on the ex-dividend date, at the current market value of the underlying security.
Interest on payment-in-kind debt instruments is accrued as income at the coupon
rate and a market adjustment is made periodically.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest. There were no transactions in shares of beneficial interest
for the years ended October 31, 1997 and 1996.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997 net unrealized appreciation on investments and written
options of $118,052 was composed of gross appreciation of $1,304,632, and gross
depreciation of $1,186,580.
4. MANAGEMENT AND ADMINISTRATIVE 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 an annual fee of 0.65% on
the Fund's average annual net assets.
Mitchell Hutchins Asset Management Inc. serves as the Fund's Administrator. The
Fund pays the Administrator an annual fee of 0.20% of the Fund's average annual
net assets.
The Manager acts as the accounting agent for the Fund at an annual fee of
$18,000, plus out-of-pocket costs and expenses reasonably incurred. Shareholder
Financial Services, Inc. (SFSI), a wholly-owned subsidiary of the Manager, is
the transfer agent and registrar for the Fund. Fees paid to SFSI are based on
the number of accounts and the number of shareholder transactions, plus
out-of-pocket costs and expenses.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
Expenses paid indirectly represent a reduction of custodian fees for earnings on
cash balances maintained at the custodian bank by the Fund. 5. FORWARD FOREIGN
CURRENCY EXCHANGE 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 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 October 31, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Contract
Expiration Amount Valuation as of Unrealized Unrealized
Dates (000s) October 31, 1997 Appreciation Depreciatio
<S> <C> <C> <C> <C>
<C> Contracts to Purchase
- ---------------------
German Mark (DEM) ............................ 11/4/97-11/28/97 1,824 DEM $1,059,970
$14,977 $ 133 Italian Lira (ITL) ........................... 1/6/98 521,884 ITL
308,005 6,944 -- Portuguese Escudo (PTE) ...................... 12/17/97
116,707 PTE 661,552 13,723 -- Spanish Peseta (ESP) .........................
12/17/97 97,001 ESP 665,351 17,522 --
------- --------
53,166 133
------- -------- Contracts to Sell
- -----------------
Australian Dollar (AUD) ...................... 1/29/98 880 AUD 618,288 --
12,584 British Pound Sterling (GBP) ................. 11/28/97 275 GBP 460,866
-- 13,989 German Mark (DEM) ............................ 12/19/97 100 DEM
58,184 -- 2,082 Indonesian Rupiah (IDR) ...................... 2/10/98 1,642,500
IDR 437,498 2,532 -- Japanese Yen (JPY) ........................... 11/12/97
6,100 JPY 50,836 963 -- New Zealand Dollar (NZD) .....................
11/28/97 650 NZD 404,558 14,229 -- South African Rand (ZAR)
...................... 12/29/97 5,724 ZAR 1,167,848 22,112 -- Swiss Franc
(CHF) ............................ 12/17/97-1/16/98 2,765 CHF 1,988,063 -- 88,804
------- --------
39,836 117,459
------- -------- Total Unrealized Appreciation and
Depreciation ................................................ $93,002 $117,592
======= ========
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
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 in an amount (initial margin) 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 and/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 October 31, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Valuation Number as
of Unrealized Expiration of Futures October 31, Appreciation
Date Contracts 1997 (Depreciation)
- ------------------------------------------------------------------------------------------ <S>
<C> <C> <C> <C> Contracts to Purchase
- ---------------------
Nikkei 225 .................. 12/97 2 $273,717 $(23,780) U.S. Treasury Bonds,
30 yr .. 12/97 44 5,212,625 70,938 U.S. Treasury Nts., 10 yr ... 12/97
4 447,000 11,375 --------
58,533
-------- Contracts to Sell
- -----------------
Hang Seng Index ............. 11/97 4 274,015 (13,059) Nikkei 225
................... 12/97 4 328,000 11,300 U.S. Treasury Nts., 2 yr .... 12/97
4 415,750 (2,906) U.S. Treasury Nts., 5 yr .... 12/97 48 5,203,500
(85,500) --------
(90,165) --------
$(31,632)
======== </TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
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 security at a fixed price, upon exercise of the option. Options
are valued daily based upon the last sale price on the principal exchange on
which the option is traded and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon the expiration or closing of
the option transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the cost of
the security for a purchased put or call option is adjusted by the amount of
premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
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 October 31, 1997 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
----------------------------- -----------------------------
Number Amount Number Amount of
of of of Options Premiums
Options Premiums
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> Options
outstanding at October 31, 1996 ... 2,987,100 $ 31,287 -- $ -- Options
written ........................... 246,935,296 386,760 417,367,263 237,990 Options
closed or expired ................. (30,612,016) (354,360) (116,766,978) (164,324)
Options exercised ......................... (2,750,380) (37,911) (3,895,110) (21,763)
------------ --------- ------------ --------- Options
outstanding at October 31, 1997 ... 216,560,000 $ 25,776 296,705,175 $
51,903 ============ ========= ============
=========
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
8. ILLIQUID AND RESTRICTED SECURITIES
At October 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 October 31, 1997 was $4,901,847, which represents
8.95% of the Fund's net assets.
9. INTEREST RATE SWAP TRANSACTIONS
The Fund may enter into an interest rate swap transaction to seek to maintain a
total return or yield spread on a particular investment or portion of its
portfolio, or for other non-speculative purposes. Interest rate swaps involve
the exchange of commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The coupon payments are based on
an agreed upon principal amount and a specified index. Because the principal
amount is not exchanged, it represents neither an asset nor a liability to
either counterparty, and is referred to as a notional principal amount. The Fund
records an increase or decrease to interest income, the amount due or owed by
the Fund at termination or settlement. The Fund enters into swaps only on
securities it owns. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to 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. The Fund segregates liquid
assets to cover any amounts it could owe under swaps that exceed the amounts it
is entitled to receive.
As of October 31, 1997, the Fund had entered into the following interest rate
swap agreements:
<TABLE>
<CAPTION>
Swap Notional Rate Paid by the Floating Rate Received Floating Termination
Net Counterparty Principal Fund at 10/31/97 by the Fund at 10/31/97 Rate Index Date
Unrealized Loss ------------ --------- ---------------- ----------------------- ---------- -----------
- --------------- <S> <C> <C> <C> <C> <C> <C>
Morgan $1,920,000 7.65% 7.287% Three- 3/8/01 $7,560
Guaranty month Trust Co.
New Zealand of New York Dollar Bank
Bills </TABLE>
10. OTHER MATTERS
On October 9, 1997, the Board of Trustees of Oppenheimer World Bond Fund
approved the conversion of the Fund to an open-end fund, subject to shareholder
approval. If approved by shareholders, the conversion would occur during the
first quarter of calendar 1998.
30
<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
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER WORLD BOND FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ---------------------------------------
(a) Financial Statements
--------------------
(1) Financial Highlights (see Part A, Prospectus): Filed herewith.
(2) Report of Independent Auditors (see Part B, Statement of
Additional Information): Filed herewith.
(3) Statement of Investments at 10/31/97(see Part B, Statement of
Additional Information): Filed herewith.
(4) Statement of Assets and Liabilities at 10/31/97(see Part B,
Statement of Additional Information): Filed herewith.
(5) Statement of Operations ended 10/31/97(see Part B, Statement of
Additional Information): Filed herewith.
(6) Statements of Changes in Net Assets for the year ended
10/31/97(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) Form of Amended and Restated Declaration of Trust of Registrant
dated April 16, 1998: Filed with Registrant's Registration Statement, 3/31/98,
and incorporated herein by reference.
(2) Form of By-Laws as amended through April 16, 1998: Filed with
Registrant's Registration Statement, 3/31/98, and incorporated herein by
reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with
Registrant's Registration Statement, 3/31/98, and incorporated herein by
reference.
(ii) Specimen Class B Share Certificate: Filed with
Registrant's Registration Statement, 3/31/98, and incorporated herein by
reference.
(iii) Specimen Class C Share Certificate: Filed with
Registrant's Registration Statement, 3/31/98, and incorporated herein by
reference.
(5) Form of Investment Advisory Agreement: Filed herewith.
(6) (i) Form of General Distributor's Agreement: Filed herewith.
(ii) Form of Oppenheimer Funds Distributor Inc. Dealer
Agreement: - Filed with Post-Effective Amendment No. 14 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 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 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 of Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86,
refiled with Post-Effective Amendment No. 45 of Oppenheimer Special Fund (Reg.
No. 4-5272) 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(7) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant 6/7/90): Filed with Post-Effective Amendment No. 97,
8/30/90, of Oppenheimer Fund (Reg. No. 2-14586) refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg. No. 2-45272), 10/21/94,
pursuant to Item 102 of Regulation S-T, and incorporated herein by reference.
(8) Form of Custody Agreement dated April 16, 1998: Filed herewith.
(i) Form of Foreign Custody Manager Agreement dated October
9, 1997: Filed herewith
(9) Not applicable.
(10) Opinion and Consent of Counsel: Filed herewith.
(11) Independent Auditor's Consent: Filed herewith. (12) Not
applicable.
(13) Not applicable.
(14) (i) Form of Individual Retirement Account Trust Agreement:
Filed with Post-Effective Amendment No. 21 of the Registrant's Registration
Statement, 8/20/93, and incorporated herein by reference.
(ii) Form of prototype Standardized and Non-Standardized
Profit Sharing Plans and Money Purchase Plans for self-employed persons and
corporations: Filed with Post-Effective Amendment No. 15 to the Registration
Statement of Oppenheimer Mortgage Income Fund (Reg. No. 33-6614), 1/19/95, 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 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 of Oppenheimer Equity Income Fund (Reg.
No. 2-33043), 10/28/94, and incorporated herein by reference.
(v) Form of SARSEP Simplified Employee Pension IRA: Filed
with Post-Effective Amendment No. 15 to the Registration Statement of
Oppenheimer Mortgage Income Fund, (File No. 33-6614), 1/19/95, 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 (Reg. No. 33-47378), 9/28/95,
and incorporated herein by reference.
(15) (a) Form of Distribution and Service Plan and Agreement for
Class A shares under Rule 12b-1 of the Investment Company Act of 1940 dated as
of April 16, 1998: Filed herewith.
(b) Distribution and Service Plan and Agreement for Class B
Shares dated April 16, 1998 under Rule 12b-1 of the Investment Company Act:
Filed herewith.
(c) Distribution and Service Plan and Agreement for Class C
shares dated April 16, 1998 under Rule 12b-1 of the Investment Company Act:
Filed herewith.
(16) Performance computation schedule: Filed herewith.
(17) (i) Financial Data Schedule for Class A shares for the fiscal
year ended October 31, 1997 (audited): Filed herewith.
(ii) Financial Data Schedule for Class B shares for the fiscal
year ended October 31, 1997 (audited): Not applicable.
(iii) Financial Data Schedule for Class C shares for the
fiscal year ended October 31, 1997 (audited): 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: Filed with Registrant's Registration
Statement, 4/9/98, 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
Title of Class as of April 1, 1998
- -------------- ---------------------
Shares of Beneficial Interest,
Class A shares 930
Shares of Beneficial Interest, 0
Class B shares
Shares of Beneficial Interest,
Class C shares 0
Item 27. Indemnification
- -------- ---------------
Reference is made to Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Declaration of Trust filed as Exhibit (b)(1) to Registrant's
Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
Item 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.
(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>
Name & Current Position Other Business and Connections with
OppenheimerFundDuring the Past
Two Years
- --------------------------- -------------------------------
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
mangaement 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; Director (since 1994 - present)
of International Museum of Photography at George
Eastman House. 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) and Director of Product Marketing (August, 1992 -
May, 1996) with Fidelity
Investments.
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 aubsidiary 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) of McKinsey
Vice President & 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;
Member of the Oncology Advisory
Board of the Childrens Hospital;
Member of the Board of Directors of
the Colorado Museum of Contemporary
Art.
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 Bond Fund For Growth
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.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the
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:
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)
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer 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
412 Commons Way
Doylestown, PA 18901
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
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
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
C. Webb Heidinger Vice President None
28 Cable Road
Rye, NH 03870
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
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
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
LuAnn Mascia(2) Assistant Vice President None
John McDonough Vice President None
6010 Ocean Front Avenue
Virginia Beach, VA 23451
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
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
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
Daniel Phillips Vice President None
60 Glasgow Cir.
Danville, CA 94526
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
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
28214 Rey de Copas Lane
Malibu, CA 90265
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
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
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
201 Summerfield
Northbrook, IL 60062
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
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
(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. Location of Accounts and Records
- -------- ------------------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act and rules
promulgated thereunder are in the possession of Oppenheimer Management
Corporation, at its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 31. Management Services
- -------- ---------------------------
Not applicable.
Item 32. Undertakings
- -------- ----------------
(a)Not applicable.
(b)Not applicable.
(c)Not applicable.
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 of the
requirements for the effectiveness of this Registration Statement under the
Securities Act of 1933 has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 23rd day of April, 1998.
OPPENHEIMER WORLD BOND FUND
By: /s/ Bridget A. Macaskill*
---------------------------
Bridget A. Macaskill, President
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/ Leon Levy* Chairman of the
- --------------------------- Board of Trustees April 23,1998
Leon Levy
/s/ Donald W. Spiro* Vice Chairman
- --------------------------- and Trustee April 23,1998
Donald W. Spiro
/s/ Bridget A. Macaskill* President and April 23,1998
- --------------------------- Trustee
Bridget A. Macaskill
/s/ George Bowen* Treasurer and
- --------------------------- Principal Financial
George Bowen and Accounting Officer April 23,1998
/s/ Robert G. Galli* Trustee April 23,1998
- ---------------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee April 23,1998
- ---------------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee April 23,1998
- ---------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee April 23,1998
- ---------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee April 23,1998
- ---------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee April 23,1998
- ---------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee April 23,1998
- ---------------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee April 23,1998
- ---------------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
---------------------------
Robert G. Zack, Attorney-in-Fact
C-1
<PAGE>
OPPENHEIMER WORLD BOND FUND
Registration No. 33-24885
Pre-Effective Amendment No. 2
Index to Exhibits
Exhibit No. Description
24(b)(1) Form of Amended and Restated Declaration of Trust
24(b)(5) Form of Investment Advisory Agreement
24(b)(6)(i) Form of General Distributor's Agreement
24(b)(8) Form of Custody Agreement
24(b)(8)(i) Form of Foreign Custody Manager Agreement
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Independent Auditor's Consent
24(b)(15)(a) Form of Distribution and Service Plan and Agreement for
Class A Shares
24(b)(15)(b) Form of Distribution and Service Plan and Agreement for
Class B Shares
24(b)(15)(c) Form of Distribution and Service Plan and Agreement for
Class C Shares
24(b)(17)(i) Financial Data Schedule for Class A shares
C-2
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
OPPENHEIMER WORLD BOND FUND
This AMENDED AND RESTATED DECLARATION OF TRUST, made as of April 16, 1998,
by and among the individuals executing this Amended and Restated Declaration of
Trust as the Trustees.
WHEREAS, the Trustees established Oppenheimer World Bond Fund (the "Fund")
as a trust fund under the laws of the Commonwealth of Massachusetts, for the
investment and reinvestment of funds contributed thereto, under a declaration of
Trust dated October 5, 1988 (the "DOT") hereby amend the DOT as follows;
WHEREAS, the Trustees of the Fund have determined to amend the Fund's
Declaration of Trust pursuant to the provisions thereof;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Amended and Restated Declaration of Trust IN TRUST as herein set forth below.
FIRST: This Trust shall be known as Oppenheimer World Bond Fund. The
address of Oppenheimer World Bond Fund is Two World Trade Center, New York, New
York 10048-0203. The Registered Agent for Service is Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111,
Attention: Stephen Kuhn, Esq.
SECOND: Whenever used herein, unless otherwise required by the context or
specifically provided:
1. All terms used in this Declaration of Trust that are defined in the 1940
Act (defined below) shall have the meanings given to them in the 1940 Act.
2. "Board" or "Board of Trustees" or the "Trustees" means the Board of
Trustees of the Trust.
3. "By-Laws" means the By-Laws of the Trust as amended from time to time.
4. "Class" means a class of a series of Shares of the Trust established and
designated under or in accordance with the provisions of Article FOURTH.
5. "Commission" means the Securities and Exchange Commission.
6. "Declaration of Trust" shall mean this Declaration of Trust as it may be
amended or restated from time to time.
7. The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations of the Commission thereunder, all as amended from time to
time.
<PAGE>
8. "Series" refers to series of Shares of the Trust established and
designated under or in accordance with the provisions of Article FOURTH.
9. "Shareholder" means a record owner of Shares of the Trust.
10. "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any Series or Class of the Trust (as the
context may require) shall be divided from time to time and includes fractions
of Shares as well as whole Shares.
11. The "Trust" refers to the Massachusetts business trust created by this
Declaration of Trust, as amended or restated from time to time.
12. "Trustees" refers to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the time
being in office as such trustees.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
1. To hold, invest or reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise acquire,
hold for investment or otherwise, sell, sell short, assign, negotiate, transfer,
exchange or otherwise dispose of or turn to account or realize upon, securities
(which term "securities" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, financial futures contracts, indexes, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interests therein, or in
any property or assets) created or issued by any issuer (which term "issuer"
shall for the purposes of this Declaration of Trust, without limitation of the
generality thereof be deemed to include any persons, firms, associations,
corporations, syndicates, business trusts, partnerships, investment companies,
combinations, organizations, governments, or subdivisions thereof) and in
financial instruments (whether they are considered as securities or
commodities); and to exercise, as owner or holder of any securities or financial
instruments, all rights, powers and privileges in respect thereof; and to do any
and all acts and things for the preservation, protection, improvement and
enhancement in value of any or all such securities or financial instruments.
2. To borrow money and pledge assets in connection with any of the objects
or purposes of the Trust, and to issue notes or other obligations evidencing
such borrowings, to the extent permitted by the 1940 Act and by the Trust's
fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such Series and Classes and amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer,
reissue, redeem or cancel its Shares, or to classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series or Class
into one or more Series or Classes that may have been established and designated
from time to time, all without the vote or consent of the Shareholders of the
Trust, in any manner and to the extent now or hereafter permitted by this
Declaration of Trust.
-2-
<PAGE>
5. To conduct its business in all its branches at one or more offices in
New York, Colorado and elsewhere in any part of the world, without restriction
or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as the
owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith or make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and
all such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the accomplishment, carrying out or attainment of
all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of this Declaration
of Trust, and shall each be regarded as independent and construed as powers as
well as objects and purposes, and the enumeration of specific purposes, objects
and powers shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the Trust now or hereafter conferred
by the laws of the Commonwealth of Massachusetts nor shall the expression of one
thing be deemed to exclude another, though it be of a similar or dissimilar
nature, not expressed; provided, however, that the Trust shall not carry on any
business, or exercise any powers, in any state, territory, district or country
except to the extent that the same may lawfully be carried on or exercised under
the laws thereof.
FOURTH:
1. The beneficial interest in the Trust shall be divided into Shares, all
without par value, but the Trustees shall have the authority from time to time,
without obtaining shareholder approval, to create one or more Series of Shares
in addition to the Series specifically established and designated in part 3 of
this Article FOURTH, and to divide the shares of any Series into two or more
Classes pursuant to Part 2 of this Article FOURTH, all as they deem necessary or
desirable, to establish and designate such Series and Classes, and to fix and
determine the relative rights and preferences as between the different Series of
Shares or Classes as to right of redemption and the price, terms and manner of
redemption, liabilities and expenses to be borne by any Series or Class, special
and relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion on liquidation, conversion
rights, and conditions under which the several Series or Classes shall have
individual voting rights or no voting rights. Except as aforesaid, all Shares of
the different Series shall be identical.
(a) The number of authorized Shares and the number of Shares of each Series
and each Class of a Series that may be issued is unlimited, and the Trustees may
issue Shares of any Series or Class of any Series for such consideration and on
such terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable. The Trustees may classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series into one or
more Series or Classes of Series that may be established and designated from
time to time. The Trustees may hold as treasury Shares (of the same or some
other
-3-
<PAGE>
Series), reissue for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of any Series
reacquired by the Trust.
(b) The establishment and designation of any Series or any Class of any
Series in addition to that established and designated in part 3 of this Article
FOURTH shall be effective with the effectiveness of an instrument setting forth
such establishment and designation and the relative rights and preferences of
such Series or such Class of such Series or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that Series and the establishment
and designation thereof. If and to the extent the instrument referred to in this
paragraph shall be an amendment to this Declaration of Trust, the Trustees may
make any such amendment without shareholder approval.
(c) Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series or Class of any Series of the Trust to the same extent as
if such person were not a Trustee, officer or other agent of the Trust; and the
Trust may issue and sell or cause to be issued and sold and may purchase Shares
of any Series or Class of any Series from any such person or any such
organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares of such Series or Class
generally.
2. The Trustees shall have the authority from time to time, without
obtaining shareholder approval, to divide the Shares of any Series into two or
more Classes as they deem necessary or desirable, and to establish and designate
such Classes. In such event, each Class of a Series shall represent interests in
the designated Series of the Trust and have such voting, dividend, liquidation
and other rights as may be established and designated by the Trustees. Expenses
and liabilities related directly or indirectly to the Shares of a Class of a
Series may be borne solely by such Class (as shall be determined by the
Trustees) and, as provided in Article FIFTH, a Class of a Series may have
exclusive voting rights with respect to matters relating solely to such Class.
The bearing of expenses and liabilities solely by a Class of Shares of a Series
shall be appropriately reflected (in the manner determined by the Trustees) in
the net asset value, dividend and liquidation rights of the Shares of such Class
of a Series. The division of the Shares of a Series into Classes and the terms
and conditions pursuant to which the Shares of the Classes of a Series will be
issued must be made in compliance with the 1940 Act. No division of Shares of a
Series into Classes shall result in the creation of a Class of Shares having a
preference as to dividends or distributions or a preference in the event of any
liquidation, termination or winding up of the Trust, to the extent such a
preference is prohibited by Section 18 of the 1940 Act as to the Trust.
The relative rights and preferences of Shares of different Classes of a
Series shall be the same in all respects except that, and unless and until the
Board of Trustees shall determine otherwise: (i) when a vote of Shareholders is
required under this Declaration of Trust or when a meeting of Shareholders is
called by the Board of Trustees, the Shares of a Class shall vote exclusively on
matters that affect that Class only; (ii) the expenses and liabilities related
to a Class shall be borne solely by such Class (as determined and allocated to
such Class by the Trustees from time to time in a manner consistent with parts 2
and 3 of Article FOURTH); and (iii) pursuant to paragraph 10 of Article NINTH,
the Shares of each Class shall have such other rights and preferences as are set
forth from time to time in the then effective prospectus and/or statement of
additional information relating to the Shares. Dividends and distributions on
one Class of Shares may differ from the dividends and distributions on another
Class
-4-
<PAGE>
of Shares of the Series, and the net asset value of one Class of Shares may
differ from the net asset value of another Class of Shares of the Series.
3. Without limiting the authority of the Trustees set forth in part 1 of
this Article FOURTH to establish and designate any further Series, the Trustees
hereby establish one Series of Shares having the same name as the Trust, and
said Shares shall be divided into such number of Classes as shall be set forth
from time to time in the then effective prospectus and/or statement of
additional information relating to the Fund. The Shares of that Series and any
Shares of any further Series or Classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Classes at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by the Trust for
the issue or sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items
allocated to that Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the Series established and designated from time
to time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to a particular Series
shall belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series for all purposes.
(b)(1) Liabilities Belonging to Series. The liabilities, expenses, costs,
charges and reserves attributable to each Series shall be charged and allocated
to the assets belonging to each particular Series. Any general liabilities,
expenses, costs, charges and reserves of the Trust which are not identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to each Series are herein referred to as
"liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the shareholders of all Series for all purposes.
(2) Liabilities Belonging to a Class. If a Series is divided into more than
one Class, the liabilities, expenses, costs, charges and reserves attributable
to a Class shall be charged and allocated to the Class to which such
liabilities, expenses, costs, charges or reserves are attributable. Any general
liabilities, expenses, costs, charges or reserves belonging to the Series which
are not identifiable as belonging to any particular Class shall be allocated and
charged by the Trustees to and among any one or more of the Classes established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges
-5-
<PAGE>
and reserves allocated and so charged to each Class are herein referred to as
"liabilities belonging to" that Class. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and binding upon
the holders of all Classes for all purposes.
(c) Dividends. Dividends and distributions on Shares of a particular Series
or Class may be paid to the holders of Shares of that Series or Class, with such
frequency as the Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, from such of the income, capital gains
accrued or realized, and capital and surplus, from the assets belonging to that
Series, as the Trustees may determine, after providing for actual and accrued
liabilities belonging to such Series or Class. All dividends and distributions
on Shares of a particular Series or Class shall be distributed pro rata to the
Shareholders of such Series or Class in proportion to the number of Shares of
such Series or Class held by such Shareholders at the date and time of record
established for the payment of such dividends or distributions, except that in
connection with any dividend or distribution program or procedure the Trustees
may determine that no dividend or distribution shall be payable on Shares as to
which the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or procedure.
Such dividends and distributions may be made in cash or Shares or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with paragraph 13 of Article SEVENTH.
(d) Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Series and all Classes of each Series that have
been established and designated shall be entitled to receive, as a Series or
Class, when and as declared by the Trustees, the excess of the assets belonging
to that Series over the liabilities belonging to that Series or Class. The
assets so distributable to the Shareholders of any particular Class and Series
shall be distributed among such Shareholders in proportion to the number of
Shares of such Class of that Series held by them and recorded on the books of
the Trust.
(e) Transfer. All Shares of each particular Series or Class shall be
transferable, but transfers of Shares of a particular Class and Series will be
recorded on the Share transfer records of the Trust applicable to such Series or
Class of that Series only at such times as Shareholders shall have the right to
require the Trust to redeem Shares of such Series or Class of that Series and at
such other times as may be permitted by the Trustees.
(f) Equality. Each Share of a Series shall represent an equal proportionate
interest in the assets belonging to that Series (subject to the liabilities
belonging to such Series or any Class of that Series), and each Share of any
particular Series shall be equal to each other Share of that Series and shares
of each Class of a Series shall be equal to each other Share of such Class; but
the provisions of this sentence shall not restrict any distinctions permissible
under this Article FOURTH that may exist with respect to Shares of the different
Classes of a Series. The Trustees may from time to time divide or combine the
Shares of any particular Class or Series into a greater or lesser number of
Shares of that Class or Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or allocable to that
Class in any way affecting the rights of Shares of any other Class or Series.
-6-
<PAGE>
(g) Fractions. Any fractional Share of any Class and Series, if any such
fractional Share is outstanding, shall carry proportionately all the rights and
obligations of a whole Share of that Class and Series, including those rights
and obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.
(h) Conversion Rights. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that (i) holders of
Shares of any Series shall have the right to exchange said Shares into Shares of
one or more other Series of Shares, (ii) holders of shares of any Class shall
have the right to exchange said Shares into Shares of one or more other Classes
of the same or a different Series, and/or (iii) the Trust shall have the right
to carry out exchanges of the aforesaid kind, in each case in accordance with
such requirements and procedures as may be established by the Trustees.
(i) Ownership of Shares. The ownership of Shares shall be recorded on the
books of the Trust or of a transfer or similar agent for the Trust, which books
shall be maintained separately for the Shares of each Class and Series that has
been established and designated. No certification certifying the ownership of
Shares need be issued except as the Trustees may otherwise determine from time
to time. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the transfer of
Shares and similar matters. The record books of the Trust as kept by the Trust
or any transfer or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders and as to the number of Shares of each Class and Series
held from time to time by each such Shareholder.
(j) Investments in the Trust. The Trustees may accept investments in the
Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase or
sale of Shares that conform to such authorized terms and to reject any purchase
or sale orders for Shares whether or not conforming to such authorized terms.
FIFTH: The following provisions are hereby adopted with respect to voting
Shares of the Trust and certain other rights:
1. The Shareholders shall have the power to vote (a) for the election of
Trustees when that issue is submitted to them, (b) with respect to the amendment
of this Declaration of Trust except where the Trustees are given authority to
amend the Declaration of Trust without shareholder approval, (c) to the same
extent as the shareholders of a Massachusetts business corporation, as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (d) with respect to those matters relating to the Trust as may
be required by the 1940 Act or required by law, by this Declaration of Trust, or
the By-Laws of the Trust or any registration statement of the Trust filed with
the Commission or any State, or as the Trustees may consider desirable.
2. The Trust will not hold shareholder meetings unless required by the 1940
Act, the provisions of this Declaration of Trust, or any other applicable law.
The Trustees may call a meeting of shareholders from time to time.
-7-
<PAGE>
3. Except as herein otherwise provided, at all meetings of Shareholders,
each Shareholder shall be entitled to one vote on each matter submitted to a
vote of the Shareholders of the affected Series for each Share standing in his
name on the books of the Trust on the date, fixed in accordance with the
By-Laws, for determination of Shareholders of the affected Series entitled to
vote at such meeting (except, if the Board so determines, for Shares redeemed
prior to the meeting), and each such Series shall vote separately ("Individual
Series Voting"); a Series shall be deemed to be affected when a vote of the
holders of that Series on a matter is required by the 1940 Act; provided,
however, that as to any matter with respect to which a vote of Shareholders is
required by the 1940 Act or by any applicable law that must be complied with,
such requirements as to a vote by Shareholders shall apply in lieu of Individual
Series Voting as described above. If the shares of a Series shall be divided
into Classes as provided in Article FOURTH, the shares of each Class shall have
identical voting rights except that the Trustees, in their discretion, may
provide a Class of a Series with exclusive voting rights with respect to matters
which relate solely to such Classes. If the Shares of any Series shall be
divided into Classes with a Class having exclusive voting rights with respect to
certain matters, the quorum and voting requirements described below with respect
to action to be taken by the Shareholders of the Class of such Series on such
matters shall be applicable only to the Shares of such Class. Any fractional
Share shall carry proportionately all the rights of a whole Share, including the
right to vote and the right to receive dividends. The presence in person or by
proxy of the holders of one-third of the Shares, or of the Shares of any Series
or Class of any Series, outstanding and entitled to vote thereat shall
constitute a quorum at any meeting of the Shareholders or of that Series or
Class, respectively; provided however, that if any action to be taken by the
Shareholders or by a Series or Class at a meeting requires an affirmative vote
of a majority, or more than a majority, of the shares outstanding and entitled
to vote, then in such event the presence in person or by proxy of the holders of
a majority of the shares outstanding and entitled to vote at such a meeting
shall constitute a quorum for all purposes. At a meeting at which is a quorum is
present, a vote of a majority of the quorum shall be sufficient to transact all
business at the meeting, except as otherwise provided in Article NINTH. If at
any meeting of the Shareholders there shall be less than a quorum present, the
Shareholders or the Trustees present at such meeting may, without further
notice, adjourn the same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except such as might
have been lawfully transacted had the meeting not been adjourned.
4. Each Shareholder, upon request to the Trust in proper form determined by
the Trust, shall be entitled to require the Trust to redeem from the net assets
of that Series all or part of the Shares of such Series and Class standing in
the name of such Shareholder. The method of computing such net asset value, the
time at which such net asset value shall be computed and the time within which
the Trust shall make payment therefor, shall be determined as hereinafter
provided in Article SEVENTH of this Declaration of Trust. Notwithstanding the
foregoing, the Trustees, when permitted or required to do so by the 1940 Act,
may suspend the right of the Shareholders to require the Trust to redeem Shares.
5. No Shareholder shall, as such holder, have any right to purchase or
subscribe for any Shares of the Trust which it may issue or sell, other than
such right, if any, as the Trustees, in their discretion, may determine.
6. All persons who shall acquire Shares shall acquire the same subject to
the provisions of the Declaration of Trust.
7. Cumulative voting for the election of Trustees shall not be allowed.
-8-
<PAGE>
SIXTH:
1. The persons who shall act as initial Trustees until the first meeting or
until their successors are duly chosen and qualify are the initial trustees
executing this Declaration of Trust or any counterpart thereof. However, the
By-Laws of the Trust may fix the number of Trustees at a number greater or
lesser than the number of initial Trustees and may authorize the Trustees to
increase or decrease the number of Trustees, to fill any vacancies on the Board
which may occur for any reason including any vacancies created by any such
increase in the number of Trustees, to set and alter the terms of office of the
Trustees and to lengthen or lessen their own terms of office or make their terms
of office of indefinite duration, all subject to the 1940 Act. Unless otherwise
provided by the By-Laws of the Trust, the Trustees need not be Shareholders.
2. A Trustee at any time may be removed either with or without cause by
resolution duly adopted by the affirmative vote of the holders of two-thirds of
the outstanding Shares, present in person or by proxy at any meeting of
Shareholders called for such purpose; such a meeting shall be called by the
Trustees when requested in writing to do so by the record holders of not less
than ten per centum of the outstanding Shares. A Trustee may also be removed by
the Board of Trustees as provided in the By-Laws of the Trust.
3. The Trustees shall make available a list of names and addresses of all
Shareholders as recorded on the books of the Trust, upon receipt of the request
in writing signed by not less than ten Shareholders (who have been shareholders
for at least six months) holding in the aggregate shares of the Trust valued at
not less than $25,000 at current offering price (as defined in the then
effective Prospectus and\or Statement of Additional Information relating to the
Shares under the Securities Act of 1933, as amended from time to time) or
holding not less than 1% in amount of the entire amount of Shares issued and
outstanding; such request must state that such Shareholders wish to communicate
with other Shareholders with a view to obtaining signatures to a request for a
meeting to take action pursuant to part 2 of this Article SIXTH and be
accompanied by a form of communication to the Shareholders. The Trustees may, in
their discretion, satisfy their obligation under this part 3 by either making
available the Shareholder list to such Shareholders at the principal offices of
the Trust, or at the offices of the Trust's transfer agent, during regular
business hours, or by mailing a copy of such communication and form of request,
at the expense of such requesting Shareholders, to all other Shareholders, and
the Trustees may also take such other action as may be permitted under Section
16(c) of the 1940 Act.
4. The Trust may at any time or from time to time apply to the Commission
for one or more exemptions from all or part of said Section 16(c) of the 1940
Act, and, if an exemptive order or orders are issued by the Commission, such
order or orders shall be deemed part of said Section 16(c) for the purposes of
parts 2 and 3 of this Article SIXTH.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Trust, the Trustees and the
Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest in the
new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he or she shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity
of the Trustees,
-9-
<PAGE>
or any one of them, shall not operate to annul or terminate the Trust but the
Trust shall continue in full force and effect pursuant to the terms of this
Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any assets
now or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the assets of the Trust shall at all
times be considered as vested in the Trustees. No Shareholder shall have, as a
holder of beneficial interest in the Trust, any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, or in any
part thereof.
4. The Trustees in all instances shall act as principals, and are and shall
be free from the control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute, and to authorize
the officers and agents of the Trust to make and execute, any and all contracts
and instruments that they may consider necessary or appropriate in connection
with the management of the Trust. The Trustees shall not in any way be bound or
limited by present or future laws or customs in regard to Trust investments, but
shall have full authority and power to make any and all investments which they,
in their uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in this Declaration of Trust or
by the By-Laws of the Trust, the Trustees shall have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause, and to appoint and
designate from among the Trustees such committees as the Trustees may determine,
and to terminate any such committee and remove any member of such committee;
(c) to employ as custodian of any assets of the Trust a bank or trust
company or any other entity qualified and eligible to act as a custodian,
subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and shareholder servicing agent, or both;
(e) to provide for the distribution of Shares either through a principal
underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-Laws of the
Trust;
(g) to delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property held in Trust hereunder; and to
execute and deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
-10-
<PAGE>
(i) to exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities held in trust hereunder;
(j) to hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, either in its own name
or in the name of a custodian or a nominee or nominees, subject in either case
to proper safeguards according to the usual practice of Massachusetts business
trusts or investment companies;
(k) to consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(m) to make, in the manner provided in the By-Laws, distributions of income
and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by the 1940
Act and the Trust's fundamental policy thereunder as to borrowing;
(o) to enter into investment advisory or management contracts, subject to
the 1940 Act, with any one or more corporations, partnerships, trusts,
associations or other persons;
(p) to change the name of the Trust or any Class or Series of the Trust as
they consider appropriate without prior shareholder approval;
(q) to establish officers' and Trustees' fees or compensation and fees or
compensation for committees of the Trustees to be paid by the Trust or each
Series thereof in such manner and amount as the Trustees may determine; and
(r) to engage, employ or appoint any person or entities to perform any act
for the Trust or the Trustees and to authorize their compensation.
5. No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) The Trustees shall have no power to bind any Shareholder personally
or to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription to any Shares or otherwise. This
paragraph shall not limit the right of the Trustees to assert claims against any
shareholder based upon the acts or omissions of such shareholder or for any
other reason. There is hereby expressly disclaimed shareholder and Trustee
liability for the acts and obligations of the Trust. Every note, bond, contract
or other undertaking issued by or on behalf of the Trust or the Trustees
relating to the Trust shall include a notice and provision limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such notice and provision shall not operate to impose any
-11-
<PAGE>
liability or obligation on any Shareholder).
(b) Whenever this Declaration of Trust calls for or permits any action to
be taken by the Trustees hereunder, such action shall mean that taken by the
Board of Trustees by vote of the majority of a quorum of Trustees as set forth
from time to time in the By-Laws of the Trust or as required by the 1940 Act.
(c) The Trustees shall possess and exercise any and all such additional
powers as are reasonably implied from the powers herein contained such as may be
necessary or convenient in the conduct of any business or enterprise of the
Trust, to do and perform anything necessary, suitable, or proper for the
accomplishment of any of the purposes, or the attainment of any one or more of
the objects, herein enumerated, or which shall at any time appear conducive to
or expedient for the protection or benefit of the Trust, and to do and perform
all other acts and things necessary or incidental to the purposes herein before
set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power, to the extent not inconsistent with
the 1940 Act, to determine conclusively whether any moneys, securities, or other
properties of the Trust are, for the purposes of this Trust, to be considered as
capital or income and in what manner any expenses or disbursements are to be
borne as between capital and income whether or not in the absence of this
provision such moneys, securities, or other properties would be regarded as
capital or income and whether or not in the absence of this provision such
expenses or disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class of Trustee
shall be elected for a period shorter than that from the time of the election
following the division into classes until the next meeting and thereafter for a
period shorter than the interval between meetings or for a period longer than
five years, and the term of office of at least one class shall expire each year.
8. The Shareholders shall have the right to inspect the records, documents,
accounts and books of the Trust, subject to reasonable regulations of the
Trustees, not contrary to Massachusetts law, as to whether and to what extent,
and at what times and places, and under what conditions and regulations, such
right shall be exercised.
9. Any officer elected or appointed by the Trustees or by the Shareholders
or otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in the By-Laws of the Trust.
10. The Trustees shall have power to hold their meetings, to have an office
or offices and, subject to the provisions of the laws of Massachusetts, to keep
the books of the Trust outside of said Commonwealth at such places as may from
time to time be designated by them. Action may be taken by the Trustees without
a meeting by unanimous written consent or by telephone or similar method of
communication.
11. Securities held by the Trust shall be voted in person or by proxy by
the President or a Vice-President, or such officer or officers of the Trust as
the Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
-12-
<PAGE>
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or
employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, partner, director, trustee,
employee or stockholder, or otherwise may have an interest, may be a party to,
or may be pecuniarily or otherwise interested in, any contract or transaction of
the Trust, and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated; provided that in such case a Trustee, officer
or employee or a partnership, corporation or association of which a Trustee,
officer or employee is a member, officer, director, trustee, employee or
stockholder is so interested, such fact shall be disclosed or shall have been
known to the Trustees including those Trustees who are not so interested and who
are neither "interested" nor "affiliated" persons as those terms are defined in
the 1940 Act, or a majority thereof; and any Trustee who is so interested, or
who is also a director, officer, partner, trustee, employee or stockholder of
such other corporation or a member of such partnership or association which is
so interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were not so interested.
(b) Specifically, but without limitation of the foregoing, the Trust may
enter into a management or investment advisory contract or underwriting contract
and other contracts with, and may otherwise do business with any manager or
investment adviser for the Trust and/or principal underwriter of the Shares of
the Trust or any subsidiary or affiliate of any such manager or investment
adviser and/or principal underwriter and may permit any such firm or corporation
to enter into any contracts or other arrangements with any other firm or
corporation relating to the Trust notwithstanding that the Trustees of the Trust
may be composed in part of partners, directors, officers or employees of any
such firm or corporation, and officers of the Trust may have been or may be or
become partners, directors, officers or employees of any such firm or
corporation, and in the absence of fraud the Trust and any such firm or
corporation may deal freely with each other, and no such contract or transaction
between the Trust and any such firm or corporation shall be invalidated or in
any way affected thereby, nor shall any Trustee or officer of the Trust be
liable to the Trust or to any Shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the existence of any
such contract or transaction; provided that nothing herein shall protect any
director or officer of the Trust against any liability to the trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(c) As used in this paragraph the following terms shall have the meanings
set forth below:
(i) the term "indemnitee" shall mean any present or former Trustee, officer
or employee of the Trust, any present or former Trustee, partner, Director or
officer of another trust, partnership, corporation or association whose
securities are or were owned by the Trust or of which the Trust is or was a
creditor and who served or serves in such capacity at the request of the Trust,
and the heirs, executors, administrators, successors and assigns of any of the
foregoing; however, whenever conduct by an indemnitee is referred to, the
conduct shall be that of the original indemnitee rather than that of the heir,
executor, administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, to which an indemnitee is or was a party or is threatened to be
made a party by reason of the fact or facts under
-13-
<PAGE>
which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by an indemnitee in connection with a covered proceeding; and
(v) the term "adjudication of liability" shall mean, as to any covered
proceeding and as to any indemnitee, an adverse determination as to the
indemnitee whether by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered expenses
in any covered proceeding if there has been an adjudication of liability against
such indemnitee expressly based on a finding of disabling conduct.
(e) Except as set forth in paragraph (d) above, the Trust shall indemnify
any indemnitee for covered expenses in any covered proceeding, whether or not
there is an adjudication of liability as to such indemnitee, such
indemnification by the Trust to be to the fullest extent now or hereafter
permitted by any applicable law unless the By-laws limit or restrict the
indemnification to which any indemnitee may be entitled. The Board of Trustees
may adopt By-Law provisions to implement subparagraphs (c), (d) and (e) hereof.
(f) Nothing herein shall be deemed to affect the right of the Trust and/or
any indemnitee to acquire and pay for any insurance covering any or all
indemnitees to the extent permitted by applicable law or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by applicable law. Such rights to indemnification shall not, except as
otherwise provided by law, be deemed exclusive of any other rights to which such
indemnitee may be entitled under any statute, By-Law, contract or otherwise.
13. The Trustees are empowered, in their absolute discretion, to establish
bases or times, or both, for determining the net asset value per Share of any
Class and Series in accordance with the 1940 Act and to authorize the voluntary
purchase by any Class and Series, either directly or through an agent, of Shares
of any Class and Series upon such terms and conditions and for such
consideration as the Trustees shall deem advisable in accordance with the 1940
Act.
14. Payment of the net asset value per Share of any Class and Series
properly surrendered to it for redemption shall be made by the Trust within
seven days, or as specified in any applicable law or regulation, after tender of
such stock or request for redemption to the Trust for such purpose together with
any additional documentation that may be reasonably required by the Trust or its
transfer agent to evidence the authority of the tenderor to make such request,
plus any period of time during which the right of the holders of the shares of
such Class of that Series to require the Trust to redeem such shares has been
suspended. Any such payment may be made in portfolio securities of such Class of
that Series and/or in cash, as the Trustees shall deem advisable, and no
Shareholder shall have a right, other than as determined by the Trustees, to
have Shares redeemed in kind.
15. The Trust shall have the right, at any time and without prior notice to
the Shareholder,
-14-
<PAGE>
to redeem Shares of the Class and Series held by such Shareholder held in any
account registered in the name of such Shareholder for its current net asset
value, if and to the extent that such redemption is necessary to reimburse
either that Series or Class of the Trust or the distributor (i.e., principal
underwriter) of the Shares for any loss either has sustained by reason of the
failure of such Shareholder to make timely and good payment for Shares purchased
or subscribed for by such Shareholder, regardless of whether such Shareholder
was a Shareholder at the time of such purchase or subscription, subject to and
upon such terms and conditions as the Trustees may from time to time prescribe.
EIGHTH: The name "Oppenheimer" included in the name of the Trust and of any
Series shall be used pursuant to a royalty-free, non-exclusive license from
OppenheimerFunds, Inc. ("OFI"), incidental to and as part of any one or more
advisory, management or supervisory contracts which may be entered into by the
Trust with OFI. Such license shall allow OFI to inspect and subject to the
control of the Board of Trustees to control the nature and quality of services
offered by the Trust under such name. The license may be terminated by OFI upon
termination of such advisory, management or supervisory contracts or without
cause upon 60 days' written notice, in which case neither the Trust nor any
Series or Class shall have any further right to use the name "Oppenheimer" in
its name or otherwise and the Trust, the Shareholders and its officers and
Trustees shall promptly take whatever action may be necessary to change its name
and the names of any Series or Classes accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or the Shareholders, heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the Trust estate
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust shall, upon request by the Shareholder, assume
the defense of any such claim made against any Shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership is
created hereby. No individual Trustee hereunder shall have any power to bind the
Trust, the Trust's officers or any Shareholder. All persons extending credit to,
doing business with, contracting with or having or asserting any claim against
the Trust or the Trustees shall look only to the assets of the Trust for payment
under any such credit, transaction, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor; notice of such disclaimer shall be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. Nothing in this Declaration of Trust shall protect a
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee
hereunder.
3. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing,
shall be binding upon everyone interested. Subject to the provisions of
paragraph 2 of this Article NINTH, the Trustees shall not be liable for errors
of judgment or mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operations of this Declaration
of Trust, applicable laws, contracts, obligations, transactions or any other
business the Trust may enter into, and subject to the provisions of
-15-
<PAGE>
paragraph 2 of this Article NINTH, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
4. This Trust shall continue without limitation of time but subject to the
provisions of sub- sections (a), (b), (c) and (d) of this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of a majority of
the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may sell and convey the assets of that Series
(which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders of the outstanding
Shares of the Series the assets of which have been so transferred.
(b) The Trustees, with the favorable vote of the holders of a majority of
the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may at any time sell and convert into money all
the assets of that Series. Upon making provisions for the payment of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
that Series, the Trustees shall distribute the remaining assets of that Series
ratably among the holders of the outstanding Shares of that Series.
(c) The Trustees, with the favorable vote of the holders of a majority of
the outstanding voting securities, as defined in the 1940 Act, of any one or
more Series entitled to vote, may otherwise alter, convert or transfer the
assets of that Series or those Series.
(d) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-sections (a) and (b), and in subsection (c)
where applicable, the Series the assets of which have been so transferred shall
terminate, and if all the assets of the Trust have been so transferred, the
Trust shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest of
all parties shall be cancelled and discharged.
5. The original or a copy of this instrument and of each restated
declaration of trust or instrument supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental or restated declaration of trust shall be
filed with the Secretary of the Commonwealth of Massachusetts, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental or restated declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such supplemental or restated declaration of trust. In this instrument or in
any such supplemental or restated declaration of trust, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as amended or affected by any such
supplemental or restated declaration of trust. This instrument may be executed
in any number of counterparts, each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust
-16-
<PAGE>
shall be of the type commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the Shares
held in any account if the aggregate net asset value of such Shares (taken at
cost or value, as determined by the Board) has been reduced to $200 or less upon
such notice to the shareholder in question, with such permission to increase the
investment in question and upon such other terms and conditions as may be fixed
by the Board of Trustees in accordance with the 1940 Act.
8. In the event that any person advances the organizational expenses of the
Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
with criteria fixed by the Board of Trustees, to be amortized over a period or
periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust including
action which is required or permitted by the 1940 Act or any other applicable
law, such action shall be deemed to have been properly taken if such action is
in accordance with the construction of the 1940 Act or such other applicable law
then in effect as expressed in "no action" letters of the staff of the
Commission or any release, rule, regulation or order under the 1940 Act or any
decision of a court of competent jurisdiction, notwithstanding that any of the
foregoing shall later be found to be invalid or otherwise reversed or modified
by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus and/or statement of additional information
relating to the Shares under the Securities Act of 1933 or in any proxy
statement of the Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is
permitted or required to place a value on assets of the Trust, such action may
be delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and, if a vote of Shareholders is
required under this Declaration of Trust, the favorable vote of the holders of a
"majority" of the outstanding voting securities, as defined in the 1940 Act,
entitled to vote, or by any larger vote which may be required by applicable law
in any particular case, the Trustees may amend or otherwise supplement this
instrument, by making a Restated Declaration of Trust or a Declaration of Trust
supplemental hereto, which thereafter shall form a part hereof; any such
Supplemental or Restated Declaration of Trust may be executed by and on behalf
of the Trust and the Trustees by an officer or officers of the Trust.
-17-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of this
16th day of April, 1998.
Signatures Title
- ------------ -----
/s/ Leon Levy
------------------------
Leon Levy Chairman of the
Board of Trustees
/s/ Donald W. Spiro
------------------------
Donald W. Spiro Vice Chairman
and Trustee
/s/ Bridget A. Macaskill
------------------------
Bridget A. Macaskill President and Trustee
/s/ George C. Bowen
------------------------
George C. Bowen Treasurer and
Principal Financial
and Accounting Officer
/s/ Robert G. Galli
------------------------
Robert G. Galli Trustee
/s/ Benjamin Lipstein
------------------------
Benjamin Lipstein Trustee
/s/ Elizabeth B. Moynihan
------------------------
Elizabeth B. Moynihan Trustee
/s/ Kenneth A. Randall
------------------------
Kenneth A. Randall Trustee
/s/ Edward V. Regan
------------------------
Edward V. Regan Trustee
<PAGE>
/s/ Russell S. Reynolds, Jr.
------------------------
Russell S. Reynolds, Jr. Trustee
/s/ Pauline Trigere
------------------------
Pauline Trigere Trustee
/s/ Clayton K. Yeutter
------------------------
Clayton K. Yeutter Trustee
Exhibit 24(b)(5)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 16th day of April, 1998, by and between OPPENHEIMER WORLD
BOND FUND (hereinafter referred to as the "Fund"), and OPPENHEIMERFUNDS, INC.
(hereinafter referred to as "OFI").
WHEREAS, the Fund is a open-end, diversified management investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), and OFI is an investment adviser registered as such with the
Commission under the Investment Advisors Act of 1940;
WHEREAS, the Fund desires that OFI shall act as its investment adviser pursuant
to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. General Provision.
The Fund hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Fund such other duties and
functions as are hereinafter set forth. OFI shall, in all matters, give to the
Fund and its Board of Trustees the benefit of its best judgment, effort, advice
and recommendations and shall, at all times conform to, and use its best efforts
to enable the Fund to conform to (i) the provisions of the Investment Company
Act and any rules or regulations thereunder; (ii) any other applicable
provisions of state or Federal law; (iii) the provisions of the Declaration of
Trust and By-Laws of the Fund as amended from time to time; (iv) policies and
determinations of the Board of Trustees of the Fund; (v) the fundamental
policies and investment restrictions of the Fund as reflected in its
registration statement under the Investment Company Act or as such policies may,
from time to time, be amended by the Fund's shareholders; and (vi) the
Prospectus and Statement of Additional Information of the Fund in effect from
time to time. The appropriate officers and employees of OFI shall be available
upon reasonable notice for consultation with any of the Trustees and officers of
the Fund with respect to any matters dealing with the business and affairs of
the Fund including the valuation of portfolio securities of the Fund which are
either not registered for public sale or not traded on any securities market.
2. Investment Management.
(a) OFI shall, subject to the direction and control by the Fund's Board of
Trustees, (i) regularly provide investment advice and recommendations to the
Fund with respect to its investments, investment policies and the purchase and
sale of securities; (ii) supervise continuously the investment program of the
Fund and the composition of its portfolio and determine what securities shall be
purchased or sold by the Fund; and (iii) arrange, subject to the provisions of
paragraph 7 hereof, for the purchase of securities and other investments for the
Fund and the sale of securities and other investments held in the Fund's
portfolio.
(b) Provided that the Fund shall not be required to pay any compensation
for services under this Agreement other than as provided by the terms of this
Agreement and subject to the provisions of paragraph 7 hereof, OFI may obtain
investment information, research or assistance from any other person, firm or
corporation to supplement, update or otherwise improve its investment management
services.
(c) Provided that nothing herein shall be deemed to protect OFI from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under this
Agreement, OFI shall not be liable for any loss sustained by reason of good
faith errors or omissions in connection with any matters to which this Agreement
relates.
-1-
<PAGE>
(d) Nothing in this Agreement shall prevent OFI or any officer thereof from
acting as investment adviser for any other person, firm or corporation or in any
way limit or restrict OFI or any of its directors, officers, stockholders or
employees from buying, selling or trading any securities for its or their own
account or for the account of others for whom it or they may be acting, provided
that such activities will not adversely affect or otherwise impair the
performance by OFI of its duties and obligations under this Agreement.
3. Other Duties of OFI.
OFI shall, at its own expense, provide and supervise the activities of all
administrative and clerical personnel as shall be required to provide effective
corporate administration for the Fund, including the compilation and maintenance
of such records with respect to its operations as may reasonably be required;
the preparation and filing of such reports with respect thereto as shall be
required by the Commission; composition of periodic reports with respect to
operations of the Fund for its shareholders; composition of proxy materials for
meetings of the Fund's shareholders; and the composition of such registration
statements as may be required by Federal and state securities laws for
continuous public sale of shares of the Fund. OFI shall, at its own cost and
expense, also provide the Fund with adequate office space, facilities and
equipment. OFI shall, at its own expense, provide such officers for the Fund as
the Board of Trustees may request.
4. Allocation of Expenses.
All other costs and expenses of the Fund not expressly assumed by OFI under
this Agreement, or to be paid by the Distributor of the shares of the Fund,
shall be paid by the Fund, including, but not limited to: (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums for fidelity and
other coverage requisite to its operations; (iv) compensation and expenses of
its trustees other than those affiliated with OFI; (v) legal and audit expenses;
(vi) custodian and transfer agent fees and expenses; (vii) expenses incident to
the redemption of its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto; (ix)
fees and expenses, other than as hereinabove provided, incident to the
registration under Federal and state securities laws of shares of the Fund for
public sale; (x) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund; (xi) except as noted above, all other
expenses incidental to holding meetings of the Fund's shareholders; and (xii)
such extraordinary non-recurring expenses as may arise, including litigation,
affecting the Fund and any legal obligation which the Fund may have to indemnify
its officers and trustees with respect thereto. Any officers or employees of OFI
or any entity controlling, controlled by or under common control with OFI who
also serve as officers, trustees or employees of the Fund shall not receive any
compensation from the Fund for their services.
5. Compensation of OFI.
The Fund agrees to pay OFI and OFI agrees to accept as full compensation
for the performance of all functions and duties on its part to be performed
pursuant to the provisions hereof, a fee computed on the aggregate net asset
value of the shares of the Fund as of the close of each business day and payable
monthly at the following annual rate:
.75% of the first $200 million of net assets;
.72% of the next $200 million;
.69% of the next $200 million;
.66% of the next $200 million;
.60% of the next $200 million; and
.58% of net assets in excess of $1 billion.
6. Use of Name "Oppenheimer."
OFI hereby grants to the Fund a royalty-free, non-exclusive license to use
the name "Oppenheimer" in the name
-2-
<PAGE>
of the Fund for the duration of this Agreement and any extensions or renewals
thereof. To the extent necessary to protect OFI's rights to the name
"Oppenheimer" under applicable law, such license shall allow OFI to inspect and,
subject to control by the Fund's Board, control the nature and quality of
services offered by the Fund under such name and may, upon termination of this
Agreement, be terminated by OFI, in which event the Fund shall promptly take
whatever action may be necessary to change its name and discontinue any further
use of the name "Oppenheimer" in the name of the Fund or otherwise. The name
"Oppenheimer" may be used or licensed by OFI in connection with any of its
activities, or licensed by OFI to any other party.
7. Portfolio Transactions and Brokerage.
(a) OFI is authorized, in arranging the purchase and sale of the Fund's
portfolio securities, to employ or deal with such members of securities or
commodities exchanges, brokers or dealers (hereinafter "broker-dealers"),
including "affiliated" broker-dealers (as that term is defined in the Investment
Company Act), as may, in its best judgment, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable security price obtainable) of the Fund's
portfolio transactions as well as to obtain, consistent with the provisions of
subparagraph (c) of this paragraph 7, the benefit of such investment information
or research as will be of significant assistance to the performance by OFI of
its investment management functions.
(b) OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by OFI on the basis of all relevant factors and considerations
including, insofar as feasible, the execution capabilities required by the
transaction or transactions; the ability and willingness of the broker-dealer to
facilitate the Fund's portfolio transactions by participating therein for its
own account; the importance to the Fund of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Fund.
(c) OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Fund's portfolio transactions to broker-dealers, other than an
affiliated broker-dealer, qualified to obtain best execution of such
transactions who provide brokerage and/or research services (as such services
are defined in Section 28(e)(3) of the Securities Exchange Act of 1934) for the
Fund and/or other accounts for which OFI or its affiliates exercise "investment
discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the Fund that is in excess
of the amount of commission another broker-dealer adequately qualified to effect
such transaction would have charged for effecting that transaction, if OFI
determines, in good faith, that such commission is reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OFI or its affiliates with respect to the accounts as to
which they exercise investment discretion. In reaching such determination, OFI
will not be required to place or attempt to place a specific dollar value on the
brokerage and/or research services provided or being provided by such
broker-dealer. In demonstrating that such determinations were made in good
faith, OFI shall be prepared to show that all commissions were allocated for
purposes contemplated by this Agreement and that the total commissions paid by
the Fund over a representative period selected by the Fund's trustees were
reasonable in relation to the benefits to the Fund.
(d) OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of the Board of
Trustees of the Fund and the provisions of this paragraph 7.
-3-
<PAGE>
(e) The Fund recognizes that an affiliated broker-dealer: (i) may act as
one of the Fund's regular brokers for the Fund so long as it is lawful for it so
to act; (ii) may be a major recipient of brokerage commissions paid by the Fund;
and (iii) may effect portfolio transactions for the Fund only if the
commissions, fees or other remuneration received or to be received by it are
determined in accordance with procedures contemplated by any rule, regulation or
order adopted under the Investment Company Act for determining the permissible
level of such commissions.
(f) Subject to the foregoing provisions of this paragraph 7, OFI may also
consider sales of shares of the Fund and the other funds advised by OFI and its
affiliates as a factor in the selection of broker-dealers for its portfolio
transactions.
8. Duration.
This Agreement will take effect on the date first set forth above. Unless
earlier terminated pursuant to paragraph 10 hereof, this Agreement shall remain
in effect until April 16, 2000, and thereafter will continue in effect from year
to year, so long as such continuance shall be approved at least annually by the
Fund's Board of Trustees, including the vote of the majority of the trustees of
the Fund who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, or by the holders of
a "majority" (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund and by such a vote of the Fund's Board of
Trustees.
9. Disclaimer of Shareholder or Trustee Liability.
OFI understands and agrees that the obligations of the Fund under this
Agreement are not binding upon any shareholder or Trustee of the Fund
personally, but bind only the Fund and the Fund's property; OFI represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder or Trustee liability for acts or obligations of the
Fund.
10. Termination.
This Agreement may be terminated (i) by OFI at any time without penalty
upon sixty days' written notice to the Fund (which notice may be waived by the
Fund); or (ii) by the Fund at any time without penalty upon sixty days' written
notice to OFI (which notice may be waived by OFI) provided that such termination
by the Fund shall be directed or approved by the vote of a majority of all of
the trustees of the Fund then in office or by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund (as defined in the
Investment Company Act).
11. Assignment or Amendment.
This Agreement may not be amended or the rights of OFI hereunder sold,
transferred, pledged or otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of the "majority" of the
outstanding voting securities of the Fund. This Agreement shall automatically
and immediately terminate in the event of its "assignment," as defined in the
Investment Company Act.
12. Definitions.
The terms and provisions of the Agreement shall be interpreted and defined
in a manner consistent with the provisions and definitions contained in the
Investment Company Act.
-4-
<PAGE>
OPPENHEIMER WORLD BOND FUND
Attest:
/s/ Mitchell J. Lindauer /s/ Robert G. Zack
------------------------
------------------------
Mitchell J. Lindauer Robert G. Zack
Assistant Secretary
OPPENHEIMERFUNDS, INC.
Attest:
/s/ Katherine P. Feld /s/ Andrew J. Donohue
------------------------
------------------------
Katherine P. Feld Andrew J. Donohue
Executive Vice President
-5-
Exhibit 24(b)(6)(i)
GENERAL DISTRIBUTOR'S AGREEMENT
BETWEEN
OPPENHEIMER WORLD BOND FUND
AND
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Dated: April 23, 1998
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center, Suite 3400
New York, NY 10048
Dear Sirs:
OPPENHEIMER WORLD BOND FUND, a Massachusetts business trust (the "Fund"),
is registered as an investment company under the Investment Company Act of 1940
(the "1940 Act"), and an indefinite number of one or more classes of its shares
of beneficial interest ("Shares") have been registered under the Securities Act
of 1933 (the "1933 Act") to be offered for sale to the public in a continuous
public offering in accordance with the terms and conditions set forth in the
Prospectus and Statement of Additional Information ("SAI") included in the
Fund's Registration Statement as it may be amended from time to time (the
"current Prospectus and/or SAI").
In this connection, the Fund desires that your firm (the "General
Distributor") act in a principal capacity as General Distributor for the sale
and distribution of Shares which have been registered as described above and of
any additional Shares which may become registered during the term of this
Agreement. You have advised the Fund that you are willing to act as such General
Distributor, and it is accordingly agreed by and between us as follows:
1. Appointment of the Distributor. The Fund hereby appoints you as the sole
General Distributor, pursuant to the aforesaid continuous public offering of its
Shares, and the Fund further agrees from and after the date of this Agreement,
that it will not, without your consent, sell or agree to sell any Shares
otherwise than through you, except (a) the Fund may itself sell shares without
sales charge as an investment to the officers, trustees or directors and bona
fide present and former full-time employees of the Fund, the Fund's Investment
Adviser and affiliates thereof, and to other investors who are identified in the
current Prospectus and/or SAI as having the privilege to buy Shares at net asset
value; (b) the Fund may issue shares in connection with a merger, consolidation
or acquisition of assets on such basis as may be authorized or permitted under
the 1940 Act; (c) the Fund may issue shares for the reinvestment of dividends
and other distributions of the Fund or of any other Fund if permitted by the
current Prospectus and/or SAI; and (d) the Fund may issue shares as underlying
securities of a unit investment trust if such unit investment trust has elected
to use Shares as an underlying investment; provided that in no event as to any
of the foregoing exceptions shall Shares be issued and sold at less than the
then-existing net asset value.
2. Sale of Shares. You hereby accept such appointment and agree to use your
best efforts to sell Shares, provided, however, that when requested by the Fund
at any time because of market or other
-1-
<PAGE>
economic considerations or abnormal circumstances of any kind, or when agreed to
by mutual consent of the Fund and the General Distributor, you will suspend such
efforts. The Fund may also withdraw the offering of Shares at any time when
required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is understood that you do not
undertake to sell all or any specific number of Shares.
3. Sales Charge. Shares shall be sold by you at net asset value plus a
front-end sales charge not in excess of 4.75% of the offering price, but which
front-end sales charge shall be proportionately reduced or eliminated for larger
sales and under other circumstances, in each case on the basis set forth in the
Fund's current Prospectus and/or SAI. The redemption proceeds of shares offered
and sold at net asset value with or without a front-end sales charge may be
subject to a contingent deferred sales charge ("CDSC") under the circumstances
described in the current Prospectus and/or SAI. You may reallow such portion of
the front-end sales charge to dealers or cause payment (which may exceed the
front-end sales charge, if any) of commissions to brokers through which sales
are made, as you may determine, and you may pay such amounts to dealers and
brokers on sales of shares from your own resources (such dealers and brokers
shall collectively include all domestic or foreign institutions eligible to
offer and sell the Shares), and in the event the Fund has more than one class of
Shares outstanding, then you may impose a front-end sales charge and/or a CDSC
on Shares of one class that is different from the charges imposed on Shares of
the Fund's other class(es), in each case as set forth in the current Prospectus
and/or SAI, provided the front-end sales charge and CDSC to the ultimate
purchaser do not exceed the respective levels set forth for such category of
purchaser in the Fund's current Prospectus and/or SAI.
4. Purchase of Shares.
(a) As General Distributor, you shall have the right to accept or reject
orders for the purchase of Shares at your discretion. Any consideration which
you may receive in connection with a rejected purchase order will be returned
promptly.
(b) You agree promptly to issue or to cause the duly appointed transfer or
shareholder servicing agent of the Fund to issue as your agent confirmations of
all accepted purchase orders and to transmit a copy of such confirmations to the
Fund. The net asset value of all Shares which are the subject of such
confirmations, computed in accordance with the applicable rules under the 1940
Act, shall be a liability of the General Distributor to the Fund to be paid
promptly after receipt of payment from the originating dealer or broker (or
investor, in the case of direct purchases) and not later than eleven business
days after such confirmation even if you have not actually received payment from
the originating dealer or broker or investor. In no event shall the General
Distributor make payment to the Fund later than permitted by applicable rules of
the National Association of Securities Dealers, Inc.
(c) If the originating dealer or broker shall fail to make timely
settlement of its purchase order in accordance with applicable rules of the
National Association of Securities Dealers, Inc., or if a direct purchaser shall
fail to make good payment for shares in a timely manner, you shall have the
right to cancel such purchase order and, at your account and risk, to hold
responsible the originating dealer or broker, or investor. You agree promptly to
reimburse the Fund for losses suffered by it that are attributable to any such
cancellation, or to errors on your part in relation to the effective date of
accepted purchase orders, limited to
-2-
<PAGE>
the amount that such losses exceed contemporaneous gains realized by the Fund
for either of such reasons with respect to other purchase orders.
(d) In the case of a canceled purchase for the account of a directly
purchasing shareholder, the Fund agrees that if such investor fails to make you
whole for any loss you pay to the Fund on such canceled purchase order, the Fund
will reimburse you for such loss to the extent of the aggregate redemption
proceeds of any other shares of the Fund owned by such investor, on your demand
that the Fund exercise its right to claim such redemption proceeds. The Fund
shall register or cause to be registered all Shares sold to you pursuant to the
provisions hereof in such names and amounts as you may request from time to time
and the Fund shall issue or cause to be issued certificates evidencing such
Shares for delivery to you or pursuant to your direction if and to the extent
that the shareholder account in question contemplates the issuance of such
certificates. All Shares when so issued and paid for, shall be fully paid and
non-assessable by the Fund (which shall not prevent the imposition of any CDSC
that may apply) to the extent set forth in the current Prospectus and/or SAI.
5. Repurchase of Shares.
(a) In connection with the repurchase of Shares, you are appointed and
shall act as Agent of the Fund. You are authorized, for so long as you act as
General Distributor of the Fund, to repurchase, from authorized dealers,
certificated or uncertificated shares of the Fund ("Shares") on the basis of
orders received from each dealer ("authorized dealer") with which you have a
dealer agreement for the sale of Shares and permitting resales of Shares to you,
provided that such authorized dealer, at the time of placing such resale order,
shall represent (i) if such Shares are represented by certificate(s), that
certificate(s) for the Shares to be repurchased have been delivered to it by the
registered owner with a request for the redemption of such Shares executed in
the manner and with the signature guarantee required by the then-currently
effective prospectus of the Fund, or (ii) if such Shares are uncertificated,
that the registered owner(s) has delivered to the dealer a request for the
redemption of such Shares executed in the manner and with the signature
guarantee required by the then-currently effective prospectus of the Fund.
(b) You shall (a) have the right in your discretion to accept or reject
orders for the repurchase of Shares; (b) promptly transmit confirmations of all
accepted repurchase orders; and (c) transmit a copy of such confirmation to the
Fund, or, if so directed, to any duly appointed transfer or shareholder
servicing agent of the Fund. In your discretion, you may accept repurchase
requests made by a financially responsible dealer which provides you with
indemnification in form satisfactory to you in consideration of your acceptance
of such dealer's request in lieu of the written redemption request of the owner
of the account; you agree that the Fund shall be a third party beneficiary of
such indemnification.
(c) Upon receipt by the Fund or its duly appointed transfer or shareholder
servicing agent of any certificate(s) (if any has been issued) for repurchased
Shares and a written redemption request of the registered owner(s) of such
Shares executed in
-3-
<PAGE>
the manner and bearing the signature guarantee required by the then-currently
effective Prospectus or SAI of the Fund, the Fund will pay or cause its duly
appointed transfer or shareholder servicing agent promptly to pay to the
originating authorized dealer the redemption price of the repurchased Shares
(other than repurchased Shares subject to the provisions of part (d) of Section
5 of this Agreement) next determined after your receipt of the dealer's
repurchase order.
(d) Notwithstanding the provisions of part (c) of Section 5 of this
Agreement, repurchase orders received from an authorized dealer after the
determination of the Fund's redemption price on a regular business day will
receive that day's redemption price if the request to the dealer by its customer
to arrange such repurchase prior to the determination of the Fund's redemption
price that day complies with the requirements governing such requests as stated
in the current Prospectus and/or SAI.
(e) You will make every reasonable effort and take all reasonably available
measures to assure the accurate performance of all services to be performed by
you hereunder within the requirements of any statute, rule or regulation
pertaining to the redemption of shares of a regulated investment company and any
requirements set forth in the then-current Prospectus and/or SAI of the Fund.
You shall correct any error or omission made by you in the performance of your
duties hereunder of which you shall have received notice in writing and any
necessary substantiating data; and you shall hold the Fund harmless from the
effect of any errors or omissions which might cause an over- or under-
redemption of the Fund's Shares and/or an excess or non-payment of dividends,
capital gains distributions, or other distributions.
(f) In the event an authorized dealer initiating a repurchase order shall
fail to make delivery or otherwise settle such order in accordance with the
rules of the National Association of Securities Dealers, Inc., you shall have
the right to cancel such repurchase order and, at your account and risk, to hold
responsible the originating dealer. In the event that any cancellation of a
Share repurchase order or any error in the timing of the acceptance of a Share
repurchase order shall result in a gain or loss to the Fund, you agree promptly
to reimburse the Fund for any amount by which any loss shall exceed
then-existing gains so arising.
6. 1933 Act Registration. The Fund has delivered to you a copy of its
current Prospectus and SAI. The Fund agrees that it will use its best efforts to
continue the effectiveness of the Registration Statement under the 1933 Act. The
Fund further agrees to prepare and file any amendments to its Registration
Statement as may be necessary and any supplemental data in order to comply with
the 1933 Act. The Fund will furnish you at your expense with a reasonable number
of copies of the Prospectus and SAI and any amendments thereto for use in
connection with the sale of Shares.
7. 1940 Act Registration. The Fund has already registered under the 1940
Act as an investment company, and it will use its best efforts to maintain such
registration and to comply with the requirements of the 1940 Act.
-4-
<PAGE>
8. State Blue Sky Qualification. At your request, the Fund will take such
steps as may be necessary and feasible to qualify Shares for sale in states,
territories or dependencies of the United States, the District of Columbia, the
Commonwealth of Puerto Rico and in foreign countries, in accordance with the
laws thereof, and to renew or extend any such qualification; provided, however,
that the Fund shall not be required to qualify shares or to maintain the
qualification of shares in any jurisdiction where it shall deem such
qualification disadvantageous to the Fund.
9. Duties of Distributor. You agree that:
(a) Neither you nor any of your officers will take any long or short
position in the Shares, but this provision shall not prevent you or your
officers from acquiring Shares for investment purposes only; and
(b) You shall furnish to the Fund any pertinent information required to be
inserted with respect to you as General Distributor within the purview of the
Securities Act of 1933 in any reports or registration required to be filed with
any governmental authority; and
(c) You will not make any representations inconsistent with the information
contained in the current Prospectus and/or SAI; and
(d) You shall maintain such records as may be reasonably required for the
Fund or its transfer or shareholder servicing agent to respond to shareholder
requests or complaints, and to permit the Fund to maintain proper accounting
records, and you shall make such records available to the Fund and its transfer
agent or shareholder servicing agent upon request; and
(e) In performing under this Agreement, you shall comply with all
requirements of the Fund's current Prospectus and/or SAI and all applicable
laws, rules and regulations with respect to the purchase, sale and distribution
of Shares.
10. Allocation of Costs. The Fund shall pay the cost of composition and
printing of sufficient copies of its Prospectus and SAI as shall be required for
periodic distribution to its shareholders and the expense of registering Shares
for sale under federal securities laws. You shall pay the expenses normally
attributable to the sale of Shares, other than as paid under the Fund's
Distribution Plan under Rule 12b-1 of the 1940 Act, including the cost of
printing and mailing of the Prospectus (other than those furnished to existing
shareholders) and any sales literature used by you in the public sale of the
Shares and for registering such shares under state blue sky laws pursuant to
paragraph 8.
11. Duration. This Agreement shall take effect on the date first written
above, and shall supersede any and all prior General Distributor's Agreements by
and among the Fund and you. Unless earlier terminated pursuant to paragraph 12
hereof, this Agreement shall remain in effect until April 16, 1999. This
Agreement shall continue in effect from year to year thereafter, provided that
such continuance shall be specifically approved at least annually: (a) by the
Fund's Board of Trustees or by vote of a majority of the voting securities of
the Fund; and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or "interested persons" (as defined the 1940 Act) of any such
person, cast in person at a meeting called for the purpose of voting on such
approval.
-5-
<PAGE>
12. Termination. This Agreement may be terminated (a) by the General
Distributor at any time without penalty by giving sixty days' written notice
(which notice may be waived by the Fund); (b) by the Fund at any time without
penalty upon sixty days' written notice to the General Distributor (which notice
may be waived by the General Distributor); or (c) by mutual consent of the Fund
and the General Distributor, provided that such termination by the Fund shall be
directed or approved by the Board of Trustees of the Fund or by the vote of the
holders of a "majority" of the outstanding voting securities of the Fund. In the
event this Agreement is terminated by the Fund, the General Distributor shall be
entitled to be paid the CDSC under paragraph 3 hereof on the redemption proceeds
of Shares sold prior to the effective date of such termination.
13. Assignment. This Agreement may not be amended or changed except in
writing and shall be binding upon and shall enure to the benefit of the parties
hereto and their respective successors; however, this Agreement shall not be
assigned by either party and shall automatically terminate upon assignment.
14. Disclaimer of Shareholder Liability. The General Distributor
understands and agrees that the obligations of the Fund under this Agreement are
not binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property; the General Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming Trustee and shareholder liability for acts or obligations of the
Fund.
15. Section Headings. The heading of each section is for descriptive
purposes only, and such headings are not to be construed or interpreted as part
of this Agreement.
If the foregoing is in accordance with your understanding, so indicate by
signing in the space provided below.
OPPENHEIMER WORLD BOND FUND
By:/s/ Andrew J. Donohue
Andrew J. Donohue
Secretary
Accepted:
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
Katherine P. Feld
Vice President & Secretary
-6-
OPPENHEIMER MULTI-GOVERNMENT TRUST
CO-CUSTODY AGREEMENT
Agreement made as of this 18th day of August, 1992, between OPPENHEIMER
MULTI- GOVERNMENT TRUST, a business trust organized and existing under the laws
of the Commonwealth of Massachusetts, having its principal office and place of
business at 2 World Trade Center, New York, New York 10048 (hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a
banking business, having its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person is
an Officer or employee of the Fund, duly authorized by the Board of Trustees of
the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of OSS"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
-1-
<PAGE>
4. "Call Option" shall mean an exchange traded Option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received (irrespective of constructive receipt) by the
Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded Option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Fund's Board of Trustees specifically approving deposits therein by the
Custodian, including, without limitation, a Foreign Depository.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Foreign Subcustodian" shall mean an "Eligible Foreign Custodian" as
defined in Rule 17-5 which is appointed by the Custodian to perform or
coordinate the receipt, custody and
-2-
<PAGE>
delivery of Foreign Property of the Fund outside the United States in a manner
consistent with the provisions of this Agreement and whose written contract is
approved by the Board of Trustees of the Fund in accordance with Rule 17f-5.
References to the Custodian herein shall, when appropriate, include reference to
its Foreign Subcustodians.
12. "Foreign Depository" shall mean an entity organized under the laws of a
foreign country which operates a system outside the United States in general use
by foreign banks and securities brokers for the central or transnational
handling of securities or equivalent book-entries which is regulated by a
foreign government or agency thereof and which is an "Eligible Foreign
Custodian" as defined in Rule 17f-5.
13. "Foreign Securities" shall mean securities and/or short term paper as
defined in Rule 17f-5 under the Act, whether issued in registered or bearer
form.
14. "Foreign Property" shall mean Foreign Securities and money of any
currency which is held outside of the United States.
15. "Futures Contract" shall mean a Financial Futures Contract and/or Index
Futures Contracts.
16. "Futures Contract Option" shall mean an Option with respect to a
Futures Contract.
17. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
18. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
19. "Index Option" shall mean an exchange traded Option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
20. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and
-3-
<PAGE>
withdrawn from time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in its books
and records.
21. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
22. "Nominee" shall mean, in addition to the name of the registered nominee
of the Custodian, (i) a partnership or other entity of a Foreign Subcustodian
which is used solely for the assets of its customers other than the Custodian
and the Foreign Subcustodian, if any, by which it was appointed; or (ii) the
nominee of a Foreign Depository which is used for the securities and other
assets of its customers, members or participants.
23. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
24. "Officers" shall mean the President, any Vice President, the Secretary,
the Treasurer, the Controller, any Assistant Secretary, any Assistant Treasurer,
and any other person or persons, whether or not any such other person is an
officer or employee of the Fund, but in each case only if duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix B or such other Certificate as may be received by the
Custodian from time to time; provided that each person who is designated in any
such Certificate as holding the position of "Officer of OSS" shall be an Officer
only for purposes of Articles XII and XIII hereof.
25. "Option" shall mean a Call Option, Covered Call Option, Index Option
and/or a Put Option.
26. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
-4-
<PAGE>
27. "Put Option" shall mean an exchange traded Option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
28. "Repurchase Agreement" shall mean an agreement pursuant to which the
Fund buys Securities and agrees to resell such Securities at a described or
specified date and price.
29. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
30. "Rule 17f-5" shall mean Rule 17f-5 (Reg. 270.17f-5) promulgated by the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended.
31. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Index Options, Index Futures Contracts,
Index Futures Contract Options, Financial Futures Contracts, Financial Futures
Contract Options, Reverse Repurchase Agreements, over the counter Options on
Securities, common stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or rights to any property or assets.
32. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
33. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
34. "Shares" shall mean the shares of beneficial interest of the Fund and
its Series.
-5-
<PAGE>
35. "Terminal Link" shall mean an electronic data transmission link between
the Fund and the Custodian requiring in connection with each use of the Terminal
Link the use of an authorization code provided by the Custodian and at least two
access codes established by the Fund, provided, that the Fund shall have
delivered to the Custodian a Certificate substantially in the form of Appendix
C.
36. "Transfer Agent" shall mean Oppenheimer Shareholder Services, a
division of Oppenheimer Management Corporation, its successors and assigns.
37. "Transfer Agent Account" shall mean any account in the name of the
Fund, or the Transfer Agent, as agent for the Fund, maintained with United
Missouri Bank or such other Bank designated by the Fund in a Certificate.
38. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned or held by the Fund during the
period of this Agreement.
2. The Custodian hereby accepts appointment as such custodianand agrees to
perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except for monies received and maintained in the Transfer Agent Account,
or as otherwise provided in paragraph 7 of this Article or in Article VIII or
XV, the Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series
-6-
<PAGE>
to which the same are specifically allocated, and the Custodian shall not be
responsible for any Securities or money not so delivered. Except for assets held
at DTC, the Custodian shall physically segregate, keep and maintain the
Securities of the Series separate and apart from each other Series and from
other assets held by the Custodian. Except as otherwise expressly provided in
this Agreement, the Custodian will not be responsible for any Securities and
moneys not actually received by it, unless the Custodian has been negligent or
has engaged in willful misconduct with respect thereto. The Custodian will be
entitled to reverse any credit of money made on the Fund's behalf where such
credits have been previously made and moneys are not finally collected, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto; provided that if such reversal is thirty (30) days or more
after the credit was issued, the Custodian will give five (5) days' prior notice
of such reversal. The Fund shall deliver to the Custodian a certified resolution
of the Board of Trustees of the Fund, substantially in the form of Exhibit A
hereto, approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in any Depository, the
Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to de posit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or rep resentative capacity and will be specifically
allocated on the Custodian's books to the separate ac count for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a Certificate
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All Securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and de liver Securities held pursuant to this Agreement.
-7-
<PAGE>
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the ac count of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be subject only
to drafts, orders, or charges of the Custodian pursuant to this Agreement and
shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates or Resolutions of the Fund's Board of Trustees
certified by an Officer and by the Secretary or Assistant Secretary of the Fund
setting forth the name and address of the person to whom the payment is to be
made, the Series account from which payment is to be made, the purpose for which
payment is to be made, and declaring such purpose to be a proper corporate
purpose; provided, however, that amounts representing dividends, distribu tions,
or redemptions proceeds with respect to Shares shall be paid only to the
Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees or
operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or subcustodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book- entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Secu rities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any
-8-
<PAGE>
duly appointed registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System or a Depository
or their successor or successors, or their nominee or nominees. The Fund agrees
to furnish to the Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or a Depository any
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such Securities
specifically allocated to a Series which are not held in the Book-Entry System
or in a Depository in a separate account in the name of such Series physically
segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income, dividends and distributions due or
payable;
(b) Promptly give notice to the Fund and promptly present for payment and
collect the amount of money or other consideration payable upon such Securities
which are called, but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or more of the
publications listed in Appendix D annexed hereto, which may be amended at any
time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account the
amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender
-9-
<PAGE>
offers and exchange offers, pendency of calls, maturities of Securities and
expiration of rights) relating to Securities held pursuant to this Agreement
which are actually received by the Custodian, such proxies and other similar
materials to be executed by the registered holder (if Securities are registered
otherwise than in the name of the Fund), but without indicating the manner in
which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly
or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated in
such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series specified
in such Certificate in exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder speci
fically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series specified
in such Certificate to any protective committee, reorganization committee or
other person in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation, and
receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940 in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in Certificates in
connection with any such purchase,
-10-
<PAGE>
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise in the name the Custodian (or any nominee of the
Custodian) as custodian for the Fund; provided, however, that notwithstanding
the foregoing, payments to or deliveries from the Margin Account and payments
with respect to Securities to which a Margin Account relates, shall be made in
accordance with the terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available, the Custodian
shall, notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only against the delivery to
the Custodian of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such instruments or such
certificates are available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the Custodian shall be
held by the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS,
FUTURES CONTRACT OPTIONS, REPURCHASE AGREEMENTS,
REVERSE REPURCHASE AGREEMENTS AND SHORT SALES
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, a Futures Contract
Option, a Repurchase Agreement, a Reverse Repurchase Agreement or a Short Sale,
the Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate, oral
Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker or other party to whom
payment is to be made. Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in the Certificate out
of the moneys held for the account of such
-11-
<PAGE>
Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate, oral
Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option, Repurchase
Agreement, Reverse Repurchase Agreement or Short Sale, the Fund shall deliver
such to the Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to each sale of
Money Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale and settlement; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's written statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly appointed and
registered nominee of the Custodian) as Custodian for the Fund, out of moneys
held for the account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the Clearing Member
through whom the purchase was made, provided that the same conforms to the
amount payable as set forth in such Certificate.
-12-
<PAGE>
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph of this Article with respect
to such Option upon receipt by the Custodian of the total amount payable to the
Fund, provided that the same conforms to the total amount payable as set forth
in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct a Depository to deliver the Securities specifically allocated
to such Series, provided the same conforms to the amount payable to the Fund as
set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Index Option: (a) the Series to
which such Index Option was specifically allocated;
-13-
<PAGE>
(b) the type of Index Option (put or call) (c) the number of Options being
exercised; (d) the index to which such Option relates; (e) the expiration date;
(f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, upon receipt of the premium specified in the Certificate with
respect to such Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct a Depository to impose, upon the underlying
Securities specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with a Depository underlying a
Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate upon payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such
-14-
<PAGE>
Series to be deposited into the Collateral Account for such Series. The
Custodian shall, after making the deposits into the Collateral Account specified
in the Certificate, issue a Put Option guarantee letter substantially in the
form utilized by the Custodian on the date hereof, and deliver the same to the
Clearing Member specified in the Certificate upon receipt of the premium
specified in said Certificate. Notwithstanding the foregoing, the Custodian
shall be under no obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are to be received;
(d) the total amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically allocated
to such series, if any, to be withdrawn from the Senior Security Ac count. Upon
the return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the moneys held for the account of the series to
which such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certifi cate,
upon delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of Options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certifi cate, or (2) make the deposits into the Margin Account
specified in the Certificate.
-15-
<PAGE>
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or can cellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction ex pressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custo dian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior
-16-
<PAGE>
Security Account as may be specified in a Certificate received in connection
with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract (s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker, dealer,
or futures commission merchant to the Fund with respect to an outstanding
Futures Contract shall be received and dealt with by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
-17-
<PAGE>
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the Series to which the
same relates; (b) with respect to an Index Futures Contract, the total cash set
tlement amount to be paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered or received; (c)
the broker, dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or Securities
to be withdrawn from the Senior Security Account for such Series. The Custodian
shall make the payment or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such Option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to
-18-
<PAGE>
the broker or futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Ac count, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account
-19-
<PAGE>
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the
-20-
<PAGE>
amount and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the withdrawals from the
Senior Security Account specified in the Certificate. The withdrawals, if any,
to be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and (b) make such withdrawals from and/or in the case of
an exercise such deposits into the Senior Security Account as may be specified
in a Certificate. The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract Option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer-and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such
-21-
<PAGE>
closing out: (a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number of shares or
the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the with drawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Repurchase Agreement or a Reverse
Repurchase Agreement with respect to Securities and money held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate, or in the
event such Repurchase Agreement or Reverse Repurchase Agreement is a Money
Market Security, a Certificate, Oral Instructions, or Written Instructions
specifying: (a) the Series for which the Repurchase Agreement or Reverse
Repurchase Agreement is entered; (b) the total amount payable to or by the Fund
in connection with such Repurchase Agreement or Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker, dealer, or financial
institution with whom the Repurchase Agreement or Reverse Repurchase Agreement
is entered; (d) the amount and kind of Securities to be delivered or received by
the Fund to or from such broker, dealer, or financial institution; (e) the date
of such Repurchase Agreement or Reverse Repurchase Agreement; and (f) the amount
of cash and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to or by the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make or accept the
delivery to or from the broker, dealer, or fin ancial institution and the
deposits, if any, to the Senior Security Account, specified in such Certific
ate, Oral Instructions, or Written Instructions.
-22-
<PAGE>
2. Upon the termination of a Repurchase Agreement or a Reverse Repurchase
Agreement described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Repurchase Agreement or
Reverse Repurchase Agreement is a Money Market Security, a Certificate, Oral
Instructions, or Written Instructions to the Custodian specifying: (a) the
Repurchase Agreement or Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable to or by the
Fund in connection with such termination; (c) the amount and kind of Securities
to be received or delivered by the Fund and specifically allocated to such
Series in connection with such termination; (d) the date of termination; (e) the
name of the broker, dealer, or financial institution with whom the Repurchase
Agreement or Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Securities Account for such Series. The Custodian shall, upon
receipt or delivery of the amount and kind of Securities or cash to be received
or delivered by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make or receive the payment to or from the broker, dealer,
or financial institution and make the withdrawals, if any, from the Senior
Security Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular
Repurchase Agreement or Reverse Repurchase Agreement be combined and delivered
to the Custodian at the time of entering into such Repurchase Agreement or
Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Cer tificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
in stitution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System
-23-
<PAGE>
or a Depository only in the form of a certified or bank cashier's check payable
to the order of the Fund or the Custodian drawn on New York Clearing House
funds.
2. In connection with each termination of a loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time to
time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account to
the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
-24-
<PAGE>
4. The Custodian shall to the extent permitted by the Fund's Declaration of
Trust, investment restrictions and the Investment Company Act of 1940 have a
continuing lien and security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any such
property whenever the Custodian has made payment or delivery pursuant to any Put
Option guarantee letter or similar document or any receipt issued hereunder by
the Custodian; provided, however, that the Custodian shall not be required to
issue any Put Option guarantee letter unless it shall have received an opinion
of counsel to the Fund or its investment adviser that the issuance of such
letters is authorized by the Fund and that the Custodian's continuing lien and
security interest is valid, enforceable and not limited by the Declaration of
Trust, any investment restrictions or the Investment Company Act of 1940. In the
event the Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee letter or
similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to time
shall make such deposits thereto as may be specified in a Certificate. Promptly
after the close of business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the Custodian shall
furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
-25-
<PAGE>
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Transfer Agent
Account and any sub-dividend agent or co- dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon the Custodian to rely
on Oral Instructions, Written Instructions, or a Certificate setting forth the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the share holders of
record as of that date and the total amount payable to the Transfer Agent
Account on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Ac count out of the moneys held for the account of the
Series specified therein the total amount payable to the Transfer Agent Account
and with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to be
delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of
such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Fund's General Distributor, the
Custodian shall credit such money to the separate account in the name of the
Series for which such money was re ceived.
-26-
<PAGE>
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish, or cause to be furnished, to
the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate, Oral Instructions, or Written
Instruc tions or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other reason indebted to
the Custodian with respect to a Series, (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pur suant to
a separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 1/2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, unless the
Fund has given a Certificate that the Custodian shall not impose a lien and
security interest to secure such overdrafts (in which event it shall not do so),
the Custodian shall have a continuing lien and security interest in the
aggregate
-27-
<PAGE>
amount of such overdrafts and indebtedness as may from time to time exist in and
to any property specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any money balance in an account
standing in the name of such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had out standing a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness, including pursuant to any Reverse
Repurchase Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's prospectus
and Statement of Additional Information. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Secu rities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares
-28-
<PAGE>
or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
ARTICLE XV
CUSTODY OF ASSETS OUTSIDE THE U.S.
1. The Custodian is authorized and instructed to employ, as its agent, as
subcustodians for the securities and other assets of the Fund maintained outside
of the United States the Foreign Subcustodians and Foreign Depositories
designated on Schedule A hereto. Except as provided in Schedule A, the Custodian
shall employ no other Foreign Custodian or Foreign Depository. The Custodian and
the Fund may amend Schedule A hereto from time to time to agree to designate any
additional Foreign Subcustodian or Foreign Depository with which the Custodian
has an agreement for such entity to act as the Custodian's agent, as
subcustodian, and which the Custodian in its absolute discretion proposes to
utilize to hold any of the Fund's Foreign Property. Upon receipt of a
Certificate or Written Instructions from the Fund, the Custodian shall cease the
employment of any one or more of such subcustodians for maintaining custody of
the Fund's assets and such custodian shall be deemed deleted from Schedule A.
2. The Custodian shall limit the securities and other assets maintained in
the custody of the Foreign Subcustodians to: (a) "foreign securities," as
defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the Fund may
determine to be reasonably necessary to effect the foreign securities
transactions of the Fund.
3. The Custodian shall identify on its books as belonging to the Fund, the
Foreign Securities held by each Foreign Subcustodian. 4. Each agreement pursuant
to which the Custodian employs a Foreign Subcustodian shall be substantially in
the form reviewed and approved by the Fund and will not be amended in a way that
materially affects the Fund without the Fund's prior written consent and shall:
(a) require that such institution establish custody account(s) for the
Custodian on behalf of the Fund and physically segregate in each such account
securities and other assets of the fund, and, in the event that such institution
deposits the securities of the Fund in a Foreign Depository, that it shall
identify on its books as belonging to the Fund or the Custodian, as agent for
the Fund, the securities so deposited;
-29-
<PAGE>
(b) provide that:
(1) the assets of the Fund will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Foreign
Subcustodian or its creditors, except a claim of payment for their safe custody
or administration;
(2) beneficial ownership for the assets of the Fund will be freely
transferable without the payment of money or value other than for custody or
administration;
(3) adequate records will be maintained identifying the assets as belonging
to the Fund;
(4) the independent public accountants for the Fund will be given access to
the books and records of the Foreign Subcustodian relating to its actions under
its agreement with the Custodian or confirmation of the contents of those
records;
(5) the Fund will receive periodic reports with respect to the safekeeping
of the Fund's assets, including, but not necessarily limited to, notification of
any transfer to or from the custody account(s); and
(6) assets of the Fund held by the Foreign Subcustodian will be subject
only to the instructions of the Custodian or its agents.
(c) Require the institution to exercise reasonable care in the performance
of its duties and to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations, with the
exception of any such losses, damages, costs, expenses, liabilities or claims
arising as a result of an act of God. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to any
claims against a Foreign Subcustodian as a conse quence of any such loss,
damage, cost, expense, liability or claim of or to the Fund, if and to the
extent that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
5. Upon receipt of a Certificate or Written Instructions, which may be
continuing instructions when deemed appropriate by the parties, the Custodian
shall on behalf of the Fund make or cause its Foreign Subcustodian to transfer,
exchange or deliver securities owned by the Fund, except to the extent
explicitly prohibited therein. Upon receipt of a Certificate or Written Instruc
tions, which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall on behalf of the fund pay out or cause its Foreign
Subcustodians to pay out monies of the Fund.
-30-
<PAGE>
The Custodian shall use all means reasonably available to it, including, if
specifically authorized by the Fund in a Certificate, any necessary litigation
at the cost and expense of the Fund (except as to matters for which the
Custodian is responsible hereunder) to require or compel each Foreign
Subcustodian or Foreign Depository to perform the services required of it by the
agreement between it and the Custodian authorized pursuant to this Agreement.
6. The Custodian shall maintain all books and records as shall be necessary
to enable the Custodian readily to perform the services required of it hereunder
with respect to the Fund's For eign Properties. The Custodians shall supply to
the Fund from time to time, as mutually agreed upon, statements in respect of
the Foreign Securities and other Foreign Properties of the Fund held by Foreign
Subcustodians, directly or through Foreign Depositories, including but not
limited to an identification of entities having possession of the Fund's Foreign
Securities and other assets, an advice or other notification of any transfers of
securities to or from each custodial account maintained for the Fund or the
Custodian on behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of such securities.
The Custodian shall promptly and faithfully transmit all reports and information
received pertaining to the Foreign Property of the Fund, including, without
limitation, notices or reports of corporate action, proxies and proxy soliciting
materials.
7. Upon request of the Fund, the Custodian shall use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Subcustodian, or confirmation of the contents
thereof, insofar as such books and records relate to the Foreign Property of the
Fund or the performance of such Foreign Subcustodian under its agreement with
the Custodian; provided that any litigation to afford such access shall be at
the sole cost and expense of the Fund.
8. The Custodian recognizes that employment of a Foreign Subcustodian or
Foreign Depository for the Fund's Foreign Securities and Foreign Property is
permitted by Section 17(f) of the Investment Company Act of 1940 only upon
compliance with Section (a) of Rule 17f-5 promulgated thereunder. With respect
to the Foreign Subcustodians and Foreign Depositories identified on Schedule A,
the Custodian represents that it has furnished the Fund with certain materials
prepared by the Custodian and with such other information in the possession of
the Cus todian as the Fund advised the Custodian was reasonably necessary to
assist the Board of Trustees of the Fund in making the determinations required
of the Board of Trustees by Rule 17f-5, including, without limitation,
consideration of the matters set forth in the Notes to Rule 17f-5. If the
Custodian recommends any additional Foreign Subcustodian or Foreign Depository,
the Custodian shall supply information similar in kind and scope to that
furnished pursuant to the preceding sentence. Further, the Custodian shall
furnish annually to the Fund, at such time as the Fund and Custodian shall
mutually agree, information concerning each Foreign Subcustodian and Foreign
Depository then
-31-
<PAGE>
identified on Schedule A similar in kind and scope to that furnished pursuant to
the preceding two sentences.
9. The Custodian's employment of any Foreign Subcustodian or Foreign
Depository shall constitute a representation that the Custodian believes in good
faith that such Foreign Subcustodian or Foreign Depository provides a level of
safeguards for maintaining the Fund's assets not materially different from that
provided by the Custodian in maintaining the Fund's securities in the United
States. In addition, the Custodian shall monitor the financial condition and
general operational performance of the Foreign Subcustodians and Foreign
Depositories and shall promptly inform the Fund in the event that the Custodian
has actual knowledge of a material adverse change in the financial condition
thereof or that there appears to be a substantial likelihood that the share
holders' equity of any Foreign Subcustodian will decline below $200 million
(U.S. dollars or the equivalent thereof) or that its shareholders' equity has
declined below $200 million , or that the Foreign Subcustodian or Foreign
Depository has breached the agreement between it and the Custodian in a way that
the Custodian believes adversely affects the Fund. Further, the Custodian shall
advise the Fund if it believes that there is a material adverse change in the
operating environ ment of any Foreign Subcustodian or Foreign Depository.
ARTICLE XVI
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its duties
hereunder, and, except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of the
subcustodians or co-custodians appointed by the Custodian or of the officers,
employees, or agents of any of them. The Custodian may, with respect to
questions of law arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund, at the expense of
the Fund, or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence, bad faith or willful
misconduct on the part of the Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
-32-
<PAGE>
(a) The validity (but not the authenticity) of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the pro priety of the amount paid or received
therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the propriety
of the amount to be received or paid therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of any dividend by the Fund,
as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obli gation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities held
in any Margin Account, Senior Security Account or Collateral Account in
connection with transactions by the Fund, except that this subparagraph shall
not excuse any liability the Custodian may have for failing to establish,
maintain, make deposits to or withdrawals from such accounts in accordance with
this Agreement. In addition, the Custodian shall be under no duty or obligation
to see that any broker, dealer, futures commission merchant or Clearing Member
makes payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment received by the
Custodian from any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to notify the Fund of
the Custodian's receipt or non-receipt of any such payment.
-33-
<PAGE>
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives such money directly or by the final crediting of
the account representing the Fund's interest at the Book-Entry System or the
Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or proceeding
in respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required, or
alternatively, the Fund shall be subrogated to the rights of the Custodian with
respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or distribution by the Transfer
Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may, with the prior approval of the Board of Trustees of
the Fund, appoint one or more banking institutions as subcustodian or
subcustodians, or as co-Custodian or
-34-
<PAGE>
co-Custodians, of Securities and moneys at any time owned by the Fund, upon such
terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed institution;
provided, however, that appointment of any foreign banking institution or
depository shall be subject to the provisions of Article XV hereof.
8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any subcustodian of the Securities and moneys
owned by the Fund.
9. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it, for the account
of the Fund and specifically allo cated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its then current
prospectus, or (b) to ascertain whether any transactions by the Fund, whether or
not involving the Custodian, are such transactions as may properly be engaged in
by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon in writing from time to time between the Custodian and the
Fund. The Custodian may charge such compensation, and any such expenses with
respect to a Series incurred by the Custodian in the performance of its duties
under this Agreement against any money specifically allocated to such Series.
The Custodian shall also be entitled to charge against any money held by it for
the account of a Series the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not limited to, the
expenses of subcustodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase and sale
of Securities of the Fund. Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any overdraft or
indebtedness or interest thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing, Oral Instructions, or Written Instructions received
by the Custodian and reasonably believed by the Custodian to be genuine. The
Fund agrees to forward to the Custodian a Certificate or facsimile thereof
confirming Oral Instructions or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions or Written Instructions are
given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of
-35-
<PAGE>
the transactions or enforceability of the transactions thereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in
acting upon Oral Instructions or Written Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the ac curacy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in Appendix
E hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and re cords shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable Securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry system,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever aris ing out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of the negligence, bad faith,
or willful misconduct of the Custodian, any co-Custodian or subcustodian
appointed by the Custodian, or that of the officers, employees, or agents of any
of them.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian will comply with the procedures, guidelines or
restrictions ("Procedures") adopted by the Fund from time to time for particular
types of investments or transactions, e.g., Repurchase Agreements and Reverse
Repurchase Agreements, provided that the Custodian has received from the Fund a
copy of such Procedures. If within ten days after receipt of any such
Procedures, the Custodian determines in good faith that it is unreasonable for
it to comply with any new procedures, guidelines or restrictions set forth
therein, it may within such ten day period send notice to the Fund that it does
not intend to comply with those new procedures, guide lines or restrictions
which it identifies with particularity in such notice, in which event the
Custodian shall not be required to comply with such identified procedures,
guidelines or restrictions; provided, however, that, anything to the contrary
set forth herein or in any other agreement with the Fund, if the Custodian
identifies procedures, guidelines or restrictions with which it does not intend
to comply, the Fund shall be entitled to terminate this Agreement without cost
or penalty to the Fund upon thirty days' written notice.
19. Whenever the Custodian has the authority to deduct monies from the
account for a series without a Certificate, it shall notify the Fund within one
business day of such deduction and the reason for it. Whenever the Custodian has
the authority to sell Securities or any other property of the Fund on behalf of
any Series without a Certificate, the Custodian will notify the Fund of its
intention to do so and afford the Fund the reasonable opportunity to select
which Securities or other property it wishes to sell on behalf of such Series.
If the Fund does not promptly sell sufficient Securities or Deposited Property
on behalf of the Series, then, after notice, the Custodian may proceed with the
intended sale.
20. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth or
referred to in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
-36-
<PAGE>
ARTICLE XVII
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement shall
continue until terminated by either the Custodian giving to the Fund, or the
Fund giving to the Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after the date of the
giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the Securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Cus todian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary or any Assistant Secretary,
designating a successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a successor custodian which
shall be a bank or trust company eligible to serve as a custodian for Securities
of a management investment company under the Investment Company Act of 1940 and
which is acceptable to the Fund. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and moneys then owned by the Fund and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement arising thereafter,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors rights, or if a petition is presented for the
-37-
<PAGE>
winding up or liquidation of the party or a resolution is passed for its winding
up or liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance of, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
ARTICLE XVIII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized only for the purpose of the Fund
providing Certificates to the Custodian and the Custodian providing notices to
the Fund and only after the Fund shall have established access codes and
internal safekeeping procedures to safeguard and protect the confidentiality and
availability of such access codes. Each use of the Terminal Link by the Fund
shall constitute a representation and warranty that at least two officers have
each utilized an access code that such internal safekeeping procedures have been
established by the Fund, and that such use does not contravene the Investment
Company Act of 1940 and the rules and regulations thereunder.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Termi nal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
-38-
<PAGE>
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its con trol, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all Infor
mation whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in ad vance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Custodian's prior
written consent. The Fund acknowledges that any software provided by the
Custodian as part of the Terminal Link is the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the same, whether by the
Fund or the Custodian and whether with or without the Custodian's consent, shall
become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes or
the Fund utilizes in connection with the Terminal Link makes any warranties or
representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will cause its officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the other to act in accordance with and
rely on Certificates and notices received by it through the Terminal Link. Each
party acknowledges that it is its responsibility to assure that only its
authorized persons use the Terminal Link on its behalf, and that a party shall
not be responsible nor liable for use of the Terminal Link on behalf of the
other party by unauthorized persons of such other party.
9. Notwithstanding anything else in this Agreement to the contrary, neither
party shall have any liability to the other for any losses, damages, injuries,
claims, costs or expenses arising as a result of a delay, omission or error in
the transmission of a Certificate or notice by use of the Terminal Link except
for money damages for those suffered as the result of the negligence, bad faith
or willful misconduct of such party or its officers, employees or agents in an
amount not exceeding for any incident $100,000; provided, however, that a party
shall have no liability under this Section 9 if the other party fails to comply
with the provisions of Section 11.
10. Without limiting the generality of the foregoing, in no event shall
either party or any manufacturer or supplier of its computer equipment, software
or services relating to the Terminal Link be responsible for any special,
indirect, incidental or consequential damages which the other party may incur or
experience by reason of its use of the Terminal Link even if such party, manufac
turer or supplier has been advised of the possibility of such damages, nor with
respect to the use of
-39-
<PAGE>
the Terminal Link shall either party or any such manufacturer or supplier be
liable for acts of God, or with respect to the following to the extent beyond
such person's reasonable control: machine or computer breakdown or malfunction,
interruption or malfunction of communication facilities, labor difficulties or
any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, and (ii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors, omissions
or interruption in, or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or a notice transmitted by the Terminal Link, verify to the other
party by use of the Terminal Link its receipt of such Certificate or notice, and
in the absence of such verification the party to which the Certificate or notice
is sent shall not be liable for any failure to act in accordance with such
Certificate or notice and the sending party may not claim that such Certificate
or notice was received by the other party.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Per sons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
officer ceases to be an officer of the Fund, or in the event that other or
additional officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled
-40-
<PAGE>
to rely and to act upon the signatures of the officers as set forth in the last
delivered Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or rehired by this
Agreement to be given to the Fund shall be sufficiently given if addressed to
the Fund and mailed or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from time to time
designate in writing.
5. This Agreement constitutes the entire agreement between the parties,
replaces all prior agreements and may not be amended or modified in any manner
except by a written agreement executed by both parties with the same formality
as this Agreement and approved by a resolution of the Board of Trustees of the
Fund, except that Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of the instrument are not
binding upon any of the Trustees or shareholders individually but are
-41-
<PAGE>
binding upon the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a particular series
of the Fund shall under no circumstances be charges with liabilities
attributable to any other series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular series
of the Fund shall look only to the assets of that particular series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto af fixed, as of the day and year first above
written.
OPPENHEIMER MULTI-GOVERNMENT TRUST
By: /s/ Robert G. Galli
Robert G. Galli, Secretary
[SEAL]
Attest:
/s/ Robert G. Zack
Robert G. Zack, Assistant Secretary
THE BANK OF NEW YORK
[SEAL] By: ______________________________
Attest:
________________________
-43-
<PAGE>
APPENDIX A
I, President and I, , of Oppenheimer Fund, a Massachusetts business trust
(the "Fund") do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of OSS" shall be
an Authorized Person only for purposes of Articles XII and XIII. The signatures
set forth opposite their respective names are their true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX B
I, President and I, , of Oppenheimer Fund, a Massachusetts business trust
(the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of OSS"
is specified serve in the following positions with the Fund and each has been
duly elected or appointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's Declaration of
Trust and By-Laws. With respect to the following individuals for whom a position
of "Officer of OSS" is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an Officer for purposes of
the Fund's Custody Agreement with The Bank of New York, but only for purposes of
Articles XII and XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
__________________ _______________________ __________________
<PAGE>
APPENDIX C
The undersigned, hereby certifies that he or she is the duly elected and
acting of Oppenheimer Fund (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Trustees of the Fund at a meeting duly
held on __________________, 199 , at which a quorum at all times present and
that such resolutions have not been modified or rescinded and are in full force
an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of 199
(the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to act in accordance with, and to rely on
instructions by the Fund to the Custodian communicated by a Terminal
Link as defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to officers of the Fund as defined in the
Custody Agreement, and shall establish internal safekeeping procedures
to safeguard and protect the confidentiality and availability of such
access codes.
RESOLVED, that Officers of the Fund as defined in the Custody
Agreement shall, following the establishment of such access codes and
such internal safekeeping procedures, advise the Custodian that the
same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of , as of the day
of , 199 .
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and
acting of Oppenheimer Fund, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on 199 , at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated
as of , 199 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the
Book-Entry System, as defined in the Custody Agreement, all
Securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the
Book-Entry System to the extent possible in connection with its
performance thereunder, including, without limitation, In
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of , as of the
day of , 199 .
__________________________
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned , hereby certifies that he or she is the duly elected and
acting of Oppenheimer Fund, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated
as of , 199 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in The Depository Trust Company
("DTC") as a "Depository" as defined in the Custody Agreement,
all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to
utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of as of the
day of , 199 .
___________________________
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, hereby certifies that he or she is the duly elected and
acting of Oppenheimer Fund, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated
as of 199 , (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Parti cipants Trust Company as
a Depository, as defined in the Custody Agreement, all Securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection
with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 199 .
_______________________
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and
acting of Oppenheimer Fund, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on , 199 , at which a quorum was at
all times present and that such resolution has not been modified or rescinded
and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated
as of , 199 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement,
to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in
Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of , 199 .
____________________________
[SEAL]
<PAGE>
EXHIBIT D
[FORM OF FOREIGN SUBCUSTODIAN AGREEMENT]
Appendix A
Article XIX.1.........................................................49
Appendix B
Article XIX.2.........................................................50
Exhibit A
Article III.1..........................................................7
Exhibit B
Article III.1..........................................................8
Exhibit C
Article III.1..........................................................8
Exhibit D ................................................................34
Article XV.4..........................................................34
Schedule A
Article XV.1..........................................................33
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of October 9, 1997 between each investment company
identified on Appendix A attached hereto (each hereinafter referred to as the
"Fund") individually and severally, and not jointly and severally, and The Bank
of New York ("BNY").
WITNESSETH:
WHEREAS, the Fund desires to appoint BNY as Foreign Custody Manager on the
terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the
duties set forth herein on the terms and conditions contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agrees as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. Capitalized terms used in this Agreement and not otherwise defined in
this Agreement shall have the meanings given such terms in the Rule.
2. "Board" shall mean the board of directors or board of trustees, as the
case may be, of the Fund.
3. "Eligible Foreign Custodian" shall have the meaning provided in the
Rule.
4. "Monitoring System" shall mean a system established by BNY to fulfill
the Responsibilities specified in clauses (d) and (e) of Article III of this
Agreement.
5. "Qualified Foreign Bank" shall have the meaning provided in the Rule.
6. "Responsibilities" shall mean the responsibilities delegated to BNY as a
Foreign Custody Manager with respect to each Specified Country and each Eligible
Foreign Custodian selected by BNY, as such responsibilities are more fully
described in Article III of this Agreement.
7. "Rule" shall mean Rule 17f-5 under the Investment Company Act of 1940,
as amended, as such Rule became effective on June 16, 1997.
8. "Securities Depository" shall mean any securities depository or clearing
agency within the meaning of Section (a)(1)(ii) or (a)(1)(iii) of the Rule.
<PAGE>
9. "Specified Country" shall mean each country listed on Schedule I
attached hereto (as amended from time to time) and each country, other than the
United States, constituting the primary market for a security with respect to
which the Fund has given settlement instructions to The Bank of New York as
custodian (the "Custodian") under its Custody Agreement with the Fund.
ARTICLE II
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect to
each Specified Country the Responsibilities (the "Delegation").
2. BNY accepts the Delegation and agrees in performing the Responsibilities
as a Foreign Custody Manager to exercise reasonable care, prudence and diligence
such as a bailee for hire having responsibility for the safekeeping of the
Fund's assets would exercise.
3. BNY shall provide to the Fund (i) notice promptly after the placement of
assets of the Fund with a particular Eligible Foreign Custodian selected by BNY
within a Specified Country, (ii) at such times as the Board deems reasonable and
appropriate based on the circumstances of the Fund's foreign custody
arrangements (but not less often than quarterly) written reports notifying the
Board of any material change in the arrangements (including, in the case of
Qualified Foreign Banks, any material change in any contract governing such
arrangements and in the case of Securities Depositories, any material change in
the established practices or procedures of such Securities Depositories) with
respect to assets of the Fund with any such Eligible Foreign Custodian, and
(iii) not less often than annually a report summarizing the material custodial
risks known to BNY which accompany such arrangements.
ARTICLE III
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with respect to
each Specified Country select an Eligible Foreign Custodian. In connection
therewith, BNY shall: (a) determine that assets of the Fund held by such
Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
Section (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Qualified Foreign Bank are governed by a written
contract, with the Custodian (or, in the case of a Securities Depository, by
such a contract, by the rules or established practices or procedures of the
Securities Depository, or by any combination of the foregoing) which will
provide reasonable care for the Fund's assets based on the standards specified
in paragraph (c)(1) of the Rule; (c) determine that each contract with a
Qualified Foreign Bank shall include the provisions specified in paragraph
(c)(2)(i)(A) through (F) of the Rule or, alternatively,
2
<PAGE>
in lieu of any or all of such (c)(2)(i)(A) through (F) provisions, such other
provisions as BNY determines will provide, in their entirety, the same or a
greater level of care and protection for the assets of the Fund as such
specified provisions; (d) monitor pursuant to the Monitoring System the
appropriateness of maintaining the assets of the Fund with a particular Eligible
Foreign Custodian pursuant to paragraph (c)(1) of the Rule including in the case
of a Qualified Foreign Bank, any material change in the contract governing such
arrangement and in the case of a Securities Depository, any material change in
the established practices or procedures of such Securities Depository; and (3)
promptly advise the Fund whenever an arrangement (including, in the case of a
Qualified Foreign Bank, any material change in the contract governing such
arrangement and in the case of a Securities Depository, any material change in
the established practices or procedures of such Securities Depository) described
in preceding clause (d) no longer meets the requirements of the Rule. BNY, as
Foreign Custody Manger, will make the determination that it is appropriate to
maintain assets in each Eligible Foreign Custodian and will exercise reasonable
care in the process.
2. (a) For purposes of Clauses (a) and (b) of this Section 1, with respect
to Securities Depositories, it is understood that to the extent permitted to a
Foreign Custody Manager under the Rule, such determination may be made on the
basis of, and the obligation of BNY hereunder to investigate any such Securities
Depository shall be limited to, obtaining publicly available information with
respect to each such Securities Depository, absent actual knowledge by BNY to
the contrary.
(b) For purposes of clause (d) of preceding Section 1 of this Article,
BNY's determination of appropriateness shall not include, nor be deemed to
include, any evaluation of Country Risks associated with investment in a
particular country. For purposes hereof, "Country Risks" shall mean systemic
risks of holding assets in a particular country including, but no limited to,
(a) the necessity to use any Securities Depository the use of which is mandatory
by law or regulation or because securities cannot be withdrawn from such
Securities Depository, or because maintaining securities outside the Securities
Depository is not consistent with universal custodial practices in the relevant
market, (b) such country's financial infrastructure, (c) such country's
prevailing custody and settlement practices, (d) nationalization, expropriation
or other governmental actions, (e) regulation of the banking or securities
industry, (f) currency controls, restrictions, devaluations or fluctuations, and
(g) market conditions which affect the orderly execution of securities
transactions or affect the value of securities.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
3
<PAGE>
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present; and (c) the Board or its
investment advisor has considered the Country Risks associated with investment
in each Specified Country and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
Specified Country.
2. BNY hereby represents that (a) BNY is duly organized and existing under
the laws of the State of New York, with full power to carry on its businesses as
now conducted, and to enter into this Agreement and to perform its obligations
hereunder; (b) this Agreement been duly authorized, executed and delivered by
BNY, constitutes a valid and legally binding obligation of BNY enforceable in
accordance with its terms, and no statue, regulation, rule, order, judgment or
contract binding on BNY prohibits BNY's execution or performance of this
Agreement; and (c) BNY has established and will maintain the Monitoring System.
ARTICLE V
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages, liabilities or
claims, including attorneys' and accountants' fees, sustained or incurred by, or
asserted against, the Fund except to the extent the same arises out of the
failure of BNY to exercise the care, prudence and diligence required by Section
2 of Article II hereof. In no event shall BNY be liable to the Fund, the Board,
or any third party for special, indirect or consequential damages, or for lost
profits or loss of business, arising in connection with this Agreement. Anything
contained herein to the contrary notwithstanding, nothing contained herein shall
affect or alter the duties and responsibilities of BNY or the Fund under any
other agreement between BNY and the Fund, including without limitation, the
Custody Agreement or any Securities Lending Agreement.
2. The Fund agrees to indemnify BNY and holds it harmless from and against
any and all costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees, sustained or incurred by, or asserted against,
BNY by reason or as a result of any action or inaction, or arising out of BNY's
performance hereunder, provided that the Fund shall not indemnify BNY to the
extent any such costs, expenses, damages, liabilities or claims arises out of
BNY's failure to exercise the reasonable care, prudence and diligence required
by Section 2 of Article II hereof.
3. BNY shall only such duties as are expressly set forth herein. In no
event shall BNY be liable for any Country Risks associated with investments in a
particular country.
ARTICLE VI
MISCELLANEOUS
1. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by it
at its offices at 90 Washington Street, New York, New York 10286, or at such
place as BNY may from time to time designate in writing.
4
<PAGE>
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at c/o OppenheimerFunds, Inc. Two World Trade Center, 34th
Floor, New York, New York 10048-0203, Attention: General Counsel, or at such
other place as the Fund may from time to time designate in writing.
3. In case any provisions in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided however, that this Agreement shall not be assignable by either
party without the written consent of the other.
4. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and BNY hereby consent to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any dispute
arising hereunder. The Fund hereby irrevocably waives, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have to
the laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. The Fund and BNY each hereby irrevocably waives any and all rights to
trial by jury in any legal proceeding arising out of or relating to this
Agreement.
5. The parties hereto agree that in performing hereunder, BNY is acting
solely on behalf of the Fund and no contractual or service relationship shall be
deemed to be established hereby between BNY and any other person.
6. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
7. This Agreement shall terminate simultaneously with the termination of
the Custody Agreement between the Fund and the Custodian, and may otherwise be
terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety
(90) days after the date of such notice.
8. In consideration of the services provided by BNY hereunder, the Fund
shall pay to BNY such compensation and out-of-pocket expenses as may be agreed
upon from time to time.
9. For each Fund organized as a Massachusetts trust, a copy of its
Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts. Notice is hereby given that each such instrument is executed on
behalf of the trustees of each such Fund and not individually, and that the
obligations of this Agreement are not binding upon any of the trustees or
shareholders
5
<PAGE>
individually but are binding only upon the respective Fund. The parties
expressly agree that BNY and its assignees and affiliates shall look solely to
the respective Fund's assets and property with respect to enforcement of any
claim.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of this
date first above written.
/s/ Andrew J. Donohue, Secretary on
behalf of each Fund identified on
Appendix A attached hereto individually
and severally, and not jointly and
severally
THE BANK OF NEW YORK
By: /s/ Jorge E. Ramos
Title: Jorge E. Ramos, VP
6
<PAGE>
Appendix A
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Integrity Funds (consisting of the following series:)
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Main Street Funds, Inc. (as to the following series:)
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds (as to the following 8 series:)
Oppenheimer High Income Fund
Oppenheimer Bond Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Growth & Income Fund
Oppenheimer Global Securities Fund
Oppenheimer Strategic Bond Fund
Panorama Series Fund, Inc. (as to the following 6 series):
Total Return Portfolio
Growth Portfolio
International Equity Portfolio
LifeSpan Capital Appreciation Portfolio
LifeSpan Balanced Portfolio
LifeSpan Diversified Income Portfolio
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 Multiple Strategies Fund
Oppenheimer World Bond Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Series Fund, Inc. (as to the following 5 series):
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Bond Fund Series - Oppenheimer Bond Fund for Growth
Oppenheimer MidCap Fund
Oppenheimer International Small Company Fund
7
<PAGE>
FOREIGN CUSTODY MANAGER AGREEMENT
SCHEDULE 1
Argentina
Australia
Austria
Bangladesh
Belgium
Bermuda
Botswana
Brazil
Bulgaria
Canada
Chile
China
Columbia
Cyprus
Czech Republic
Denmark
Easdaq
Ecuador
Egypt
Estonia
Euromarket (Cedel)
Finland
France
Germany
Ghana
Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Israel
Italy
Ivory Coast
Japan
Jordan
Kenya
Korea
Latvia
Lebanon
Lithuania
Luxembourg
Malaysia
Mauritius
Mexico
Morocco
Namibia
Netherlands
New Zealand
Nigeria
Norway
Pakistan
Peru
Philippines
Poland
Portugal
Russia
Singapore
Slovenia
South Africa
Spain
Sri Lanka
Swaziland
Sweden
Switzerland
Taiwan
Thailand
Tunisia
Turkey
Ukraine
United Kingdom
United States
Uruguay
Venezuela
Zambia
Zimbabwe
FOREIGN.WPD
8
April 21, 1998
Oppenheimer World Bond Fund
Two World Trade Center
New York, NY 10048-0203
Dear Ladies and Gentlemen:
This opinion is being furnished to Oppenheimer World Bond Fund, a
Massachusetts business trust (the "Fund"), in connection with the Registration
Statement on Form N-1A (the "Registration Statement") under the Securities Act
of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as
amended, filed by the Fund. As counsel for the Fund, we have examined such
statutes, regulations, corporate records and other documents and reviewed such
questions of law that we deemed necessary or appropriate for the purposes of
this opinion.
As to matters of Massachusetts law contained in this opinion, we have
relied upon the opinion of Pepe & Hazard LLP dated April 21, 1998.
Based upon the foregoing, we are of the opinion that the Class A, Class B
and Class C shares to be issued as described in the Registration Statement have
been duly authorized and, assuming receipt of the consideration to be paid
therefor, upon delivery as provided in the Registration Statement, will be
legally and validly issued, fully paid and non-assessable (except for the
potential liability of shareholders described in the Fund's Statement of
Additional Information under the caption "About the Fund - How the Fund is
Managed - Organization History").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Registration Statement.
We do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky Weitzen Shalov & Wein
------------------------------------------
Gordon Altman Butowsky Weitzen Shalov & Wein
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
Oppenheimer World Fund
We consent to the use in this Registration Statement of World bond Fund of our
report dated October 21, 1997, appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
reference to our firm under the heading "Financial Highlights" included in the
Prospectus, which is also a part of such Registration Statement.
/s/ KPMG Peat Marwick LLP
- ---------------------
KPMG Peat Marwick
Denver, Colorado
April 21,1998
C-2
Exhibit 24(b)(15)(a)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class A Shares of
Oppenheimer World Bond Fund
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
16th day of April, 1998, by and between World Bond Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class A Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Rule 12b-1 (the "Rule") under the
Investment Company Act of 1940 (the "1940 Act") pursuant to which the Fund will
reimburse the Distributor for a portion of its costs incurred in connection with
the personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of the Fund. The Fund may be deemed to
be acting as distributor of securities of which it is the issuer, pursuant to
the Rule, according to the terms of this Plan. The Distributor is authorized
under the Plan to pay "Recipients," as hereinafter defined, for rendering
services and for the maintenance of Accounts. Such Recipients are intended to
have certain rights as third-party beneficiaries under 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 (a) the 1940 Act, (b) the Rule,
(c) 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 (d) 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 United
States Securities and Exchange Commission.
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 Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund 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.
-1-
<PAGE>
(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.
(a) Under the Plan, the Fund will make payments to the Distributor, within
forty-five (45) days of the end of each calendar quarter, in the amount of the
lesser of: (i) .0625% (.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of the Shares, computed as of
the close of each business day, or (ii) the Distributor's actual expenses under
the Plan for that quarter of the type approved by the Board. The Distributor
will use such fee received from the Fund in its entirety to reimburse itself for
payments to Recipients and for its other expenditures and costs of the type
approved by the Board incurred in connection with the personal service and
maintenance of Accounts including, but not limited to, the services described in
the following paragraph. 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.
The services to be rendered by the Distributor and Recipients in connection
with the personal service and the maintenance of Accounts may include, but shall
not be limited to, the following: answering routine inquiries from the
Recipient's customers concerning the Fund, providing such customers with
information on their investment in shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the Fund's
investment plans and dividend payment options available, and providing such
other information and customer liaison services and the maintenance of Accounts
as the Distributor or the Fund may reasonably request. It may be presumed that a
Recipient has provided services qualifying for compensation under the Plan if it
has Qualified Holdings of Shares to 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 services, 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 services in
this regard. If either the Distributor or the Board still is not satisfied, it
may take appropriate steps to terminate the Recipient's status as such under the
Plan, whereupon such entity's rights as a third-party beneficiary hereunder
shall terminate.
Payments received by the Distributor from the Fund under the Plan will not
be used to pay any interest expense, carrying charges or other financial costs,
or allocation of overhead by the Distributor, or for any other purpose other
than for the payments described in this Section 3. The amount payable to the
Distributor each quarter will be reduced to the extent that reimbursement
payments otherwise permissible under the Plan have not been authorized by the
Board for that quarter. Any unreimbursed expenses incurred for any quarter by
the Distributor may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not to
exceed .0625% (.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of the Shares, computed as of the close
of each business day, of Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers. The Distributor may make Plan payments to any
"affiliated" person (as defined in the 1940 Act) of the
-2-
<PAGE>
Distributor if such affiliated person qualifies as a Recipient. 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, to be set from time to
time by a majority of the Independent Trustees.
A majority of the Independent Trustees may at any time or from time to time
increase or decrease and thereafter adjust the rate of fees to be paid to the
Distributor or to any Recipient, but not to exceed the rate set forth above,
and/or increase or decrease the number of shares constituting Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum Qualified
Holdings 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.
(c) Under the Plan, payments may 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.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Fund who are not "interested persons" of the Fund
shall be committed to the discretion of the Independent Trustees. Nothing herein
shall prevent the Independent Trustees from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Fund's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
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 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 securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its "assignment" (as
defined in the 1940 Act); (iii) it 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 (iv) it 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 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 Plan has been
approved by a vote of the Board and of the Independent Trustees cast in person
at a meeting called on December 11, 1997, for the purpose of voting on this
Plan. Unless terminated as hereinafter provided, it shall continue in effect
from year to year thereafter or as the Board may otherwise determine only so
long as such continuance is
-3-
<PAGE>
specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on such
continuance. 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 Trust's outstanding voting securities of the
Class. This Plan may not be amended to increase materially the amount of
payments to be made without approval of the Class A Shareholders, in the manner
described above, and all material amendments must be approved by a vote of the
Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund and the Trust under this Plan are
not binding upon any Trustee or shareholder of 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 disclaiming shareholder and
Trustee liability for acts or obligations of the Fund or the Trust.
Oppenheimer World Bond Fund
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
OppenheimerFunds Distributor, Inc.
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
-4-
Exhibit 24(b)(15)(b)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer World Bond Fund
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
16th day of April, 1998, by and between Oppenheimer World Bond Fund (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 Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund 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 Fund'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 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 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 Fund'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 Plan has been
approved by a vote of the Board and of the Independent Trustees cast in person
at a meeting called on December 11, 1997, for the purpose of voting on this
Plan. 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 Fund under this Plan are not binding upon any
Trustee of the Trust or shareholder of 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 Trust disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
Oppenheimer World Bond Fund
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
OppenheimerFunds Distributor, Inc.
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
70512B-2.B98
4/98
-5-
<PAGE>
Exhibit 24(b)(15)(c)
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer World Bond Fund
This Distribution and Service Plan and Agreement (the "Plan") is dated as of the
16th day of April, 1998, by and between World Bond Fund (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 Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund 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
-1-
<PAGE>
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.
(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
-2-
<PAGE>
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 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%
-3-
<PAGE>
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 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
-4-
<PAGE>
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 Fund'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 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 Plan has been
approved by a vote of the Board and of the Independent Trustees cast in person
at a meeting called on December 11, 1997, for the purpose of voting on this
Plan. 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.
-5-
<PAGE>
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 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 Fund under this Plan are not binding upon any
Trustee of the Trust or shareholder of 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 Trust disclaiming shareholder
and Trustee liability for acts or obligations of the Fund.
Oppenheimer World Bond Fund
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
OppenheimerFunds Distributor, Inc.
By: /s/ Andrew Donohue
------------------------------
Andrew Donohue
-6-
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 841057
<NAME> Oppenheimer World Bond Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 59,000,447
<INVESTMENTS-AT-VALUE> 59,113,384
<RECEIVABLES> 7,760,039
<ASSETS-OTHER> 2,617
<OTHER-ITEMS-ASSETS> 980,565
<TOTAL-ASSETS> 67,856,605
<PAYABLE-FOR-SECURITIES> 10,355,155
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,720,530
<TOTAL-LIABILITIES> 13,075,685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,740,223
<SHARES-COMMON-STOCK> 6,615,505
<SHARES-COMMON-PRIOR> 6,615,505
<ACCUMULATED-NII-CURRENT> 82,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,105,071)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,018
<NET-ASSETS> 54,780,920
<DIVIDEND-INCOME> 3,465
<INTEREST-INCOME> 5,438,948
<OTHER-INCOME> 0
<EXPENSES-NET> 655,053
<NET-INVESTMENT-INCOME> 4,787,360
<REALIZED-GAINS-CURRENT> 1,085,931
<APPREC-INCREASE-CURRENT> (1,609,166)
<NET-CHANGE-FROM-OPS> 4,264,125
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,445,641
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (181,516)
<ACCUMULATED-NII-PRIOR> 523,824
<ACCUMULATED-GAINS-PRIOR> (7,083,779)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663,356
<AVERAGE-NET-ASSETS> 55,339,000
<PER-SHARE-NAV-BEGIN> 8.31
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> 0.67
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.28
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
